Welch, Courtney Reintroduce Bicameral Legislation to Eliminate Federal Student Loan Interest

Mar 24, 2026
WASHINGTON, D.C.–U.S. Senator Peter Welch (D-Vt.),a member of the Senate Finance Committee,today joinedU.S. Representative Joe Courtney (D-CT-02)in reintroducing theStudent Loan Interest Elimination Act, bicameral legislation to refinance the interest on federal student loans for all existing borrowers to zero percent and cap interest rates for future borrowers. The lawmakers’ legislation would make higher education more affordable by immediately eliminating interest rates for the nearly 43 million Americans with existing federally held student loans.
“Student debt holds so many Vermonters back from achieving their dreams—whether they’re hoping to buy a home, grow their family, or simply trying to make ends meet. It shouldn’t be this expensive to get an education, and it shouldn’t be this hard to pay off your debt,”said Senator Welch.“Eliminating interest rates on all federal student loans and capping future interest rates is an essential step in making affordable college education a reality for students in Vermont, Connecticut, and across the country.
“At a time when Americans are experiencing a cost-of-living crisis, student loan repayment with interest adds a crushing burden to millions of middle-class student loan borrowers,”said Rep. Courtney. “The fact that the federal government receives a windfall from interest payments made by borrowers caught in this debt trap is particularly galling and serves no public interest. TheStudent Interest Elimination Actprovides a budget neutral solution to this problem by eliminating all interest payments to the government with a mechanism to ensure that taxpayers will not bear the cost of this reform. Allowing borrowers to refinance their loans down to a no interest monthly payment will provide sorely needed relief. Right now, the Trump Administration’s policies on student loans are worsening middle-class families’ economic plight. It’s time for real action in Washington to bring commonsense reforms to this problem.”
Higher education costs continue to skyrocket, with tuition rising40 timeshigher than 1960s levels for public colleges—a 312.4% increase when adjusted for inflation. As a result, average college debt hasmore than doubledsince 2007, forcing nearly43 millionAmericans—1 in 6 American adults—to take out federal student loans to help pay for higher education. In Vermont, around78,000student loan borrowers hold a collective$2.9 billionin federal student loan debt.
The outstanding federal student loan balance tops nearly $2 trillion, with the average student borrower carrying a balance of$40,000in federal student loan debt. Federal student loans also represent over90%of all student loan debt. Student loan debt is now thesecond-highest sourceof consumer debt, only behind home mortgages, and will continue to grow as the cost of higher education rises faster than incomes. Many borrowers are unable to make a dent in their principal because of high interest rates, causing total costs to balloon and, for some, pushing repayment into decades rather than years.
Unlike other proposals to lower student loan interest rates, theStudent Loan Interest Elimination Actincludes a pay-for to offset the cost of eliminating interest to save taxpayer dollars.  Under this legislation, the Department of Education would create a Trust Fund to offset the elimination of interest. Student loan borrowers will make payments on their principal balance, which would be deposited into the Trust Fund. The returns on those investments would fund the costs of operating the student loan program, saving taxpayers from fronting the bill while saving borrowers from higher interest rates and student loan interest capitalization.
TheStudent Loan Interest Elimination Actis endorsed by the American Association of Colleges and Universities, EdTrust, and the Hildreth Institute.
“TheStudent Loan Interest Elimination Actwould provide significant relief for student borrowers and help expand access to educational opportunity. Its passage would be an important step toward a long-term solution to the student loan crisis,”said David Tritelli,Vice President for Communications and Public Affairs,American Association of Colleges and Universities.
“At a time when students urgently need support, we’re proud to endorse creative and effective solutions like theStudent Loan Interest Elimination Act, which would not only provide relief to student borrowers but also provide long term stability for our entire higher education ecosystem,”said Bahar Akman Imboden,Managing Director,Hildreth Institute. “We thank Representative Courtney and Senator Welch for their leadership on this important piece of legislation.”
Learn moreabout theStudent Loan Interest Elimination Act of 2026.
Read and downloadthe full text of the bill.
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