The U.S. Department of Education announced an extension to the deadline for federal student loan borrowers to enroll in automatic payments and receive a 1 percentage point interest rate reduction. Initially, the deadline was set for the end of the day on Wednesday, but now borrowers have until December 31 to sign up. This discount, available since this summer, will apply as long as borrowers remain enrolled through June 30, 2028. Nearly 2 million federal student loan holders have already taken advantage of the autopay incentive.

This interest rate discount applies specifically to loans from the Direct Loan program, including Direct Subsidized, Direct Unsubsidized, Direct PLUS, and Direct Consolidation Loans. Parent PLUS loans within the Direct Loan program also qualify, but Federal Family Education Loans (FFEL) and private student loans are excluded. To be eligible, loans must have been disbursed after July 1, 2012, and be in good standing. The average interest rate on federal student loans is currently 6.54%, according to higher education expert Mark Kantrowitz.

Borrowers can easily enroll in autopay through their loan servicer’s website, typically by accessing a “manage payments” section and providing bank details. The process is straightforward and usually takes only a few minutes. If borrowers are unsure of their loan servicer’s identity or contact information, they can find this information at StudentAid.gov. The interest rate reduction has the potential to save borrowers significant money over the life of their loans by lowering their monthly payments.

The extension is part of the Trump administration’s broader efforts to make student loan repayment more manageable amid the growing total of outstanding federal student debt, which now exceeds $1.7 trillion. With over 42 million Americans carrying student loans, this program aims to encourage timely payments with the added incentive of reducing the cost of borrowing. The new deadline gives borrowers additional time to take advantage of the financial benefit before the end of the year.