Student Loan Interest Elimination Act
Key claim: The Student Loan Interest Elimination Act (HR8045) would set federal student-loan interest to 0% for existing and new loans beginning July 1, 2026, refinance non-Direct federal loans to 0% interest without origination fees, and create an Education Affordability Trust Fund funded by loan payments to cover program costs and potentially expand Pell Grants.
Abstract
(HR8045 · 119th Congress) Student Loan Interest Elimination Act This bill eliminates interest on existing and new federal student loans beginning on July 1, 2026. Specifically, for existing federal student loans, the bill directs the Department of Education (ED) to establish and implement procedures to (1) modify the terms of Federal Direct Loans so that beginning on July 1, 2026, no interest shall accrue on such a loan; and (2) allow a borrower to opt out of this loan modification. Additionally, ED must establish and implement procedures to (1) refinance eligible loans that are not Federal Direct Loans (e.g., privately held Federal Family Education Loans and Perkins Loans), and (2) allow a borrower to opt out of this loan refinancing. The bill outlines the terms and conditions of these refinanced loans, including by prohibiting ED from charging origination fees and specifying that no interest shall accrue on these loans. For new federal student loans made on or after July 1, 2026, the bill sets the applicable interest rate at 0%. The bill establishes the Education Affordability Trust Fund. ED must deposit all payments made on federal student loans into this trust fund. The Education Affordability Trust Fund Board, as established by this bill, must transfer the assets from investments of this trust fund to ED to pay for the administrative costs of carrying out federal student loan programs. The bill allows ED to use excess amounts of funds in the trust fund to carry out a Supplemental Pell Grant Program. Latest action (2026-03-24): Referred to the Committee on Education and Workforce, and in addition to the Committee on the Budget, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Why this matters
Eliminating interest on all federal student loans would fundamentally alter repayment economics for tens of millions of borrowers and shift the federal loan program from a partially self-financing model to one dependent on a dedicated trust fund. For institutions and the aid system, tying loan repayments to a fund that could also expand Pell Grants links borrower repayment directly to grant-aid capacity, a notable structural change even though the bill is only introduced.