This bill eliminates interest on federal student loans in two major ways. First, it automatically modifies all existing federal student loans to have zero interest starting July 1, 2026, though borrowers can opt out if they choose. Second, it stops the government from making new subsidized loans after June 30, 2026, and sets the interest rate to zero percent for all new federal student loans made on or after July 1, 2026. This means future borrowers won't pay any interest on their loans either.

The bill also increases how much students can borrow by adjusting loan limits for inflation starting in 2027. To pay for these changes, it creates an Education Affordability Trust Fund that collects all repayments from federal student loans and invests them in bonds. The investment returns from this fund pay for the Department of Education's loan administration costs. If there's extra money left over, it can be used to give supplemental grants to Pell Grant recipients or support programs at colleges that keep tuition increases low.

The bill establishes a 6-member board to manage the trust fund's investments, with members appointed by the President and confirmed by the Senate. These board members must have at least 10 years of financial investment experience, and at least three must have experience working with rural lenders or low-income communities. The board will hire independent fund managers to invest the money primarily in bonds, with strict requirements about investment quality and diversification.