On Thursday, Congressional Democrats put forth new legislation that aims to promptly reduce interest rates to 0 percent for the entire population of 44 million student loan borrowers in the United States.
Bill to end interest on current borrowers’ student loans
The Student Loan Interest Elimination Act, proposed by Rep. Joe Courtney (D-Conn.) and Sen. Peter Welch (D-Vt.), targets existing student loan debtors by immediately removing interest costs. The proposed legislation, however, does not extend the interest benefit to future borrowers, who would face a different interest scheme.
Under the proposed Student Loan Interest Elimination Act, interest rates for future borrowers would be determined using a “sliding scale” linked to their financial need, potentially resulting in 0 percent interest for some students. The maximum interest rate for any student would be capped at 4 percent.
Additionally, the legislation outlines the establishment of a trust fund that will allocate interest payments to cover administrative expenses related to the student loan program.
Student Loan Interest Payments to Resume in September
Following a three-year suspension due to the COVID-19 pandemic, student loan interest payments will resume in September. However, borrowers will have alternative options to manage their interest payments upon restart.
President Biden’s forthcoming SAVE program will exempt borrowers making monthly payments from being charged for unpaid monthly interest.