Kaine & Banks Introduce Bill to Eliminate Antiquated Tax on Student Loans

WASHINGTON, D.C. –Today, U.S. Senator Tim Kaine, a member of the Senate Health, Education, Labor and Pensions (HELP) Committee, (D-VA) and U.S. Senator Jim Banks (R-IN) introduced theStudent Loan Tax Elimination Act, legislation to remove antiquated “origination fees” for federal student loans.
“Student loan debt is holding Virginia families and the overall economy back,”said Kaine.“It should be easier, not harder, for American students to afford to go to college if that is the right path for them. That’s why I’m introducing this bipartisan, commonsense legislation to finally get rid of an antiquated tax on student loan borrowers.”
“Students deserve a fair deal when paying for college,”said Banks. “My bill ends a hidden tax on student loans and ensures our next generation has a greater opportunity to receive a more affordable education.”
Origination fees were historically intended to offset costs incurred by the private-sector partners that serviced federal student loans. Direct Subsidized and Direct Unsubsidized loans are charged a fee of 1.057 percent, with PLUS loans receiving a fee of 4 percent. In 2010, Congress shifted responsibility for all federal student loans from private-sector partners to the U.S. Department of Education – but these fees remained in place and have been burdening borrowers since. TheStudent Loan Tax Elimination Actwould finally remove these fees, eliminating what has been tantamount to a needless tax on student loan borrowers.
Kaine has vigorously advocated for policies to make a high-quality education more affordable for Virginians and for all Americans. In April 2025, Kaine and Senator Jeff Merkley (D-OR)introduced legislationto expand federal student loan repayment options. In February 2025, KaineintroducedtheJumpstarting Our Businesses by Supporting Students(JOBS)Act, legislation to allow students to use federal Pell Grants for shorter-term job training programs; parts of this legislation became law in July 2025.
The legislation is cosponsored by U.S. Senators Cory Booker (D-NJ) and Chris Van Hollen (D-MD). U.S. Representatives Lloyd Smucker (R-PA-11) and Sharice Davids (D-KS-03) have introduced companion legislation in the House of Representatives.
Full text of the legislation is availablehere.
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