Congress cuts student loan costs by eliminating origination fees
H.R. 3165 — Student Loan Tax Elimination Act · Filed by Lloyd Smucker (R-PA) · 4 cosponsors · Introduced May 1, 2025 · Referred to committee
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What it does
This bill eliminates origination fees on federal student loans by repealing the provision in the Higher Education Act that authorizes them. Starting July 1 after enactment, borrowers taking out new Direct Loans will no longer pay the 1.05–1.1% upfront fee currently deducted from loan disbursements, saving them money on the cost of borrowing.
Why we flagged it
The bill's sole operative mechanism is the repeal of an existing fee, directly lowering borrowing costs for federal student loan recipients. It is a straightforward consumer-benefit measure with no hidden provisions or riders.
What the text implies
- Elimination of origination fees reduces federal revenue from loan origination, potentially increasing the net cost of the Direct Loan program to taxpayers unless offset by appropriations or other revenue.
- Borrowers who took out loans before the effective date (July 1 following enactment) will not benefit retroactively; the fee elimination applies only to new loans, creating a cohort divide.
The full analysis lists 3 implications of this text.
Who stands to gain
federal student loan borrowers (all new Direct Loan recipients)