US House Rep Susan Davis' office issued the following:
Washington, July 10, 2019
WASHINGTON – Congresswoman Susan Davis (D-CA), Chair
of the Higher Education and Workforce Investment Subcommittee, and Rep.
Lloyd Smucker (R-PA), Ranking Member of the subcommittee, and Rep.
Sharice Davids (D-KS) introduced legislation to eliminate all
administrative fees on federal student loans, which would save students
over $1.7 billion per year.
“Students who are about to take control of their future and
invest in their higher education shouldn't be hit with hidden fees.” said Rep. Davis.
“Student debt makes it harder for graduates to fully participate in our
economy, like buying a home or maybe venture out on a new startup.
Federal student loans are an investment in our nation’s future. We need
to be sure we are getting a good return on that investment by ensuring
graduates can contribute to the economy when they leave college.”
“Today’s student loan framework isn’t working,” said Rep. Smucker. “Students
and parents should fully understand the terms of the federal dollars
they are borrowing. When the federal government created the Federal
Direct Loan Program, it also created various fees and policies -
including loan origination fees. At the end of the day, the origination
fee is only adding to a borrower’s debt load, and making the web of
borrowing and repaying loans more confusing. Eliminating the origination
fee is a good step towards streamlining the Federal Direct Lending
Program. This will reduce the cost of borrowing, and empower students to
gain a better understanding of what they are responsible for repaying.”
“Too many students in Kansas and across the country are struggling with student loan debt,” said Rep. Davids.
“We should be encouraging students to pursue higher education, not
penalizing them, and we can start by eliminating these unnecessary and
costly fees. This legislation will reduce the burden of student loans up
front so all our students can have the opportunity to succeed.”
The Fee Free Student Loan Act removes all administrative
fees, which can range from one to four percent, on federal student
loans.
For example, if a college student takes out an estimated
$30,000 in federal loans over the course of their undergraduate
education, an average origination fee of 1% (a conservative estimate)
adds up to $300.
As a result of legislation passed in 2010, all federal
student loans issued through the Department of Education were taken out
of the hands of private lenders and issued directly by the Department.
Despite the elimination of private lenders in the federal loan process,
students are still being charged administration fees on student loans.
This hidden tax adds billions of dollars to student debt every year.