Student Loan Overhaul: Replacing Interest with Upfront Fees and Income-Driven Repayment
This legislation fundamentally changes federal student loans by eliminating traditional interest and replacing it with a one-time financing fee (20% or 35% of the principal) charged upfront. It also establishes a new, mandatory income-driven repayment plan where monthly payments are calculated based on 10% of the borrower's discretionary income. These changes apply to new loans disbursed starting July 1, 2024.
Key points
Federal student loans will have 0% interest; instead, a one-time financing fee (20% or 35%) is charged upon disbursement.
A new Income Dependent Repayment Plan is introduced, capping annual payments at 10% of income above 150% of the poverty line.
Repayment obligations are automatically linked to IRS tax data; failure to file a required tax return can result in loan delinquency.
Borrowers who pay off their loans early may receive a partial refund of the financing fee, depending on their income level.
Expired
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