HR3165-119

What This Bill Does

The Student Loan Tax Elimination Act repeals section 455(c) of the Higher Education Act, the subsection that authorizes origination fees on federal Direct Loans. The repeal applies to loans under Direct Loan program part D whose first principal disbursement is made on or after the July 1 following enactment, and to Federal Direct Consolidation Loan applications received on or after that same date. The bill is a narrow borrower-cost measure: it does not forgive principal or change interest rates, but it removes an up-front federal fee that reduces loan proceeds or increases borrowing cost.

Who Benefits and How

Federal student loan borrowers benefit because new Direct Loans no longer carry origination fees after the effective date. Graduate and professional students benefit because they often borrow larger amounts and therefore pay larger fee totals. Parent PLUS borrowers benefit from lower upfront borrowing costs on new loans. Direct Consolidation Loan applicants benefit when applications after the effective date are not subject to the repealed fee authority.

Who Bears the Burden and How

Department of Education loan program staff must update fee calculations, forms, servicing instructions, and disbursement rules. Student loan servicers must revise borrower disclosures and account setup for loans without origination fees. Federal student loan accounts lose fee revenue that would otherwise offset program costs. College financial aid offices must explain changed loan proceeds and cost-of-borrowing information.

Key Provisions

• Repeals the Higher Education Act Direct Loan origination fee subsection.
• Applies to new Direct Loans first disbursed on or after the July 1 following enactment.
• Applies to Direct Consolidation Loan applications received on or after that date.
• Reduces upfront federal borrowing costs without changing principal forgiveness or interest-rate rules.