Legislation Introduced to Exclude State-Based Loan Programs from Preferred Lender Requirements
By Megan Walter, Senior Policy Analyst
Sens. Bill Cassidy (R-La.) and Lisa Murkowski (R-Alaska) introduced the State-Based Education Loan Awareness Act last week, a bill that would clarify how state-based education loan programs are treated under federal financial aid rules by excluding them from the definition of a “preferred lender arrangement” (PLA).
Under current law, institutions s that recommend specific private lenders may be considered to have a PLA, which can trigger a series of disclosure, reporting, and conduct requirements designed to prevent conflicts of interest and protect borrowers.
The State-Based Education Loan Awareness Act would carve out an exception for certain state-based loan programs, allowing institutions to share information about them without being subject to PLA requirements.
To meet the requirements for the exclusion, the loan program must:
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Be provided by a state agency, state authority, or nonprofit organization
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Provide loans that are not funded, insured, or guaranteed by the Federal government
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Be authorized, established, or chartered by state law, or otherwise approved by the state
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Offer interest rates and fees that are at least as favorable as those for federal Direct PLUS loans at the time of origination
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Only be made available to a borrower after they have been advised of their eligibility for Federal education loans and of the interest fees, rates, and benefits of Federal education loans.
Similar versions of this bill were introduced in the 116th Congress by Murkowski and in the 118th Congress by Rep. Pete Sessions (R-Texas), which would have also excluded loans made by federal agencies other than the Department of Education (ED) from PLA requirements, in addition to state-based education loans.
This bill is in the early stages of introduction and now awaits consideration from the Senate Health, Education, Labor, and Pensions (HELP) Committee.
Publication Date: 3/23/2026
Peter G | 4/1/2026 7:5:48 PM
No one is probably checking these comments anymore, but can we clarify if 'a state' means any state, or is it specific to a state affiliated either with a school location or student resident?
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