The LOAN Act of 2023 makes significant changes to how federal student loans work, starting July 1, 2024. Instead of charging interest on student loans, the government would set the interest rate to 0% and replace it with a one-time upfront fee. This means borrowers would pay a flat fee when they take out the loan rather than accumulating interest charges over time. If you pay off your loan early, you can get a refund of part or all of that upfront fee, which rewards people who can afford to pay faster.

The bill also changes how borrowers repay their loans. Rather than having multiple repayment options, there would be one main default plan based on your income—meaning your monthly payment would be calculated based on how much you earn. You'd still have the choice to pick a traditional 10-year fixed repayment plan if you prefer predictable payments instead. The Department of Education would send you annual statements showing what you owe and how much you need to pay each year. To figure out your income-based payments, the government would share tax information between the Treasury Department and the Education Department to make sure they have accurate information about your earnings.

LOAN Act of 2023

Rubio, Marco

Leveraging Opportunities for Americans Now Act of 2023 or the LOAN Act of 2023 This bill revises interest rates and repayment plans for federal student loans. Specifically, the bill directs the Department of Education (ED) to set the interest rate on federal student loans made on or after July 1, 2024, at 0% and replace the interest with a one-time financing fee. Further, the bill permits ED to credit or refund borrowers who pay the balance of their loan earlier than required by their repayment plan with the amount of the financing fee. In addition, the bill establishes an income-dependent education assistance repayment plan as the default repayment plan for federal student loans. A borrower may select either this new plan or a 10-year fixed repayment plan. ED must calculate annual repayment amounts and provide annual statements to borrowers. The Department of the Treasury must transmit tax information to ED as necessary to determine a borrower's repayment obligations and financing fee adjustments.