Rep. Luria Introduces LOAN Act to Reform Federal Student Loans and Eliminate Interest

Press Release

Today, Rep. Elaine Luria (D-VA) announced the introduction of the Leveraging Opportunities for Americans Now (LOAN) Act to reform the federal student loan system and eliminate interest. The LOAN Act will lower education costs by replacing interest payments with a financing fee, which can be paid over time.

More than 43 million Americans have federal student loan debt, which accounts for 90% of all student loan debt in the country.

"The current federal student loan system has failed too many American families, leaving people with mounting debt from high-interest loans," Rep. Luria said. "My legislation is designed to lower the costs of higher education, eliminate interest, and ensure that we have a fairer system for loan repayment that benefits every American."

Rep. Luria's legislation is the House companion to Sen. Marco Rubio's (R-FL) Senate bill.

"BPC Action applauds Congresswoman Luria for her leadership addressing out-of-control student debt through the introduction of the LOAN Act. Now bipartisan and bicameral, this legislation offers a thoughtful option for reform of the higher education financing system," Executive Director of Bipartisan Policy Center Action Michele Stockwell said. "The changes made would support federal student loan borrowers by promoting simplification, transparency, and automatic features in the student loan repayment process.

The LOAN Act replaces the current federal student loan interest rate with a simpler, transparent, and lower cost fee. The legislation will also provide an income-based repayment plan to ensure that individuals' payment remain affordable.

The LOAN Act:

Replaces federal student loan with a one-time financing fee, beginning with loans offered after July 1, 2022;
Allows borrowers currently enrolled in a program of study to keep their existing loan or to take the new loan option without interest;
Automatically provides borrowers with an income-based repayment plan to ensure they are not asked to pay more than they are able;
Allows borrowers to still choose the standard 10-year repayment plan;
Incentives borrowers to pay off loans in advance by reducing financing fees for borrowers who pay more towards their loan than necessary; and
Requires the Secretary of Education to allow adjustments in borrowers' monthly and annual repayment obligations if the borrower is experiencing extremely, unforeseen financial hardships.

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