Federal student loans get cheaper: origination fees eliminated for new borrowers
S. 3538 — Student Loan Tax Elimination Act · Filed by Jim Banks (R-IN) · 4 cosponsors · Introduced Dec 17, 2025 · Referred to committee
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What it does
This bill eliminates origination fees that the federal government currently charges borrowers when they take out Federal Direct loans. Starting July 1 after the bill is enacted, new Direct loans and consolidation loans will no longer have these upfront fees deducted from the loan amount, saving borrowers money on every new federal student loan.
Why we flagged it
The bill's sole operative mechanism is the repeal of an existing fee authority, directly lowering borrower costs on federal student loans. It is a straightforward consumer-benefit measure with no hidden riders or narrow beneficiaries.
What the text implies
- Elimination of origination fees reduces federal revenue from loan origination; the bill does not specify how the Department of Education will absorb this revenue loss or whether it will seek appropriations to offset it.
- Borrowers with existing loans carrying origination fees are not affected; the benefit applies only to loans disbursed after July 1 following enactment, creating a two-tier system.
The full analysis lists 3 implications of this text.
Who stands to gain
federal student loan borrowers (direct beneficiaries of fee elimination)