WASHINGTON, D.C. – Today, Senator Mike Braun (R-Ind.), Senator Kyrsten Sinema (D-AZ), Senator Rick Scott (R-FL), and Senator Chris Coons (D-DE) introduced the Student Loan Tax Elimination Act of 2019, which removes the “origination fee” adding unnecessary debt to student borrowers’ overall student loan costs.
“Student loan origination fees are nothing more than a hidden tax that burdens students,” said Senator Mike Braun. “This legislation is a step forward and offers one solution to addressing our broken higher education system that fails to put students first.”
“Education was my key to opportunity. Our bill eliminates burdensome federal student loan fees, helping Arizona families better afford college and increasing opportunities available to Arizona students,” said Senator Kyrsten Sinema.
Senator Rick Scott said, “Our students deserve every opportunity to graduate college and pursue successful careers without mountains of debt. Throughout my time as Governor, I focused on keeping college costs low so every Floridian could get an affordable education. In Florida, we’ve held the line on tuition for six years straight and increased the transparency of education expenses. Now, I’m proud to build on these efforts by supporting the Student Loan Tax Elimination Act so more students can afford a great education and pursue their dreams.”
“The cost of college places an ever-increasing burden on a growing number of Americans. In Delaware, 62 percent of bachelor’s degree students have student debt, and that debt averages more than $34,000 per person. I’m proud to support this measure to reduce the student loan burden for students in Delaware and across the country,” said Senator Chris Coons.
Information provided by National Association of Student Financial Aid Administrators:
Student Loan Tax Elimination Act: “The amendment made by subsection (a) shall apply with respect to loans made under part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) for which the first disbursement of principal is made, or, in the case of a Federal Direct Consolidation Loan, the application is received, on or after July 1, 2019.”
Origination fees are 1 percent for Direct Subsidized Loans and Direct Unsubsidized Loans, and 4 percent for all Direct PLUS Loans where the where the fees offset subsidies to lenders. “The Higher Education Act of 1965, as amended, specifies a loan origination fee of 1 percent for all Direct Subsidized Loans and Direct Unsubsidized Loans, and a fee of 4 percent for all Direct PLUS Loans for both parent borrowers and graduate and professional student borrowers. Origination fees are adjusted annually due to sequestration. Origination fees are a relic of the bank-based guaranteed student loan program, a program where the fees offset subsidies to lenders that no longer originate such loans.”
- Student loan origination fees sends $1.7 billion to the federal government. “Student loan origination fees, the hidden student loan tax, generated a staggering $1.7 billion in revenue for the federal government in award year 2017-18, and $8.3 billion over the past five award years.”
- The average undergraduate student pays $294 and the average graduate student pays $1,174 in origination fees. “The average undergraduate borrower in a four-year program will pay an estimated $294 in origination fees and associated interest if enrolled in a standard 10-year repayment plan, while the average graduate student in a two-year program pays about $1,174 in fees and interest on that fee if repaying over 10 years.”