Braun
Senators Mike Braun (R-Ind.), Kyrsten Sinema (I-Ariz.), Elizabeth Warren (D-Mass.), Josh Hawley (R-Mo.), Tim Kaine (D-Va.), Chris Coons (D-Del.), and Chris Van Hollen (D.-Md.) introduced their bipartisan Student Loan Tax Elimination Act to remove an antiquated tax that adds unnecessary debt to student borrowers and worsens the country’ national debt posture.
Representative Lloyd Smucker (R-Pa.-11) introduced the companion legislation in the House of Representatives.
“We should do what we can to ease the burden on American students, and removing this unnecessary tax on student borrowers won’t cost a thing,” Sen. Braun said. “I’m proud to lead this bipartisan bill to eliminate a tax that is not good for borrowers or taxpayers.”
Federal student loans currently contain a hidden tax called an “origination fee.” Origination fees historically existed to offset the costs of private-sector partners that, in the current federal student loan program, no longer originate federal student loans.
Before a federal student loan is disbursed, an origination fee is calculated as a tax to the borrower, increasing the overall borrower loan cost. The origination fee is subsequently deducted from the amount actually received by borrower. While a student borrower is given less than their guaranteed loan amount, they are still expected to pay that dollar amount back – with interest.
Since private sector partners no longer originate loans, there are not costs to offset as there were when the fee was established, so this fee is no longer necessary.
Click here to read the bill.