Picking up a persistent clamor from students and aid offices alike, Rep. Susan Davis (D-CA) has introduced legislation that would end the practice of charging origination fees on student loans. The Fee Free Student Loan Act was introduced on September 24 and repeals the authorization to charge origination fees on all Direct Loans for undergraduate students, graduate students, and parents, with a proposed implementation date of July 1, 2015.
In a press release announcing the bill Rep. Davis describes origination fees as a tax on students, and points out that it adds billions of dollars to outstanding student debt in a decidedly un-transparent manner. The ongoing existence of origination fees is a residue of the Federal Family Education Loan (FFEL) Program; what began as a temporary budget measure has metastasized into a multi-billion dollar source of revenue at the expense of students.
NASFAA has been calling for an end to origination fees for years, and included such a recommendation in our proposals for reauthorization that were submitted to Congress last summer. More recently NASFAA placed a renewed focus on this issue in light of ongoing sequestration cuts that result in an increase in the origination fee each October. These trivial, yet administratively burdensome, increases represent mere pennies on most loans, but seem arbitrary to students and further erode their belief in the predictability and reliability of the federal aid system.
While the bill is not currently scheduled for a vote, there is a slight possibility it will receive attention during the so-called “lame-duck” session of Congress scheduled for November. Regardless of the ultimate fate of this specific bill, it remains an important and welcome issue marker as reauthorization continues into the next Congress.
Publication Date: 10/1/2014