Student Loans and the Cost of Education — 2026-10-02

Top developments

Federal Auto-Pay Interest Rate Discount Extended to Year-End

On September 29, 2026, the U.S. Department of Education announced an extension of the deadline for borrowers to enroll in auto-pay and receive a temporary 1-percentage-point interest rate reduction. The new deadline is December 31, 2026, extended from the original September 30, 2026 cutoff. Borrowers who enroll or are already enrolled will benefit from the rate reduction through June 30, 2028. The extension applies to all borrowers with Federal Direct Loans originated after July 1, 2012, including student and parent borrowers.

South Korean Students Tap Loans for Basic Living Expenses; Debt Surge 30% in Two Years

Student living expense loans from the Korean Scholarship Foundation (한국장학재단) surged to 850.6 billion won (approximately $652 million USD), a more than 30% increase over two years. The spike reflects growing financial strain on university students struggling with food and transportation costs. Loan delinquency balances also jumped 30% in the same period, raising concerns about mounting youth debt burdens. The surge is not confined to low-income households; higher-income brackets also showed increased borrowing. and

1 sources

mbn.co.kr

mbn.co.kr

Education Department Launches New Default Resolution Portal

On September 30, 2026, the Department of Education debuted a new resolution portal to help borrowers with defaulted federal student loans. The portal represents a long-awaited tool for borrowers seeking to resolve their loan defaults, though questions remain about its full operational scope and effectiveness.

Deadlines Extended Amid Confusion Over Repayment Plan Changes

The Education Department quietly extended multiple critical deadlines for student loan borrowers, including the 90-day deadline to switch repayment plans and the auto-pay enrollment deadline. On October 1, 2026, the Department also updated the income-driven repayment plan application, providing borrowers an additional avenue to select repayment options. These last-minute extensions have sparked confusion among borrowers who faced earlier firm deadlines. and

Context & numbers

U.S. Loan Default Crisis: As of June 2026, more than 9.3 million federal student loan borrowers were in default, holding $234 billion in outstanding loans—approximately 14% of the total $1.64 trillion federally managed portfolio. Default numbers increased by approximately 400,000 borrowers in the most recent quarter.

Delinquency Trend: The student loan delinquency rate (balances 90+ days past due as a share of total debt) reached 10.6% in Q2 2026, up from 10.16% a year earlier. Additionally, 8.931 million federal borrowers had loans at least 30 days delinquent as of 2026 Q1. and

Japan Private University Costs: In Japan, private university first-year costs averaged ¥1.21 million (approximately $8,200 USD) for humanities, ¥1.60 million for sciences, and ¥4.78 million for medicine and dentistry programs.

South Korean National Scholarship Restructuring: Beginning in 2027, South Korea will consolidate its national scholarship support tiers from 10 income brackets to 5, with a nomenclature change from "1–10 categories" to "Category 가–마" (A–E).

On the radar

• December 31, 2026: Final deadline for federal student loan borrowers to enroll in auto-pay to lock in the 1% interest rate reduction through June 2028.
• Grad PLUS Program Termination: Graduate students continue reporting constraints on federal borrowing due to the termination of the Grad PLUS program, with many tapping alternative funding sources or reconsidering further studies.
• Income-Driven Repayment Plan Updates: Watch for additional guidance as the Department of Education continues rolling out refinements to income-driven repayment plan applications and eligibility rules.