HR-9166-119
Referred to the House Committee on Education and Workforce.
Sponsored by Michael Turner (R-OH)
What it does
This bill would create a new program letting borrowers with older Federal Direct Loans or FFEL (bank-based) loans refinance into a new Federal Direct Loan at the interest rate currently offered to new borrowers of that loan type. It preserves the borrower's original repayment plan, forgiveness-clock progress (for Public Service Loan Forgiveness and income-driven repayment), and loan terms, while barring new origination fees, limiting refinancing to twice per decade, and requiring the Department of Education and the Consumer Financial Protection Bureau to notify eligible borrowers.
Who benefits
Borrowers holding older federal loans with higher fixed interest rates, especially those who took out loans when rates were higher than today's rates; FFEL borrowers whose loans currently sit outside the Direct Loan system and are ineligible for many benefits like broader income-driven repayment options; borrowers pursuing Public Service Loan Forgiveness whose refinanced loans would retain credit for prior qualifying payments.
Who is hurt
Borrowers whose original loans already carry rates lower than current rates would see no benefit and could be discouraged from refinancing; FFEL lenders and loan holders who would lose the outstanding loan balances as borrowers move to Direct Loans, reducing their portfolio and any associated servicing revenue; taxpayers, who could bear increased costs if the federal government's average portfolio interest rate declines while its cost of borrowing does not, potentially adding to the deficit depending on rate spreads.
Supporters argue
Supporters argue that borrowers who took out loans years ago at higher fixed rates are locked into worse terms than students borrowing today, and this bill lets them access current, often lower, rates without losing progress toward loan forgiveness. They contend it modernizes the FFEL-to-Direct Loan transition by pulling remaining FFEL borrowers into the Direct Loan system, where they gain access to income-driven repayment and Public Service Loan Forgiveness benefits currently unavailable to them.
Opponents argue
Opponents argue that if the government refinances existing loans at today's rates, it forgoes the higher-rate revenue those loans were projected to generate, which could increase costs to the Treasury depending on how rates have moved since origination. They contend the bill could also disrupt the private FFEL loan market by shifting balances away from lenders and guaranty agencies, and that the twice-per-decade refinancing limit and rate-comparison rules add administrative complexity for loan servicers and the Department of Education to implement correctly.
Constitutional context
Congress's authority to structure and modify the federal student loan programs rests on the Spending Clause (Art. I, §8, cl. 1), which the Higher Education Act already implements; no landmark case directly limits Congress's ability to restructure loan terms it created, since this differs from unilateral executive loan forgiveness actions reviewed in cases like Biden v. Nebraska (2023).
Checks and balances
Congress would set the refinancing framework in statute while the Department of Education and CFPB implement and administer it, with borrowers able to challenge implementation errors through existing administrative and judicial review channels.
Historical precedent
Congress previously restructured federal student lending through the SAFRA Act of 2010, which ended new FFEL loan originations and shifted lending entirely to the Direct Loan program, a similar effort to consolidate borrowers into the Direct Loan system.