Student Loan Bond Expansion Act of 2026

**What happened:** On February 3, 2026, Senator Grassley (R-IA) introduced S3761, the Student Loan Bond Expansion Act of 2026. The bill amends the Internal Revenue Code to exempt qualified student loan bonds from the state volume cap (IRC Section 146(g)) and from the alternative minimum tax (IRC Section 57(a)(5)(C)). This makes tax-exempt student loan bonds easier to issue and more attractive to institutional investors. The bill was read twice and referred to the Senate Committee on Finance. It has 4 cosponsors including Senators Welch (D-VT) and Cassidy (R-LA), indicating bipartisan support. A companion bill (HR2660) has been introduced in the House and referred to Ways and Means. **Money trail:** This bill does not authorize or appropriate any direct spending. It is a revenue-side tax change that reduces the cost of capital for student loan ABS issuers. By exempting qualified student loan bonds from the volume cap, state and local issuers face no annual limit on issuance. By exempting them from the AMT, the bonds become attractive to a broader range of tax-exempt buyers. The mechanism is a supply-side tax subsidy that lowers borrowing costs for student loan originators. **Structural winners:** SLM (Sallie Mae) is the clearest beneficiary. As the largest pure-play private student lender in the US, with a $25B+ loan portfolio, its core business is originating, servicing, and securitizing student loans. Lower funding costs directly expand net interest margins. COF (Capital One) benefits secondarily through its student loan origination business, but it is a smaller portion of earnings. The bill has bipartisan sponsorship including a Finance Committee member (Grassley) and a House companion bill, but is still in early committee stage, so passage is uncertain but plausible. **Market data context:** SLM is at $22.99, down -1.84% in the 7-day period but up +11.39% over 30 days. COF is at $190.84, down -2.94% over 7 days but up +7.14% over 30 days. Both have rallied significantly over the past month, which coincides with broader market awareness of this bill's introduction and committee assignment. The 7-day pullback is likely profit-taking in a consolidating market, not a rejection of the legislation. **Timeline:** The bill has only two actions (both on Feb 3, 2026). It requires passage through the Senate Finance Committee, full Senate, House Ways and Means, full House, and presidential signature. With a companion bill already in the House, momentum is modestly positive but legislative cycles are long. Expect no near-term (60-day) passage. If it moves to committee markup in Q2 2026, that would signal rising probability.