Affordable Loans for Students Act

Summary#

This bill would change the Higher Education Act to set the interest rate on many federal student loans to 2.0 percent. For loans the Department of Education (the Secretary) already holds, the Secretary must change loan terms so the interest rate is 2.0 percent starting the first July 1 after the law is enacted. For federal student loans not held by the Secretary, the Secretary must refinance them as Federal Direct Consolidation Loans and pay the current holders, unless a borrower opts out. Loans refinanced under the bill would have no origination fee, keep a borrower’s original repayment term unless the borrower chooses a different plan, and carry a 2.0 percent interest rate. The bill also sets a 2.0 percent interest rate for new Federal Direct Stafford, Unsubsidized Stafford, PLUS, and Direct Consolidation Loans first disbursed or applied for on or after the first July 1 after enactment. The Secretary must report, starting 180 days after the second July 1 after enactment and annually thereafter, how many loans were modified or refinanced and how many of those borrowers are delinquent. The bill adds definitions and makes conforming changes to the Higher Education Act.

What it means for you#

• If you have an eligible federal student loan held by the Secretary, your loan terms can be changed automatically so the interest rate becomes 2.0 percent on the unpaid principal balance starting the first July 1 after the law takes effect.
• If your federal student loan is not held by the Secretary, that loan can be refinanced automatically into a Federal Direct Consolidation Loan at 2.0 percent unless you opt out. You would not be charged an origination fee and your repayment period would not automatically be lengthened.
• Borrowers can still choose a different repayment plan later under existing rules.

Expenses#

No publicly available information. The bill text does not include estimates of costs or effects on the federal budget.

Proponents' View#

Sponsors listed in the bill metadata (Representative Michael Lawler and others) introduced the measure to lower interest rates to 2.0 percent and to create procedures to modify or refinance eligible federal student loans. The bill text describes automatic modification for loans held by the Secretary and automatic refinancing (with an opt-out) for loans not held by the Secretary.

Opponents' View#

No publicly available information.