S. 3538 would eliminate origination fees on Federal Direct student loans, which are upfront charges currently deducted from loan disbursements. The bill amends the Higher Education Act of 1965 by repealing the provision that authorizes these fees, making the change effective for all new federal direct loans with first disbursements on or after July 1 of the year following enactment. This would directly benefit all borrowers taking out new federal student loans, as they would receive the full loan amount without any deduction for origination fees. The legislation was introduced by Senators Banks, Kaine, Booker, and Van Hollen in December 2025 and referred to the Senate Committee on Health, Education, Labor, and Pensions. No specific funding amount or appropriation is mentioned in the bill text, as eliminating fees would reduce revenue rather than require new spending.
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