Submitted by Office of U.S. Sen. Jim Banks
Banks
On Wednesday, Dec. 17, Senators Jim Banks (R-Ind.) and Tim Kaine (D-Va.) introduced the Student 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.
“Students deserve a fair deal when paying for college,” Sen. Banks said. “My bill ends a hidden tax on student loans and ensures our next generation has a greater opportunity to receive a more affordable education.”
“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,” said Melanie Storey, President & CEO of the National Association of Student Financial Aid Administrators.
Click here to read the full text of the bill.
This bill has been endorsed by the National Association of Student Financial Aid Administrators, 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, who supports this bill, the federal government has taken in more than $6.7 billion over a five-year period from this hidden tax. During a time where 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.