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NASFAA Supports House Bill To End Student Loan Tax

  • 03/13/15

Washington, DC — The National Association of Student Financial Aid Administrators (NASFAA) applauds the recent reintroduction of Rep. Susan Davis’ (D-CA) bill to end student loan origination fees — a needless tax on students who require assistance financing their postsecondary education.

The Eliminating the Hidden Student Loan Tax Act, introduced in September and reintroduced earlier this month, repeals the authorization to charge origination fees on all Direct Loans for undergraduate students, graduate students and parents. The bill, if passed, proposes to implement the change on July 1, 2015 — the day new interest rates are annually set for student loans.

Origination fees date back to the 1980s when, under the Federal Family Education Loan (FFEL) program, student loans were serviced and disbursed by private lenders, and the fee offset costs to originate those loans. That private-federal partnership dissolved in 2010 — and despite the federal government now originating student loans directly, the fee remains, having metastasized into a multi-billion dollar source of revenue at the expense of students. A $10,000 Parent PLUS Loan, for example, currently carries a $400 origination fee that does not actually go toward helping to administer the program. On top of that, borrowers are expected to pay back the full amount of the loan, including the origination fee, plus interest!

“Student loan origination fees are an expensive relic and an unnecessary tax on borrowers,” NASFAA President Justin Draeger says. “NASFAA gives its full and unequivocal support to Rep. Davis’ bill to give much-needed relief to students and their parents.”

About NASFAA
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents more than 20,000 financial aid professionals at nearly 3,000 colleges, universities and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the U.S. Based in Washington, DC, NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis and training for financial aid administrators. For more information, visit www.nasfaa.org.

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