Protecting Taxpayers from Student Loan Bailouts Act

HR937, the Protecting Taxpayers from Student Loan Bailouts Act, was introduced in the House on February 4, 2025, and subsequently referred to the House Committee on Education and Workforce. This bill aims to limit the Department of Education's authority to issue regulations or executive actions that are economically significant (defined as having an annual effect on the economy of $100 million or more or adversely affecting the economy in a material way) and would increase student loan subsidy costs. The bill explicitly states that if the Secretary of Education determines such a regulation would increase subsidy costs, no further action can be taken on it. This bill does not authorize or appropriate any specific funding. Instead, it restricts the Department of Education's ability to implement policies that would increase federal student loan subsidy costs, effectively preventing future student loan forgiveness programs or other economically significant regulations that would shift costs to taxpayers. The mechanism is a direct prohibition on regulatory action, rather than a funding allocation. Structural losers from this bill, if it were to become law, include private lenders and financial institutions that benefit from federal student loan programs or that could be exposed to increased default risk without federal backstops. Companies like SLM Corporation ($SLM), a major student loan servicer, and Capital One Financial Corporation ($COF), which has exposure to consumer lending including student loans, would face a market where federal forgiveness programs are curtailed. This would reduce the total addressable market for companies reliant on federal loan programs and could increase default rates for private lenders as borrowers would not have the expectation of future federal relief. The bill is sponsored by Rep. Grothman (R-WI-6) with two cosponsors, indicating early-stage legislative support. Despite the long-term bearish implications of this bill, recent market data shows $SLM at $22.16, up +7.36% over the last 7 days and +11.41% over the last 30 days. $COF is currently at $184.21, up +3.41% over the last 7 days but down -5.18% over the last 30 days. These short-term movements do not reflect the potential structural changes proposed by HR937, which is still in the early stages of the legislative process. The bill has only been referred to committee, meaning significant legislative steps, including committee hearings, potential amendments, and votes in both the House and Senate, remain before it could become law. Given its early stage, the bill's passage is uncertain. However, its intent to restrict federal student loan forgiveness programs represents a significant potential shift in the student loan market landscape. The legislative process for HR937 would involve committee review, potential floor votes in the House, and then a similar process in the Senate, followed by presidential assent.