Congressional Democrats unveiled a new bill on Thursday aimed at providing immediate relief to the forty-four million student loan recipients in the United States by reducing their interest rates to 0 percent. Rep. Joe Courtney (D-Conn.) and Sen. Peter Welch (D-Vt.) introduced the Student Loan Interest Elimination Act legislation.
Under the proposed act, existing borrowers would benefit from the interest rate reduction. In contrast, future borrowers would experience a different system where interest rates would be determined based on a “sliding scale” tied to their financial needs. Even with this new system, some borrowers may still be eligible for 0 percent interest, and no student would face an interest rate higher than 4 percent.
The bill would establish a trust fund where interest payments would fund the student loan program’s administrative expenses.
Rep. Courtney emphasized that students and families are already struggling with the rising costs of higher education, and the federal government should not further exacerbate the problem by profiting from federal student loans. He highlighted the significant amount of interest students currently pay over a 10-year period, which can substantially impact their finances and quality of life.
However, due to the majority held by Republicans in the House, it is anticipated that the bill may encounter challenges in obtaining the necessary support to pass.
Student loan interest payments are set to resume in September following a three-year pause initiated during the COVID-19 pandemic. Borrowers will have other options to manage their interest payments when reinstated.
President Biden’s forthcoming SAVE program also offers relief for borrowers who make their monthly payments by exempting them from unpaid monthly interest charges.
The introduction of this legislation follows the recent striking down of President Biden’s previous student loan forgiveness plan by the Supreme Court. The program would provide debt relief of up to $10,000 for most federal borrowers and up to $20,000 for Pell Grant recipients. Republicans praised the Court’s decision, while Democrats continue to push for alternative measures to protect borrowers.