Department of Education extends 1% autopay discount for student loans to year-end

Since its June announcement, the Department of Education’s autopay incentive has drawn close to two million borrowers, granting a 0.25-point interest reduction and a cumulative 1% discount on federal student loans. The initiative, first set to expire on Sept. 30, has been extended to Dec. 31, 2026, following reports of higher repayment activity. Under Secretary Nicholas Kent highlighted the benefit’s role in improving loan portfolio health.

Participants retain eligibility for programs like the Repayment Assistance Plan, which caps interest and matches principal reductions, and Public Service Loan Forgiveness, both of which require timely payments. Financial-aid officials warned that missed payments can trigger interest capitalization, negative amortization, and credit damage. Even borrowers in default can qualify by consolidating loans and selecting a qualifying repayment plan.