Student Loan Interest Elimination Act

Key Points

• Starting July 1, 2026, the interest rate on all new federal student loans would be set to 0%. Students would only repay the principal amount they borrowed, with no interest charges added over time.
• Existing federal student loan borrowers would automatically have their loans modified so no more interest builds up. People with older types of federal loans could also refinance into the new zero-interest program through a consolidation loan with no origination fees.
• A new Education Affordability Trust Fund would be created to manage money from student loan repayments. A 6-member board of investment experts would invest these funds in safe bonds, and the returns would help cover the costs of running the loan program.
• If the Trust Fund earns more money than needed for administrative costs, the extra funds could go toward boosting Pell Grants for lower-income students, potentially pushing their total aid above the normal Pell Grant maximum.
• Annual and total borrowing limits for students would be adjusted for inflation starting July 1, 2027, so the amount students can borrow keeps pace with rising costs of living. The subsidized loan category would be eliminated, replaced by higher unsubsidized loan limits at 0% interest.