WASHINGTON, D.C. – Yesterday, Senators Jim Banks (R-Ind.) and Tim Kaine (D-Va.) introduced theStudent Loan Tax Elimination Act. This bill would eliminate origination fees for federal student loans. Rep. Lloyd Smucker (R-Pa.) and Rep. Sharice Davids (D-Kan.) are leading the bill in the House.
Senator Jim Banks (R-Ind.) said, “Students deserve a fair deal when paying for college. My bill ends a hidden tax on student loans and ensures our next generation has a greater opportunity to receive a more affordable education.”
Senator Tim Kaine (D-Va.) added, “Student loan debt is holding Virginia families and the overall economy back. It should be easier, not harder, for American students to afford to go to college if that is the right path for them. That’s why I’m introducing this bipartisan, commonsense legislation to finally get rid of an antiquated tax on student loan borrowers.”
Melanie Storey, President & CEO of the National Association of Student Financial Aid Administrators (NASFAA) said, “The Student Loan Tax Elimination Act ensures federal student loans include only the funds needed to support educational costs — eliminating a hidden tax on students and families — and provides a key step toward greater transparency and affordability.”
Key Provisions of the Student Loan Tax Elimination Act are:
- Amend the Higher Education Act to repeal origination fees imposed upon federal student loans.
Full text of the bill can be found here
This bill has been endorsed by the National Association of Student Financial Aid Administrators, the American Psychological Association, and AccessLex Institute.
Background:
The Higher Education Act of 1965 built the structure for a bank-based student lending program, a precursor to the modern student financial aid system. To help lenders manage the costs of those programs, Direct Subsidized and Direct Unsubsidized loans were charged a 1.057 percent fee, and PLUS loans were charged a 4 percent fee. Legislation in 2010 took all federal student loans out of the hands of private lenders and into the Department of Education. Despite this, these fees have remained.
According to the National Association of Student Financial Aid Administrators, which supports this bill, the federal government has taken in more than $6.7 billion over five years from this hidden tax. During a time when college costs continue to soar, this fee continues to artificially inflate costs for students. Repealing this fee would help students and families get a more affordable education.
