# U.S. Extends 1% Student Loan Auto Pay Discount Deadline to December 31 Borrowers gain three extra months to secure reduced interest rates through auto enrollment. - **Source:** [The College Investor](https://brifing.si/source/d431d77d-492e-4105-be7c-2525bbb643ab) - **Published:** 2026-09-29 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/f731325d-e6d5-4723-a83a-eac482f3b979 ## Extended Enrollment Window The U.S. Department of Education has extended the deadline for the 1% student loan auto pay discount by three months, from September 30 to December 31, 2026. Borrowers who enroll by the new deadline will maintain the reduced interest rate until June 30, 2028. This replaces the previous 0.25% auto pay discount, offering significant savings. Nearly 2 million borrowers have already enrolled since the program's launch this summer. ## Financial Impact for Borrowers The 1% discount provides substantial savings compared to the old 0.25% rate. For a borrower with a $40,000 balance, the additional 0.75% reduction saves roughly $600 in interest over two years. Larger loan balances yield even greater savings. The discount applies to Federal Direct Loans originated after July 1, 2012, including Parent PLUS loans, benefiting a wide range of borrowers. ## SAVE Plan Transition Challenges The extension aids millions of borrowers transitioning from the SAVE plan, who receive a 90-day window to select a new repayment plan. Many have yet to receive their transition notices, and the original September deadline would have excluded them. Additionally, loan servicers are experiencing delays processing repayment plan applications, preventing timely auto pay enrollment for some borrowers. ## Eligibility and Enrollment Process Four borrower groups qualify: those already enrolled in auto pay, new enrollees, former SAVE plan borrowers, and those in default. Each has specific steps to secure the discount, with defaulted borrowers facing the most complex process. They must consolidate loans, apply for a repayment plan, and enroll in auto pay by December 31 to benefit. ## Default Consequences and Incentives Defaulted borrowers face wage garnishment of up to 15% this fall, adding urgency to the December 31 deadline. The 1% discount serves as both a financial incentive and a way to avoid collections. The Department aims to reduce defaults, which grew by 1.6 million borrowers and $54 billion in the past year. ## Auto Pay Benefits Beyond Interest Auto pay ensures timely payments, crucial for programs like the Repayment Assistance Plan (RAP) and Public Service Loan Forgiveness (PSLF). RAP offers interest waivers and principal matching, while PSLF requires 120 on-time payments. Auto pay eliminates the risk of late payments disqualifying borrowers from these benefits. ## Strategic Departmental Goals The extension aligns with the Department's broader strategy to balance penalties and incentives. While wage garnishment resumes for defaulters, the auto pay discount rewards compliant borrowers. This dual approach aims to stabilize repayment rates across the federal portfolio, where 9.3 million borrowers are currently in default. ## Future Monitoring and Possibilities The Department will track auto pay's impact on delinquency rates and SAVE plan transitions. A second extension may occur if many SAVE borrowers remain in forbearance by December. Borrowers who enroll by December 31 lock in the 1% discount until June 2028, providing long-term financial relief. ## Sources covering this story - https://thecollegeinvestor.com/89534/education-department-extends-1-student-loan-auto-pay-discount-deadline-to-december-31/ — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._