Sponsors (2)
The bill sharply expands interest‑free federal lending and creates a dedicated Trust Fund to increase Pell and grant support—potentially lowering costs and improving aid access for many students—while shifting fiscal costs and control away from traditional appropriations, increasing budgetary risk, administrative complexity, and reducing some procedural safeguards.
Current and future federal student-loan borrowers (including those with eligible private loans) will stop accruing interest on Federal Direct loans beginning July 1, 2026, and eligible non‑Federal loans can be refinanced into interest‑free Federal Direct Consolidation Loans, lowering long‑term borrowing costs and simplifying payments.
Borrowers who consolidate or modify loans preserve (or can adjust to preserve) more generous preexisting benefits and have prior qualifying payments counted under a defined weighted calculation for income‑driven repayment and forgiveness, which can accelerate progress to loan forgiveness for long‑time borrowers.
Establishes an Education Affordability Trust Fund (financed by loan repayments) plus governance, audit, and disclosure rules to provide a dedicated, non‑appropriated source for supplemental Pell awards and competitive Postsecondary Student Success grants, creating a new ongoing funding stream for student aid and institutional improvement.
Expanding interest‑free status, refinancing options, and redirecting revenues to a Trust Fund will reduce federal interest revenues and increase federal outlays, potentially raising budget deficits or taxpayer costs and crowding out other spending if offsets are not provided.
The bill eliminates authority for new subsidized Stafford loans for instruction on/after July 1, 2026, removing an interest‑subsidy that helped low‑income students and potentially increasing out‑of‑pocket costs or shifting costs to families and institutions.
Concentrating significant spending and investment authority in a Presidential‑appointed, Senate‑confirmed Trust Fund Board (with executive‑level pay and discretion over investments and spending, including paying administrative costs from principal) reduces Congress's annual appropriations control and raises governance, accountability, and intergenerational‑equity concerns.
Based on analysis of 4 sections of legislative text.
Stops interest accrual on many federal student loans from July 1, 2026, allows refinancing into zero‑interest federal loans, and creates a Trust Fund for Pell top‑ups and grants.
Introduced March 24, 2026 by Peter Welch · Last progress March 24, 2026
Removes interest on many federal student loans starting July 1, 2026, and lets the Department of Education refinance certain privately held federal and nonfederal student loans into zero‑interest federal consolidation loans (with an opt‑out for borrowers). It creates an Education Affordability Trust Fund to receive loan repayments and investment returns, directs how excess returns may be used for Pell top‑ups and competitive postsecondary grants, requires reporting to Congress, and gives the Secretary limited authority to waive certain procedural rulemaking steps while implementing these changes.