Sponsors (6)
The bill enables state and nonprofit alternatives to federal and private student loans and strengthens borrower disclosures—potentially lowering borrower costs and clarifying program roles—while trading off added administrative burdens, limits on program flexibility, and possible state-level fiscal risks.
Students gain access to state-run and nonprofit education loan options with rates and fees at least as favorable as Direct PLUS, creating an alternative to private lenders that could lower out-of-pocket borrowing costs.
Students (and their families) and schools must receive clear notifications from institutions about federal loan eligibility and benefits before a State-based loan is taken, improving informed decision-making and reducing the risk borrowers choose costlier options unknowingly.
State governments and borrowers gain a clearer legal framework allowing states and nonprofits to offer education loans while prohibiting federal funding, insurance, or guarantees for those State loans, which clarifies program boundaries and helps avoid unintended federal exposure.
State governments and taxpayers face contingent fiscal and reputational risk if state-run loan programs are mismanaged, because defaults or program losses would fall on states (and ultimately taxpayers) even though federal guarantees are barred.
Students and state programs may have reduced flexibility or innovation because State loans are required to match Direct PLUS terms, which could limit tailored underwriting or product features and thereby reduce availability for some borrowers.
Schools and universities will incur additional administrative burden and complexity from requirements to provide extra counseling and disclosures to borrowers, raising compliance costs and staff time demands.
Based on analysis of 4 sections of legislative text.
Allows state-run education loan programs to be treated as permitted private education loan arrangements if non‑federally funded, state‑authorized, offer terms at least as favorable as Direct PLUS loans, and include required borrower advisals.
Introduced March 16, 2026 by Lisa Murkowski · Last progress March 16, 2026
Expands the Higher Education Act’s treatment of private education loan arrangements to explicitly include state-run loan programs and sets a federal definition for “State-based education loan program.” The law requires those state programs to be non‑federally funded or guaranteed, to be authorized under state law, to offer interest rates and fees at least as favorable as Direct PLUS loans at origination (using Truth in Lending Act calculations), and to be available only after a borrower has been advised by their school to first consider federal PLUS loans and informed of rates, fees, and key repayment benefits.