Senate bill would zero out interest on all federal student loans

What does this do?

S 4169 would eliminate interest on federal student loans, setting the rate to zero percent for new loans taken out on or after July 1, 2026, and automatically stopping interest from building on existing loans starting the same date. Annual borrowing limits would be raised and adjusted for inflation going forward. The subsidized loan program, which currently pauses interest while students are in school, would be discontinued since all loans would carry no interest.

Who does it affect?

The bill would affect the roughly 43 million Americans who currently hold federal student loans, as well as future college students who plan to borrow. Taxpayers more broadly could also be affected, since eliminating interest changes how the government recoups the cost of lending money for college.

Why does it matter?

Borrowers would repay only the amount originally borrowed, with no additional cost from interest accumulating over time. Eliminating interest alters how the government recovers the cost of running the student loan program, a function that would shift to a new Education Affordability Trust Fund sustained by investment earnings from loan repayments.

What does it cost, and who pays?

• New trust fund covers loan admin costs
• Surplus may boost Pell Grants
• Grants for colleges under 3% tuition cap