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AAMC, Higher Ed Groups Advocate for Elimination of Student Loan Origination Fees

April 23, 2021

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CONTACTS
Brett Roude, Legislative Analyst

On April 19, the AAMC joined 10 higher education groups, led by the AccessLex Institute, in letters to congressional leadership and the White House Domestic Policy Council, urging the inclusion of the Student Loan Tax Elimination Act (S. 847) in the forthcoming American Families Plan.

The bipartisan Student Loan Tax Elimination Act — which was introduced by Sens. Mike Braun (R-Ind.), Kyrsten Sinema (D-Ariz.), Chris Coons (D-Del.), Josh Hawley (R-Mo.), Raphael Warnock (D-Ga.), and Elizabeth Warren (D-Mass.) — would eliminate origination fees on all federal student loans disbursed on or after March 27, 2020.

The letters noted, “Origination fees reduce the amount of loan dollars disbursed to borrowers by a certain percentage (1 percent for Direct Stafford Loans and 4 percent for Direct PLUS Loans). This tax on students creates confusion and increases costs for borrowers, who are responsible for repaying the withheld amount, plus the interest that accrues on that amount.”

“As the COVID-19 pandemic continues and many Americans struggle to make ends meet, the upfront taking of up to 4 percent of the proceeds of a federal student loan could be the difference between whether a student, particularly low-income students, can pursue and complete their degree or not,” they added.

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