H.R. 8045 — Student Loan Interest Elimination Act

This section revises the authority for the William D. Ford Federal Direct Loan Program—under which the Department of Education makes Direct Stafford/Ford Loans, Direct PLUS Loans, and Direct Consolidation Loans to eligible students and parents—by (1) requiring that appropriated sums be made available only after using funds from the Education Affordability Trust Fund in accordance with section 494A; and (2) authorizing such sums for making loans under section 460A(b).

This section establishes a new program to modify eligible Federal Direct Loans—defined to include Direct Loans first disbursed before July 1, 2026; Federal Family Education Loan (FFEL) Program loans held by the Secretary; Federal Perkins Loans held by the Secretary; and specified health professional student loans held by the Secretary—so that no interest accrues beginning July 1, 2026, without borrower action (with opt-out available at any time). The program further requires the Secretary to refinance eligible non-Federal Direct Loans—defined to include FFEL Program loans not held by the Secretary; Perkins Loans not held by the Secretary; and specified health professional student loans not held by the Secretary (with service completion requirements for certain loans)—into Federal Direct Consolidation Loans that (1) discharge the original loan obligation; (2) carry standard consolidation terms except for eligibility for any repayment plan under section 455(d)(1), no origination fees, no interest accrual, no automatic repayment term extension (retaining the original term, though borrowers may elect other plans), and Secretary adjustments to preserve superior pre-refinancing benefits; and (3) allow opt-out and further consolidation. The Secretary must report annually to the authorizing committees, beginning one year after enactment, on the number of borrowers with modified or refinanced loans and those delinquent on such loans.

This section establishes a 0 percent interest rate for Federal Direct Unsubsidized Stafford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans for which the first disbursement is made or the application is received on or after July 1, 2026 (notwithstanding prior rates based on the 10-year Treasury note rate plus a margin of 2.05–4.60 percent per loan type, capped at 8.25–9.50 percent), and limits applicability of those prior rates to loans before July 1, 2026.

This section terminates authority under the William D. Ford Federal Direct Loan Program to make new Federal Direct Stafford Loans (i.e., subsidized loans, where the government pays interest while the borrower is in school at least half-time) for first disbursements after June 30, 2026, and prohibits appropriations or expenditures for such loans thereafter. For periods of instruction beginning on or after July 1, 2026, it further (1) eliminates student eligibility for Federal Direct Stafford Loans and (2) increases maximum annual Federal Direct Unsubsidized Stafford Loan amounts to the levels under section 428H plus the amount of Stafford Loans the student would have otherwise received.

This section establishes annual inflation adjustments, based on estimated changes in the Consumer Price Index (as defined in Higher Education Act §478(f)), for the statutory annual loan limits for undergraduate students and aggregate loan limits for undergraduate and graduate or professional students under the Federal Direct Stafford Loan and Federal Direct Unsubsidized Stafford Loan programs (specified in paragraphs (4) and (6) of Section 455(a)), effective for periods of instruction beginning on or after July 1, 2027. It also makes conforming changes to cross-references in those paragraphs to account for the new paragraph (9).

This section establishes a Supplemental Federal Pell Grant Program under which the Secretary of Education may elect to use excess amounts (or a portion thereof) in the Federal Student Aid Reserve Fund (per section 494A(c)) to award additional Pell Grants to all students receiving a regular Federal Pell Grant in an award year. The supplemental amount for each such student is proportional to the student's regular Pell Grant amount relative to total regular Pell Grants awarded that year; these supplements (1) may exceed the total maximum Federal Pell Grant or be below the minimum Federal Pell Grant (10% of the maximum), (2) when added to the regular grant may exceed annual maximums, and (3) do not count toward a student's lifetime Pell eligibility limit (generally 12 semesters).

This section requires the Secretary of Education to deposit, without further appropriation, all repayments on loans made, insured, or guaranteed under title IV of the Higher Education Act of 1965 into the Education Affordability Trust Fund established under section 494B. It directs the Trust Fund Board to transfer to the Secretary specified percentages of the trust fund's "assets"—defined as returns on bond investments exceeding loan repayments deposited into the fund, measured as average assets under management over a 180-day period—to cover administrative costs of Direct Loans (part D) to eligible students and parents at participating institutions of higher education as follows: (1) 100% if $500 million or more; (2) 40% if $400 million to less than $500 million; (3) 10% if $300 million to less than $400 million; and (4) 0% if less than $300 million. If amounts transferred exceed administrative costs, the Secretary may use excess funds for (1) the Supplemental Federal Pell Grant Program under section 401(b)(10), which provides additional Pell Grants to high-need students; and (2) the Postsecondary Student Success Program (part B of title VII), modifying it to expand eligibility to institutions under sections 101 or 102(a)(1)(B) that either limited average tuition increases to 3% over the prior three academic years, assure no more than 3% increases over the next three years, or had an endowment of $100 million or less as of January 1 of the prior calendar year, with competitive grants of $600,000 to $1 million each. Use of excess funds requires a report and congressional testimony within 180 days.

This section establishes the Education Affordability Trust Fund within the Department of Education to provide zero-interest Federal student loans to existing and future borrowers and to defray the Trust Fund's administrative expenses. It creates a 6-member Education Affordability Trust Fund Board (Board), appointed by the President with Senate advice and consent no later than 90 days after enactment, to oversee the Trust Fund. Board members must have at least 10 years of experience in financial investments (with at least 3 having experience with rural lenders, historically disenfranchised groups, or low-income communities) and may not be current elected officials; registered lobbyists under the Lobbying Disclosure Act of 1995 (2 U.S.C. 1603) and certain current or recent congressional Members, officers, or employees are disqualified from Board service. Board members serve 6-year staggered terms (maximum of 2 terms), with each serving as Chair in their final year; the President may remove members only for cause; and members must divest or blind-trust conflicting interests. The Board must meet quarterly (with additional requirements once Trust Fund assets reach specified thresholds), adopt unanimous investment guidelines, and decide other matters by majority vote. The Board shall (1) appoint independent fund managers (initially within 60 days of full Board appointment, with the Chair appointing if the Board fails to do so unanimously); (2) retain independent advisers; (3) pay Trust Fund administrative expenses from its assets; and (4) manage assets as fiduciaries with prudent standards, including diversification to minimize risk. Board members receive per diem compensation at Executive Schedule level IV and travel expenses. The appointed fund manager must attend at least 2 Board meetings annually.

This section authorizes the Secretary of Education, when implementing amendments made by titles I, II, and III, to waive (1) the master calendar requirements under section 482 of the Higher Education Act of 1965 (i.e., deadlines for developing and distributing Federal student aid forms by November 1, allocating campus-based and Pell Grant funds by June 1, and related notifications in the year preceding the award year); and (2) negotiated rulemaking requirements under section 492 of that Act. (Thus, the Secretary may expedite implementation of those amendments without adhering to prescribed timelines for student aid processes or stakeholder negotiations prior to issuing regulations.)