Sponsors (2)
The bill greatly expands student relief (interest‑free federal loans, refinancing options, and a Trust Fund to expand Pell and success grants) and speeds some regulatory actions, but does so by shifting large fiscal costs onto the federal budget, concentrating spending authority in a new Trust/Board, and introducing substantial implementation and accountability risks.
Borrowers of Federal Direct loans (current and future) will stop accruing interest beginning July 1, 2026, lowering long‑term interest costs and monthly interest charges for a large share of student loan holders.
Borrowers with eligible non‑Federal-held student loans (private or FFEL) can refinance into interest‑free Federal Direct Consolidation Loans without origination fees, simplifying payments and potentially reducing costs for people with nonfederal loans.
Borrowers who refinance or receive automatic modification retain or can preserve more generous prior benefits (including counting prior qualifying payments via a weighted calculation) and remain eligible for income‑driven repayment, which can accelerate progress to forgiveness for many long‑standing borrowers.
Expanding interest‑free status and large‑scale refinancing will significantly increase federal outlays and reduce federal interest revenues, raising fiscal costs that could increase pressure on taxpayers or contribute to higher deficits if not fully covered by the Trust Fund.
Redirecting all student loan repayments into a non‑appropriated Trust Fund and vesting spending/investment authority in a Presidential‑appointed, Senate‑confirmed Board reduces Congress's annual appropriations control and concentrates fiscal power outside regular appropriations and oversight mechanisms.
Students who begin instruction on/after July 1, 2026 lose access to new interest‑subsidized Stafford loans, removing a targeted benefit that helped low‑income students avoid interest while in school and potentially increasing out‑of‑pocket costs for vulnerable students.
Based on analysis of 4 sections of legislative text.
Stops interest on many existing federal student loans July 1, 2026, allows DOE to refinance eligible private loans into zero‑interest federal consolidation loans, and creates a Trust Fund to invest repayments and finance Pell top‑ups and grants.
Official title: 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 Peter Welch · Last progress March 24, 2026
Creates a new federal program that stops interest on most existing Federal Direct student loans as of July 1, 2026 (borrowers can opt out), lets the Department of Education refinance eligible nonfederal student loans into zero‑interest Federal Direct Consolidation Loans, and requires annual reporting on modifications and delinquencies. It also makes all Federal Direct loan repayments flow into a new Education Affordability Trust Fund managed by a six‑member board, directs investment of those assets, and allows excess returns to finance supplemental Pell grants and a new competitive postsecondary success grant program. The Secretary is given limited authority to waive some Higher Education Act procedural rulemaking steps to implement these changes more quickly.