Bill would lift tax and issuance caps on state student loan bonds

What does this do?

HR 2660 eliminates two restrictions on qualified student loan bonds, which are securities issued by state and local governments to fund student lending programs. The bill removes the Alternative Minimum Tax on investor interest income from these bonds and lifts the annual cap limiting how many such bonds a state may issue. Both changes apply only to bonds issued after the law takes effect.

Who does it affect?

State and local housing finance and student loan agencies that issue these bonds are most directly affected, as are the investors who purchase them. College students who borrow through state-run loan programs may be indirectly affected, though the bill does not require any savings to be passed on to borrowers.

Why does it matter?

When investors owe no additional tax on bond interest, they typically accept lower interest rates, which could reduce what state agencies pay to borrow money. Removing the annual issuance cap means states would face less competition with other project types for permission to issue these bonds. The bill does not affect federal student loans administered by the Department of Education.

Where does it stand?