The 18-year-old has played 21 times for the Terriers in all competitions, helping them solidify their place in the top half of the table.
The news will come as a boost for Huddersfield boss Carlos Corberan, 38, who is hoping to fire the west Yorkshire club back into the top flight.
Colwill has found himself being compared to current Blues ace Reece James, a comparison he appreciates.
He said: "I wouldn't get ahead of myself and compare myself to Reece James personally because you see what he does week-in-week-out, he's a great player.
"But it's nice and I appreciate it, but at the same time it doesn't really mean that much to me because they can compare me to whoever they like but it's down to me to work hard and put in the performances I need to help me and the team out.
"Because I can listen to it all and get big-headed but then nothing could happen and it'll all be pointless. Any player can get called or get compared to Reece James but it's down to me at the end of the day."