DOE Extends Enrollment Deadline for Student Loan Interest Rate Reduction

The Department of Education announced on Tuesday that federal student loan borrowers now have until the end of 2026  to qualify for a lower interest rate on their student loan.

Borrowers who enroll in automatic payments by December 31—including those who have already enrolled—will benefit from a 1-percentage-point (100-basis-point) interest rate reduction through June 30, 2028. The original deadline for enrollment was September 30.

“Following the Trump Administration’s announcement of the interest rate reduction earlier this year, nearly 2 million borrowers have enrolled in auto pay—helping borrowers reduce long-term interest accrual,” said Under Secretary of Education Nicholas Kent in a statement. “We are excited to see millions of borrowers take advantage of this temporary benefit, which is already driving up repayment rates and improving the overall health of the federal student loan portfolio.”

The interest-rate incentive began on July 1. Before then, borrowers enrolled in automatic payments received a 25-bps reduction from loan servicers.

The temporary interest-rate reduction applies to borrowers with eligible federal direct loans that originated after July 1, 2012, including both student and Parent PLUS borrowers.

Borrowers who are currently in default can also qualify, but they must first return their loans to good standing by consolidating eligible loans and enrolling in a repayment plan before signing up for autopay.

Borrowers enrolled in the now-defunct Saving on a Valuable Education repayment plan must first transition into another eligible repayment option before becoming eligible for the enhanced interest discount.

July 1 also marked a broader overhaul of changes to federal student loan repayment that took effect. The DOE that day eliminated the Grad PLUS loan, capping annual loans for all graduate studies at $20,500 per year ($100,000 total) and at $50,000 per year ($200,000 total) for 11 graduate programs deemed “professional degrees” for federal loan purposes. After a federal court stayed the short list of approved degrees, the Department of Education published an expanded list of degrees eligible for federal student loans, updated to include 29 programs.

Also on July 1, the DOE discontinued the Saving on a Valuable Education plan—an income-driven debt relief program created in 2023—and introduced the Tiered Standard plan, under which a borrower’s repayment term, ranging from 10 years through 15 years, depends on their total loan balance.

Borrowers continue to face affordability pressures. Student loan defaults reached a record high in March, with 9.52 million borrowers in default, according to an Associated Press analysis of data from the Office of Federal Student Aid.