Update "Qualified Scholarship Funding Corporation" Rules
Updating Internal Revenue Code section 150(d) will expand the states and organizations that can offer low-cost, non-federal loans using the proceeds of tax-exempt (private activity) bonds.
- In recent decades, tuition costs have outpaced increases in federal statutory loan limits and the need for nonprofit and state-based education loan borrowing has grown.
- Nonprofit and state-based education loan funding providers, with their access to tax-exempt financing, are uniquely qualified to make education loans with the best possible terms and to make refinancing loans at low interest rates.
- However, certain non-profit and state student loan funding providers — “qualified scholarship funding corporations” under Section 150(d) of the Internal Revenue Code — are currently ineligible to issue tax-exempt bonds to finance nonprofit and state-based education student loans and refinance education loans.
- Section 150(d) allows only qualified scholarship funding corporations to use tax-exempt financing to acquire education loans incurred under the HEA, which was the Federal Family Education Loan Program (FFELP).
- An update is needed to the Internal Revenue Code to allow qualified scholarship funding corporations to access tax-exempt financing for nonprofit and state-based education loans and refinancing loans.
In the 115th Congress, Rep. Bill Flores (R-TX) introduced H.R.480, the bipartisan Student Loan Opportunity Act, which would have amended section 150(d) of the IRC to allow qualified scholarship funding corporations to access tax-exempt financing for alternative private student loans. The bill had nine co-sponsors.