Federal student aid would expand for college students, borrowers, and graduates. The maximum Pell Grant would double to $10,000 for the 2026-2027 award year and rise to $14,000 by 2030-2031, with Pell funding shifted to mandatory appropriations and eligibility extended to graduate students, Dreamer students who came to the U.S. as children, and recipients of means-tested benefits. For borrowers, loan origination fees would drop from 4.0% to 0.0%, interest on new and refinanced loans would be capped at the lesser of the 10-year Treasury rate or 5.0%, and interest could no longer be capitalized (added to principal). Two repayment options would replace the existing menu of plans: a fixed plan and an Income-Driven Repayment plan that sets monthly payments at $0 for income up to 225% of the poverty line and cancels remaining balances after 20 to 25 years, or as few as 10 years for balances of $12,000 or less. Public Service Loan Forgiveness would require 96 qualifying payments instead of 120, defaulted-loan records would be removed from credit reports after repayment or rehabilitation, and borrowers could refinance older federal and private loans at the new capped rates. The measure also repeals the higher-education provisions enacted in Public Law 119-21, reversing recent graduate and parent loan limits, the Repayment Assistance Plan, an institutional accountability test based on low graduate earnings, and a delay of borrower-defense and closed-school discharge rules.
Average Household Impact
- Maximum Pell Grant — Doubled to $10,000 for 2026-2027, rising to $14,000 by 2030-2031
- Pell Grant funding — Shifted from annual discretionary funding to mandatory appropriations
- Pell aid for means-tested benefit recipients — Student aid index set to -$1,500, raising awards
- Pell eligibility period — Restored from 12 to 18 semesters
- Pell Grant access — Extended to graduate and postbaccalaureate students
- Federal aid eligibility — Extended to Dreamer students who entered the U.S. as children
- Loan origination fees — Cut from 4.0% to 0.0% on loans disbursed after July 2026
- Federal student loan interest rate — Capped at the lesser of the 10-year Treasury yield or 5.0%
- Interest capitalization — Eliminated, so unpaid interest is no longer added to loan principal
- Loan refinancing — New federal program to refinance older federal and private loans at the capped rate
- Income-driven repayment floor — $0 owed on income up to 225% of the poverty line
- Loan forgiveness under income-driven repayment — Balances canceled after 20-25 years, or 10 years for balances of $12,000 or less
- Public Service Loan Forgiveness payment requirement — Reduced from 120 to 96 qualifying payments
- Default records on credit reports — Removed after a defaulted loan is repaid or rehabilitated
- Subsidized federal loans — Restored for graduate and professional students
- Graduate and Grad PLUS loan access — Restored by repealing recent loan-limit law
- Borrower-defense and closed-school discharge rules — Reinstated after a prior law delayed them
- Financial-aid asset shield for family farms and small businesses — Removed, so those assets again count against aid eligibility
Transparency & Accountability
- Institutional accountability for low graduate earnings — Eligibility test repealed
- Private lender reporting — New disclosure of loan balances, defaults, and delinquencies to regulators and Congress
- Public Service Loan Forgiveness transparency — New online portal and searchable public-service job database
- Oversight study — GAO directed to assess automatic data matching for loan forgiveness
Congressional Summary
Lowering Obstacles to Achievement Now Act or the LOAN ActThis bill revises federal student aid programs, including the Federal Pell Grant program and the Public Service Loan Forgiveness (PSLF) program. It also repeals the education provisions that were enacted under P.L. 119-21 (commonly known as the One Big Beautiful Bill Act).Among other provisions, the bill revises the Federal Pell Grant program by (1) providing funding to increase the maximum award for each eligible student, and (2) allowing income-eligible graduate students to utilize their remaining Pell Grant eligibility toward their first graduate degree.Changes to the PSLF program include (1) reducing the number of monthly loan payments required for loan forgiveness, and (2) removing the requirement that a borrower must be employed in a public service job at the time of forgiveness.The bill makes Dreamer students (i.e., students who have been granted Deferred Action for Childhood Arrivals status and who entered the United States before the age of 18) who meet certain educational criteria eligible for federal financial aid.The bill also (1) establishes refinancing programs for federal and private student loans; (2) creates a new income-driven repayment plan; and (3) repeals origination fees for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.The bill repeals the education provisions that were enacted under P.L. 119-21. For example, the act addressed the amount of federal financial aid available to students by changing the mix and availability of student loans. (For more information, see CRS Report R48727.)
Details
- Congress
- 119th
- Chamber
- House
- Status
- summarized
- Action
- Introduced in House
- Action Date
- 2025-08-01
- Date Added
- 2026-06-13
- Source
- Congress.gov →
Like reading a bill in plain English?
We're building an app that does this for every bill in Congress and lets you tell your reps how you want them to vote. We're a small team getting ready to launch, and we're trying to show investors that real people want this. Be one of them. Help us get it built. Leave your email and we'll tell you the moment the app is ready.