This bill, called the Lowering Obstacles to Achievement Now (LOAN) Act, makes many changes to federal student aid rules. It raises the maximum Federal Pell Grant in steps so it reaches $14,000 by award year 2031–2032 and then ties future increases to inflation. It directs that Pell Grants be funded through mandatory appropriations. The bill expands Pell eligibility, including a special rule for people who received means-tested benefits and rules to let some graduate or postbaccalaureate students receive Pell in limited cases. It restores Pell eligibility from 12 semesters to 18 semesters and reduces some penalties tied to academic progress. It also adds a definition and limited eligibility for "Dreamer" students.
The bill changes many loan rules. It allows subsidized loans for many graduate and professional students beginning July 1, 2026. It ends origination fees for loans with first disbursements on or after July 1, 2026. It creates rules for voluntary prepayments, new default procedures, and a default reduction and rehabilitation program.
The bill replaces the many existing repayment plan options for new loans made on or after July 1, 2026 with two choices: a fixed repayment plan (generally a 10-year standard plan, with set rules for consolidation loans) and a single Income-Driven Repayment Plan with specific formulas, an annual verification process, and defined timelines for loan cancellation (for example, 240 qualifying payments for many borrowers or other schedules tied to original balances). It allows automatic enrollment or recertification into the Income-Driven Plan for certain delinquent borrowers and borrowers rehabilitating defaulted loans, including using IRS return information with an opt-out option.
For Public Service Loan Forgiveness (PSLF), the bill sets 96 qualifying monthly payments and requires public service employment during the months counted. It defines qualifying payments and repayment plans that count, creates a buyback payment process to purchase missing months, expands definitions (including treating independent contractors as employment), and requires an online portal and a public database of public service jobs.
The bill stops interest capitalization in many contexts (meaning unpaid interest will not be added to principal after deferment, forbearance, or certain program actions). It removes some disclosure requirements related to capitalization. It sets new interest-rate rules for loans first disbursed on or after July 1, 2026: loan rates will be fixed at the lower of the high yield on the 10-year Treasury (measured each June 1) or 5.0 percent for most borrower loans that year. It also creates programs to refinance older federal loans and eligible private student loans into Federal Direct loans at the new rates, with limits and eligibility rules. The refinanced private loans are generally not eligible for certain service-related repayment or forgiveness programs.
The bill also includes consumer protection and servicing measures: outreach campaigns to notify borrowers about plan choices and refinancing, rules for how prepayments are applied, protections for borrowers in default (including directions to remove default reporting after rehabilitation or consolidation), and reporting requirements for private lenders about the private loan market.
Students who qualify for Pell Grants: the maximum Pell award would grow each year to $14,000 and then rise with inflation. Some students who get means-tested benefits would get larger Pell awards. Eligibility rules for some noncitizen "Dreamer" students and some postbaccalaureate students would be added or clarified.
Current and future borrowers: loans first disbursed on or after July 1, 2026, would have no origination fee. You would choose either a fixed 10-year style plan or the single new Income-Driven Repayment Plan for all loans made on or after that date. The income-driven plan has clear formulas, annual verification, and set forgiveness timelines depending on payment counts and original balances.
Borrowers behind on payments or in default: the bill creates automatic enrollment options into the income-driven plan for certain delinquent borrowers and those rehabilitating loans. It also creates a rehabilitation process with small monthly payments and requires removal of default information from credit reports after full repayment or successful rehabilitation or consolidation.
Public service workers: PSLF requirements are reorganized. The bill counts 96 qualifying months of payments and requires employment in public service during those months. It creates an online portal to track qualifying employment and payments and allows buyback payments to count months you missed under some conditions.
Private loan borrowers: the bill creates a federal refinancing option for eligible private student loans. Those refinanced private loans would become Federal Direct loans but would not be eligible for some federal service-related forgiveness programs.
Schools, servicers, and lenders: new notice, reporting, and portal duties are required. Servicers must provide consumer information and implement automatic enrollment and data-sharing procedures. Private lenders must report market data if the refinancing program is used.
The bill authorizes mandatory appropriations for Pell Grants and adds programs that would change federal loan servicing and refinancing. No publicly available information on the total cost or budget estimates is provided in the bill text or metadata.
No publicly available information.
No publicly available information.