House Introduces Bipartisan Bill to Eliminate Student Loan Origination Fees

By Allie Bidwell, NASFAA Managing Editor

A bipartisan group of representatives on Wednesday introduced a bill to eliminate student loan origination fees, which essentially function as a tax on federal student loans. A companion bill was introduced in the Senate last month. 

The House bill—dubbed the Fee Free Student Loan Act and introduced by Reps. Susan Davis (D-CA), Lloyd Smucker (R-PA), and Sharice Davids (D-KS)—would save student loan borrowers more than $1.7 billion each year. 

"Students who are about to take control of their future and invest in their higher education shouldn't be hit with hidden fees." Davis said in a statement. "Student debt makes it harder for graduates to fully participate in our economy, like buying a home or maybe venture out on a new startup. Federal student loans are an investment in our nation's future. We need to be sure we are getting a good return on that investment by ensuring graduates can contribute to the economy when they leave college."

During the 2019 NASFAA National Conference in Orlando last month, 2018-19 National Chair Lori Vedder urged financial aid administrators to write to their representatives to end student loan origination fees.

NASFAA President and CEO Justin Draeger said the bill is a welcome change and a step toward a bipartisan fix to lift some financial burden from students. 

"There are many things lawmakers can do to ease the financial burden on students and families and increase their understanding of the federal student loan program, and eliminating student loan origination fees is a big step in the right direction," Draeger said. "We call on all members of Congress to support bipartisan efforts to eliminate these hidden fees."

NASFAA has long advocated for the removal of student loan origination fees, which range from 1% to 4% depending on the type of student loan. A 2017 issue brief from NASFAA found the federal government collected more than $8.3 billion in origination fees from students and parents from 2013-14 to 2017-18. The fees are an outdated method that was previously used to offset subsidies to lenders in bank-based guaranteed student lending.

"Today's student loan framework isn't working," Smucker said in a statement. "Students and parents should fully understand the terms of the federal dollars they are borrowing. … At the end of the day, the origination fee is only adding to a borrower's debt load, and making the web of borrowing and repaying loans more confusing. Eliminating the origination fee is a good step towards streamlining the Federal Direct Lending Program. This will reduce the cost of borrowing, and empower students to gain a better understanding of what they are responsible for repaying."

 

Publication Date: 7/15/2019


David S | 7/15/2019 12:42:57 PM

Marguerite - My guess is that instead of this going through as a standalone bill, it's folded into Reauthorization, whenever that actually happens. I'll be very happy if I'm wrong and it happens sooner, but even while there is obviously bipartisan support for this now, it's probably still a few years away from happening.

Marguerite J | 7/15/2019 9:26:26 AM

do we know the time frame of when this will go into effect, if it is passed?

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