Student Loan Reform: No Interest, New Fees, and Income-Driven Repayment
This bill reforms federal student loans by replacing traditional interest with upfront financing fees. It also introduces a new income-dependent repayment plan, adjusting monthly payments based on the borrower's income. These changes could significantly alter the cost and flexibility of higher education financing for future students.
Key points
Interest elimination: Starting July 1, 2022, new federal student loans will have 0% interest, replaced by a one-time financing fee.
New financing fees: Fees will be 20% of the loan principal for undergraduate and certain other programs, and 35% for PLUS and graduate/professional loans.
Fee reduction for prepayment: Borrowers may receive a credit or refund on financing fees for early loan repayment, with the amount depending on income.
Income-dependent repayment: A new plan sets monthly payments at 10% of income above 150% of the poverty line, with income data shared by the Treasury.
Repayment plan options: For new loans, only a 10-year fixed plan and the new income-dependent plan will be available.
Borrower protections: The bill includes appeal processes, deferment options for hardship, and preserves existing loan forgiveness options.
Expired
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