Sponsors (9)
The bill sharply reduces borrowing costs and expands grant support for many students, but does so at substantial fiscal cost and with governance, implementation, and program‑design risks that could shift costs, introduce administrative confusion, and leave some vulnerable students or taxpayers worse off.
Most federal Direct loan borrowers (students and parents) will stop accruing interest starting July 1, 2026 and new Direct loans will carry 0% interest, lowering loan balances and monthly interest costs.
Borrowers with eligible non‑federal loans can refinance into interest‑free Direct Consolidation loans that preserve access to preexisting forgiveness/benefits and inclusion in income‑driven repayment calculations, simplifying repayment while protecting prior benefits.
Pell recipients would receive proportional supplemental Pell Grants that increase grant aid and do not count against duration limits, boosting support for low‑income students.
Taxpayers will likely face substantially higher federal costs because eliminating interest accrual, offering 0% refinancing without fees, and reducing federal interest revenue increase government outlays and shrink Treasury receipts.
Terminating subsidized Stafford authority removes targeted interest subsidies for need‑based undergraduates, which may increase out‑of‑pocket costs for the lowest‑income students.
Making unsubsidized loans 0% while eliminating subsidized loans could encourage borrowing up to higher unsubsidized caps and increase principal balances for some students, shifting different kinds of cost and risk onto borrowers.
Based on analysis of 4 sections of legislative text.
Stops interest on many Federal Direct Loans starting July 1, 2026; makes new federal direct loans interest‑free; allows refinancing of eligible private loans into interest‑free federal consolidations; creates a Trust Fund to finance the program.
Official title: To amend the Higher Education Act of 1965 to eliminate interest on student loans, establish the Education Affordability Trust Fund, increase annual and aggregate loan limits, and for other purposes.
Introduced March 24, 2026 by Joe Courtney · Last progress March 24, 2026
Creates a new program to stop interest accrual on many existing Federal Direct Loans starting July 1, 2026, makes new Federal Direct Unsubsidized, PLUS, and Consolidation loans interest‑free for loans first disbursed or applied for on or after July 1, 2026, and allows borrowers to refinance eligible non‑Federal student loans into interest‑free Federal Direct Consolidation Loans. Establishes an Education Affordability Trust Fund to receive all federal student loan repayments and directs a Board to invest those assets and transfer funds to support the zero‑interest loan program and related grant programs. The bill also waives certain procedural rulemaking and calendar requirements to let the Department of Education implement changes without following some statutory timelines and negotiated‑rulemaking procedures.