For millions of Americans carrying student debt, a small checkbox on a loan servicer’s website could soon be worth a lot more money.

The U.S. Department of Education announced that federal student loan borrowers who sign up for automatic payments will be eligible for a temporary 1 percentage point reduction in their interest rate beginning July 1 (1).

Robert Kiyosaki says this 1 asset will surge 400% in a year and begs investors not to miss this ‘explosion’

Millionaires under 43 hold only 25% of their wealth in stocks. Surprised? Here’s where their money is actually going

Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — here are 5 ways to build wealth like a landlord without actually being one

That’s a significant jump from the long-standing 0.25 percentage point discount borrowers have traditionally received for enrolling in autopay. But there’s a catch because borrowers have until only Sept. 30, 2026, to enroll in order to lock in the enhanced rate reduction, which is scheduled to remain in effect through June 30, 2028.

For borrowers who are already feeling squeezed by student loan payments, it’s one of the more tangible benefits to emerge as the federal repayment system undergoes yet another overhaul.

The interest rate reduction applies to eligible federal direct loans first disbursed on or after July 1, 2012. Borrowers who are already enrolled in autopay don’t need to take any action.

According to the Department, they’ll automatically receive the additional 0.75 percentage point reduction beginning July 1, bringing their total discount to a full percentage point.

Borrowers who are in default won’t qualify unless they first return their loans to good standing. Meanwhile, borrowers who were enrolled in the now-defunct SAVE repayment plan may need to transition into another active repayment option before they can benefit from the lower rate.

And the timing isn’t accidental. The federal student loan portfolio now tops $1.7 trillion and is held by roughly 43 million borrowers, according to the latest data from the Education Data Initiative (2).

Before the pandemic-era payment pause, more than 80% of borrowers used autopay. Today, that figure has fallen to about 40%, while millions of borrowers are either delinquent or already in default. The Department has framed the richer discount as a way to encourage borrowers to resume regular repayment habits and avoid falling further behind.

The announcement also arrives ahead of broader repayment changes scheduled to take effect this summer, including the rollout of new repayment options and the phaseout of some existing plans.

Read More: Robert Kiyosaki has a grim warning for baby boomers. This is what he recommends to protect your wealth

A 1 percentage point reduction may not sound dramatic, but over time it can translate into meaningful savings.

Imagine a borrower with $30,000 in federal student loans carrying a 6.5% interest rate. Dropping that rate to 5.5% could mean paying several hundred dollars less in interest over a two-year period, depending on the repayment term and monthly payment amount.

And rates today aren’t exactly low. Federal student loan rates remain relatively elevated by recent historical standards.

Undergraduate direct loans first disbursed between July 1, 2026, and June 30, 2027, carry a fixed rate of 6.52%, while graduate loans are set at 8.07% and PLUS loans at 9.07% (3). For borrowers whose loans qualify for the enhanced autopay benefit, shaving a full percentage point off their existing rate won’t erase the cost of borrowing, but it can noticeably reduce the amount of interest that accrues over time.

Of course, autopay isn’t ideal for everyone. Some borrowers may prefer to manually schedule payments to maintain tighter control over cash flow, especially if their income fluctuates from month to month. Others could be wary after servicing transfers and administrative hiccups during the restart of federal student loan payments.

Still, for borrowers who expect to be making payments over the next two years and are comfortable enrolling in autopay, the math is fairly straightforward. Paying a lower interest rate means a larger share of each payment goes toward reducing the loan balance, rather than covering interest charges.

At a time when many borrowers are navigating changing repayment options and trying to keep up with shifting student loan policies, this is one of the few recent changes that offers a clear, easy-to-calculate benefit — provided they sign up before the Sept. 30, 2026 deadline.

Dave Ramsey warns this is America's most common retirement mistake — here's what it is and how to fix it ASAP

Insurance companies profit most from drivers who auto-renew without shopping around. Comparing 100+ quotes takes 2 minutes and costs nothing

The new tax breaks in Trump's 'big beautiful bill' expire after 2028 — and financial experts say most people won't act in time. Here's what to do before the window closes

The average American overpays for at least one of these 5 monthly bills they never think to question. Which of these are draining your budget?

Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

U.S. Department of Education (1); Education Data (2); U.S. Department of Education (3)

This article originally appeared on Moneywise.com under the title: The Department of Education just quadrupled a key discount for student loan borrowers — but the clock is ticking

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.