How the State-Based Education Loan Awareness Act Could Lower the Cost of Your Degree

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The proposed State-Based Education Loan Awareness Act could reduce college costs by allowing financial aid offices to recommend state-based, non-profit lenders. These organizations often offer lower interest rates and fewer fees than federal or private alternatives.

Many state-based, non-profit lenders, such as NC Assist, consistently offer interest rates lower than federal Direct PLUS loans. However, current federal "preferred lender" rules are so strict that many financial aid offices avoid offering a list to avoid the risk of compliance violations. The Awareness Act would create a "safe harbor," enabling schools to safely inform students and families about state-authorized loans that offer terms as favorable as, or better than, federal options.

When federal aid falls short, many students turn to high-interest private loans because they aren't aware of better alternatives. While federal PLUS loans carry a 4.228% origination fee, many state-based options charge zero fees. To ensure transparency, the Awareness Act requires schools to counsel students and families on federal benefits first, ensuring they don’t forfeit federal protections before considering a state-based loan.

This legislation is timely due to the One Big Beautiful Bill Act (OBBBA), which introduces federal borrowing limits starting July 1, 2026:

• Graduate Students: The Graduate PLUS loan program is being eliminated for new borrowers. Unsubsidized loans will be capped at $20,500/year ($100,000 lifetime limit).
• Parents: Parent PLUS loans will be restricted to $20,000/year per student ($65,000 lifetime cap).
• Lifetime Cap: A new total lifetime limit of $257,500 will apply across all federal student loans.

The Awareness Act ensures that when these caps leave students and families with a funding gap, financial aid offices can legally point toward mission-driven, non-profit alternatives instead of expensive private lenders.

NC Assist, offered by the non-profit College Foundation, Inc., provides low-cost, fixed-rate loans to bridge the gap to the total cost of education. Benefits include:

• Competitive Fixed Rates: A base rate of 7.75%, which can be lowered to 7.50% with autopay.
• Zero Fees: No application, origination, or prepayment fees.
• Flexible Borrowing: Borrow from $1,000 up to your school’s full cost of attendance (minus other aid).
• Repayment Perks: Includes a six-month grace period after you graduate or leave school and a 0.25% interest rate reduction if you make your payments by auto draft.

The State-Based Education Loan Awareness Act (S. 4097) is currently under review by the Senate Committee on Health, Education, Labor, and Pensions.