Bills to stop education loan tax, grant conversion


U.S. Sen. Mike Braun

U.S. Sen. Mike Braun, R-Indiana, has proposed legislation to eliminate some of the sting from certain higher education funding assistance.

He is working with other legislators to stop grants for future teachers from converting to loans, as well as remove a fee from student loans.

Braun, Senator Kyrsten Sinema, D-Arizona, and Congresswoman Eleanor Holmes Norton have reintroduced the Consider Teachers Act. The legislation aims to make sure that TEACH grants given to teachers do not unfairly convert into loans that must be paid back.

"The TEACH grant is an important program to incentivize teachers to serve in neglected communities, but 12 years of poor government management has turned these grants into groans for thousands of teachers," Braun said. "To show our appreciation for America's great teachers, let's get off the sidelines and fix this broken system once and for all."

In 2007, the federal government created the TEACH Grant program to provide grant assistance to students willing to work four years as a full-time teacher in a high-need area. If service requirements are not met, the grants are converted into loans.

While the program was well intentioned, Braun said, poor program administration, like clerical errors, has resulted in grants being converted into loans.

“Currently, many teachers are finding their grants converted to loan debt because of small administrative errors that might be unavoidable due to the coronavirus crisis,” Norton said. “This bill will correct the administrative process and extend the period teachers have to fulfill their service requirements by three years for those who were affected by the coronavirus crisis.”

According to the Office of Management and Budget, 66% of TEACH Grants are converted into federal direct unsubsidized Stafford Loans, which must be paid back with interest. Once converted, a loan cannot revert back to a grant. The agency reported that 21,000 teachers have completed the program without a conversion; 94,000 recipients have seen their grants convert to loans.

Braun also reintroduced a bill called the Student Loan Tax Elimination Act, which would remove the “origination fee” from student loans. Origination fees are 1% for direct subsidized and direct unsubsidized loans, and 4% for all direct PLUS loans.

"Student loan origination fees are nothing more than a hidden tax that burdens students," Braun said in a statement. "This legislation is a step forward and offers one solution to addressing our broken higher education system that fails to put students first."

Student loan origination fees generated $1.7 billion in revenue for the federal government in award year 2017-18, and $8.3 billion over the past five award years, according to information the National Association of Student Financial Aid Administrators provided to Braun.

"The average undergraduate borrower in a four-year program will pay an estimated $294 in origination fees and associated interest if enrolled in a standard 10-year repayment plan,” according to the association, “while the average graduate student in a two-year program pays about $1,174 in fees and interest on that fee if repaying over 10 years."

More on