New Legislation and Proposed Rules Aim to Ease Student Loan Burden

In a significant move to address the rising costs of higher education, Congressman Mike Lawler (R, NY-17) has introduced the Affordable Loans for Students Act. This legislation, announced on November 19, 2024, aims to lower the interest rate on federal student loans from 3.5 percent to one percent. The act would retroactively apply this interest rate adjustment to outstanding loans and authorize the Department of Education to modify and refinance student loans automatically, although borrowers would have the option to opt out if they choose.

Additionally, the legislation would facilitate the refinancing of other student loans to Part D loans, making the rate adjustment process smoother and allowing borrowers to consolidate multiple outstanding Part D loans. Lawler emphasized that high interest rates have made it challenging for borrowers to pay back their loans, and this act would make higher education more accessible and affordable. The National Association of Student Financial Aid Administrators has endorsed the legislation, highlighting its potential to make college more affordable for all borrowers.

In related news, the 2025-26 Free Application for Federal Student Aid (FAFSA) is now open, earlier than the previously announced December 1, 2024, date. Students are encouraged to submit the FAFSA as soon as possible to qualify for federal student loans, need-based Pell Grants, work-study programs, and other types of aid. The application process involves requesting a FSA ID, gathering necessary documents, and submitting the form by priority deadlines to maximize financial aid eligibility.

Meanwhile, the Biden Administration is facing challenges in its efforts to implement student loan forgiveness. With only months left in President Biden’s term, the administration has proposed new rules that would allow the Education Department to cancel student debt in cases of financial hardship. However, these efforts are likely to be hindered by the upcoming transition to the Trump administration and the required comment period for federal rule-making. Economists predict that these proposed rules may not be finalized or implemented before the end of Biden’s term.