Biden’s 2025 Budget Proposal Would Boost Pell, Eliminate Student Loan Origination Fees

NASFAA

By Maria Carrasco, NASFAA Staff Reporter

Publication Date: 3/12/2024

President Joe Biden on Monday released his budget request for fiscal year 2025, which would eliminate origination fees on federal student loans and increase the maximum federal Pell Grant award by $750 through the annual appropriations process, in addition to funding other new initiatives at the Department of Education (ED). However, the budget proposal would provide no increased funding for campus-based financial aid programs.

NASFAA has long advocated for the elimination of origination fees and has supported several pieces of bipartisan legislation. NASFAA President and CEO Justin Draeger responded to Monday’s budget proposal by applauding the move, saying that origination fees are a “hidden tax” on student loans and “an outdated mechanism that no longer serve a purpose for the federal government or for borrowers.”

“It’s not often that we see bipartisan agreement in Washington, but Republicans and Democrats alike have supported the removal of these fees to promote transparency and affordability in higher education, and we applaud the Biden administration for including this proposal in its fiscal year 2025 budget request,” Draeger said.

Currently, the Higher Education Act specifies a loan origination fee of 1% for all Direct Subsidized Loans and Direct Unsubsidized Loans, and a fee of 4% for all Direct PLUS Loans for both parent borrowers and graduate and professional student borrowers, with an annual mandatory adjustment percentage required by sequestration rules. The administration wrote in its budget proposal that origination fees “burden anyone who needs to borrow to help get an education and cost American families billions of dollars.”

Overall, the proposed budget requests $82 billion in federal discretionary spending for ED in 2025, which, according to the Biden administration, is a $3.1 billion (or 3.9%) increase from the 2023 level. However, that is about $8 billion less than last year’s 2024 proposal, which requested $90 billion in discretionary funding for ED.

Education Secretary Miguel Cardona said in a statement that Biden’s 2025 proposal “raises the bar in education.”

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