[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4862 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 4862
To amend the Higher Education Act of 1965 to double the Pell Grant
award amount, improve the Public Service Loan Forgiveness program, and
reduce interest rates, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
August 1, 2025
Mr. Scott of Virginia (for himself, Mr. Subramanyam, Ms. Underwood, Ms.
Moore of Wisconsin, and Mr. Thanedar) introduced the following bill;
which was referred to the Committee on Education and Workforce, and in
addition to the Committee on the Budget, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee
concerned
_______________________________________________________________________
A BILL
To amend the Higher Education Act of 1965 to double the Pell Grant
award amount, improve the Public Service Loan Forgiveness program, and
reduce interest rates, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Lowering Obstacles to Achievement
Now Act'' or the ``LOAN Act''.
SEC. 2. REPEAL.
Subtitles A through F of title VIII of Public Law 119-21 are
repealed. The provisions of the Higher Education Act of 1965 (20 U.S.C.
1001 et seq.) amended by such subtitles are restored and revived as if
such subtitles had not been enacted.
SEC. 3. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Repeal.
Sec. 3. Table of contents.
TITLE I--FEDERAL PELL GRANTS
Sec. 101. Doubling Federal Pell Grants and providing all Federal Pell
Grants through mandatory funding.
Sec. 102. Providing increased Federal Pell Grants and other assistance
for recipients of means-tested benefits.
Sec. 103. Federal aid eligibility for dreamer students.
Sec. 104. Restoring the total semesters of Federal Pell Grant
eligibility.
Sec. 105. Reducing financial aid penalties from satisfactory academic
progress determinations.
Sec. 106. Federal Pell Grants for graduate students.
TITLE II--AMENDMENTS TO TERMS AND CONDITIONS OF LOANS AND REPAYMENT
PLANS
Part A--General Terms and Conditions
Sec. 201. Subsidized loans for graduate and professional students.
Sec. 202. Repeal of origination fees.
Sec. 203. Prepayment amounts.
Sec. 204. Default requirements.
Part B--One Income-Contingent Repayment Plan and One Fixed Repayment
Plan
Sec. 211. Notification to borrowers.
Sec. 212. New repayment plans.
Sec. 213. Maximum repayment period for income-contingent repayment and
income-based repayment.
Sec. 214. Borrowers ineligible for loans.
Part C--Automatic Enrollment in the Income-Driven Repayment Plan for
Certain Borrowers
Sec. 221. Notification and automatic enrollment procedures for
borrowers who are delinquent on loans.
Sec. 222. Notification and automatic enrollment procedures for
borrowers who are rehabilitating defaulted
loans.
Sec. 223. Covered loan and non-covered loan defined.
Sec. 224. Automatic recertification of income for income-driven
repayment plans.
Sec. 225. Procedure and requirement for requesting tax return
information from the IRS.
Part D--Streamlining Public Service Loan Forgiveness
Sec. 231. Amendments to terms and conditions of public service loan
forgiveness.
Sec. 232. Terms and conditions of employment.
Sec. 233. Online portal and database of public service jobs.
Sec. 234. Treatment of consolidated and refinanced loans.
Sec. 235. Loan forgiveness for teachers.
Sec. 236. GAO study on data matching agreements for public service loan
forgiveness.
Part E--Support for Borrowers in Default
Sec. 241. Removal of record of default.
Sec. 242. Removal of record of default from credit history upon loan
consolidation.
Sec. 243. Default reduction program.
TITLE III--INTEREST CAPITALIZATION
Sec. 301. Elimination of interest capitalization.
Sec. 302. Elimination of disclosure requirements relating to
capitalization.
TITLE IV--INTEREST RATES
Sec. 401. Interest rate provisions for new Federal student loans on or
after July 1, 2026.
Sec. 402. Refinancing FFEL and Federal Direct Loans.
Sec. 403. Refinancing private student loans.
TITLE I--FEDERAL PELL GRANTS
SEC. 101. DOUBLING FEDERAL PELL GRANTS AND PROVIDING ALL FEDERAL PELL
GRANTS THROUGH MANDATORY FUNDING.
(a) Amount of Minimum Federal Pell Grants.--Section 401 of the
Higher Education Act of 1965 (20 U.S.C. 1070a) is amended--
(1) in subsection (a)(2)(F), by striking ``10 percent'' and
inserting ``5 percent'';
(2) in subsection (b)--
(A) in paragraph (1)(B)(i), by striking ``paragraph
(5)(A)'' and inserting ``paragraph (5)'';
(B) by striking paragraph (5) and inserting the
following:
``(5) Total maximum federal pell grant.--
``(A) Award year 2026-2027.--For award year 2026-
2027, the total maximum Federal Pell Grant award shall
be $10,000.
``(B) Award year 2027-2028.--For award year 2027-
2028, the total maximum Federal Pell Grant award shall
be $11,000.
``(C) Award year 2028-2029.--For award year 2028-
2029, the total maximum Federal Pell Grant award shall
be $12,000.
``(D) Award year 2029-2030.--For award year 2029-
2030, the total maximum Federal Pell Grant award shall
be $13,000.
``(E) Award year 2030-2031.--For award year 2030-
2031, the total maximum Federal Pell Grant award shall
be $14,000.
``(F) Award year 2031-2032 and subsequent years.--
For award year 2031-2032, and each subsequent award
year, the total maximum Federal Pell Grant award shall
be $14,000--
``(i) increased by the adjustment
percentage for the award year for which the
amount under this subparagraph is being
determined; and
``(ii) rounded to the nearest $50.
``(G) Definition of adjustment percentage.--In this
paragraph, the term `adjustment percentage,' as applied
to an award year, is equal to the percentage increase
in the Consumer Price Index, as defined in section
478(f), for the most recent calendar year ending prior
to the beginning of the award year.'';
(C) by striking paragraphs (6) and (7) and
inserting the following:
``(6) Appropriation of funds.--There are authorized to be
appropriated, and there are appropriated, out of any money in
the Treasury not otherwise appropriated, such sums as may be
necessary for fiscal year 2026 and each subsequent fiscal year
to provide the total maximum Federal Pell Grant for which a
student shall be eligible under this section during an award
year.''; and
(D) by redesignating paragraphs (8) and (9) as
paragraphs (7) and (8), respectively;
(3) in subsection (d)(5)(B)(ii)--
(A) in subclause (I)(bb), by striking ``or'' after
the semicolon;
(B) in subclause (II)(bb)(CC), by striking the
period and inserting ``; or''; and
(C) by adding at the end the following:
``(III) during a period for which
the student did not receive a loan
under this title but for which, if the
student had received such a loan, such
loan would have been discharged under
the circumstances described in
subclause (II)(bb)(CC).'';
(4) by striking subsections (g) and (h); and
(5) by redesignating subsections (i) and (j) as subsections
(g) and (h), respectively.
(b) Repeal of Scoring Requirement.--
(1) In general.--Section 406 of H. Con. Res. 95 (109th
Congress) is amended--
(A) by striking subsection (b); and
(B) by striking ``(a) In General.--Upon'' and
inserting the following: ``Upon''.
(2) Effective date.--The amendments made by paragraph (1)
shall take effect beginning on July 1, 2026.
(c) Student Support Services.--Section 402D(d)(1) of the Higher
Education Act of 1965 (20 U.S.C. 1070a-14(d)(1)) is amended by striking
``the minimum'' and inserting ``10 percent of the maximum''.
(d) Scholarship Component.--Section 404E(d) of the Higher Education
Act of 1965 (20 U.S.C. 1070a-25(d)) is amended by striking ``less than
the minimum'' and inserting ``less than 10 percent of the maximum''.
SEC. 102. PROVIDING INCREASED FEDERAL PELL GRANTS AND OTHER ASSISTANCE
FOR RECIPIENTS OF MEANS-TESTED BENEFITS.
(a) Increased Amount of Maximum Federal Pell Grants for Students
With Negative Student Aid Indexes.--Section 401(b)(1) of the Higher
Education Act of 1965 (20 U.S.C. 1070a(b)(1)), as amended by section
101 of this Act, is amended--
(1) in subparagraph (A)--
(A) in the matter preceding clause (i), by striking
``A student'' and inserting ``Except in the case of a
student with a student aid index of less than zero, a
student'';
(B) by striking clause (i); and
(C) by redesignating clauses (ii) and (iii) as
clauses (i) and (ii), respectively;
(2) by redesignating subparagraphs (B) through (E) as
subparagraphs (C) through (F), respectively;
(3) by inserting after subparagraph (A) the following:
``(B) A student with a student aid index of less
than zero shall be eligible for a Federal Pell Grant
award that exceeds the total maximum Federal Pell Grant
by an amount equal to the amount by which the student's
student aid index is less than zero.'';
(4) in subparagraph (C), as redesignated by paragraph (2)--
(A) in the matter preceding clause (i), by striking
``subparagraph (A) for an academic year,'' and
inserting ``subparagraph (A), or an increased Federal
Pell Grant under subparagraph (B), for an academic
year,''; and
(B) in clause (ii), by striking ``, except that a
student aid index of less than zero shall be considered
to be zero for the purposes of this clause'';
(5) in subparagraph (D), as redesignated by paragraph (2),
by striking ``(A) or (B)'' and inserting ``(A), (B), or (C)'';
(6) in subparagraph (E), as redesignated by paragraph (2),
by inserting ``or an increased Federal Pell Grant under
subparagraph (B)'' after ``subparagraph (A)''; or
(7) in subparagraph (F), as redesignated by paragraph (2),
by striking ``or a minimum Federal Pell Grant under
subparagraph (C)'' and inserting ``an increased Federal Pell
Grant under subparagraph (B), or a minimum Federal Pell Grant
under subparagraph (D)''.
(b) Special Student Aid Index Rule for Recipients of Means-Tested
Benefits.--Section 473 of the Higher Education Act of 1965 (20 U.S.C.
1087mm) is amended by adding at the end the following:
``(d) Special Rule for Means-Tested Benefit Recipients.--
Notwithstanding subsection (b), for an applicant (or, as applicable, an
applicant and spouse, or an applicant's parents) who, at any time
during the previous 24-month period, received a benefit under a means-
tested Federal benefit program (or whose parent or spouse received such
a benefit, as applicable), the Secretary shall for the purposes of this
title consider the student aid index as equal to -$1,500 for the
applicant.''.
SEC. 103. FEDERAL AID ELIGIBILITY FOR DREAMER STUDENTS.
Section 484 of the Higher Education Act of 1965 (20 U.S.C. 1091) is
amended--
(1) in subsection (a)(5), by inserting ``, or be a Dreamer
student, as defined in subsection (u)'' after ``becoming a
citizen or permanent resident''; and
(2) by adding at the end the following:
``(u) Dreamer Students.--
``(1) In general.--In this section, the term `Dreamer
student' means an individual who--
``(A)(i) is not a citizen or national of the United
States; and
``(ii) is inadmissible or deportable under the
Immigration and Nationality Act (8 U.S.C. 1101 et
seq.); and
``(B)(i) in the case of such an individual who was
younger than 18 years of age on the date on which the
individual initially entered the United States--
``(I) has earned a high school diploma, the
recognized equivalent of such diploma from a
secondary school, or a high school equivalency
diploma recognized by State law, or is
scheduled to complete the requirements for such
a diploma or equivalent before the next
academic year begins;
``(II) is enrolled at an institution of
higher education pursuant to subsection (d);
``(III) has served in the uniformed
services (as such term is defined in section
101 of title 10, United States Code) for not
less than 2 years and, if discharged, received
an honorable discharge;
``(IV) has acquired a degree, certificate,
or recognized postsecondary credential from an
institution of higher education or area career
and technical education school (as such term is
defined in section 3 of the Carl D. Perkins
Career and Technical Education Act of 2006 (20
U.S.C. 2302)); or
``(V) has completed not less than 2 years
in a postsecondary program at an institution of
higher education, or area career and technical
education school, in the United States and has
made satisfactory academic progress, as defined
in subsection (c), during such time period; or
``(ii)(I) is, or at any time was, eligible for a
grant of deferred action pursuant to--
``(aa) the memorandum of the Department of
Homeland Security entitled `Exercising
Prosecutorial Discretion with Respect to
Individuals Who Came to the United States as
Children' issued on June 15, 2012; or
``(bb) the memorandum of the Department of
Homeland Security entitled `Exercising
Prosecutorial Discretion with Respect to
Individuals Who Came to the United States as
Children and with Respect to Certain
Individuals Who Are the Parents of U.S.
Citizens or Permanent Residents' issued on
November 20, 2014; or
``(II) would have been eligible for such a grant of
deferred action if the applicable memorandum described
in subclause (I) had been fully in effect since the
date on which it was issued.
``(2) Hardship exception.--The Secretary shall issue
regulations that direct when the Department shall waive the age
requirement of paragraph (1)(B)(i) for an individual to qualify
as a Dreamer student under such paragraph, if the individual
demonstrates compelling circumstances, such as economic
hardship (as defined in section 435(o)).''.
SEC. 104. RESTORING THE TOTAL SEMESTERS OF FEDERAL PELL GRANT
ELIGIBILITY.
Section 401(d)(5)(A) of the Higher Education Act of 1965 is amended
by striking ``12'' each place the term appears and inserting ``18''.
SEC. 105. REDUCING FINANCIAL AID PENALTIES FROM SATISFACTORY ACADEMIC
PROGRESS DETERMINATIONS.
Section 484(c) of the Higher Education Act of 1965 (20 U.S.C.
1091(c)) is amended to read as follows:
``(c) Satisfactory Progress.--
``(1) Definitions.--In this subsection:
``(A) Appeal.--The term `appeal' means a process by
which a student who is not meeting the institution's
satisfactory academic progress standards petitions the
institution for reconsideration of the student's
eligibility for assistance under this title.
``(B) Financial aid probation.--The term `financial
aid probation' means a status assigned by an
institution to a student who fails to make satisfactory
academic progress and who has appealed and has had
eligibility for aid reinstated.
``(C) Financial aid warning.--The term `financial
aid warning' means a status assigned to a student who
fails to make satisfactory academic progress at the end
of the semester or equivalent period in which the
student first fails to make such progress.
``(D) Payment period.--The term `payment period'
means the applicable payment period described in
section 668.4 of title 34, Code of Federal Regulations,
or any successor regulation.
``(2) Satisfactory academic progress policy.--An
institution shall establish a reasonable satisfactory academic
progress policy for determining whether an otherwise eligible
student is making satisfactory academic progress in the
student's educational program and may receive assistance under
this title. The Secretary shall consider the institution's
policy to be reasonable if--
``(A) the policy is at least as strict as the
policy the institution applies to a student who is not
receiving assistance under this title;
``(B) the policy provides for consistent
application of standards to all students, including
full-time, part-time, undergraduate, and graduate
students, and all educational programs established by
the institution;
``(C)(i) the policy specifies the grade point
average that a student must achieve at each evaluation,
or if a grade point average is not an appropriate
qualitative measure, a comparable assessment measured
against a norm; and
``(ii) if a student is enrolled in an educational
program of more than 2 academic years, the policy
specifies that at the end of the second academic year,
the student must have a grade point average of at least
a `C' or its equivalent, or have academic standing
consistent with the institution's requirements for
graduation;
``(D) the policy provides for measurement of the
student's progress at each evaluation;
``(E) the policy describes--
``(i) how a student's grade point average
and the pace at which the student progresses
toward completion are affected by course
incompletes, withdrawals, or repetitions, or
transfers of credit from other institutions,
including that credit hours from another
institution that are accepted toward the
student's educational program are counted as
both attempted and completed hours; and
``(ii) how after a student reenrolls after
the student's satisfactory academic progress
was reset pursuant to paragraph (3)(B), the
student may have any credits that were earned
before the student was determined not to be
making satisfactory academic progress counted
for purposes of determining progress when the
student reenrolls, but any attempted hours that
were not earned by the student (including
incompletes, withdrawn courses, and failed
courses) before the student was determined not
to be making satisfactory academic progress
will not negatively impact the determination of
whether the student made satisfactory academic
progress after such reset;
``(F) the policy provides that, except as provided
in subparagraph (G) with respect to a student placed on
financial aid warning or financial aid probation and
paragraph (3), a student is no longer eligible to
receive assistance under this title if the student has
not achieved the required grade point average or who is
not making progress toward completion in the student's
educational program--
``(i) at the time of each evaluation with
respect to a student who is in an educational
program of 2 academic years or less in length;
or
``(ii) at the end of the second academic
year with respect to a student who is in an
educational program of more than 2 academic
years in length;
``(G) the policy describes when students will be
placed on financial aid warning or financial aid
probation, in accordance with paragraph (4), and
provides that--
``(i) a student on financial aid warning--
``(I) shall receive assistance
under this title for one payment period
despite a determination that the
student is not making satisfactory
academic progress; and
``(II) may be assigned such status
without an appeal or other action by
the student; and
``(ii)(I) a student on financial aid
probation may receive assistance under this
title for one payment period and the
institution may require the student to fulfill
specific terms and conditions, such as taking a
reduced course load or enrolling in specific
courses; and
``(II) at the end of such one payment
period, the student is required to meet the
institution's satisfactory academic progress
standards, or meet the requirements of the
academic plan developed by the institution and
the student, in order to qualify for continued
assistance under this title;
``(H) if the institution permits a student to
appeal a determination by the institution that the
student is not making satisfactory academic progress,
the policy describes--
``(i) how the student may reestablish the
student's eligibility to receive assistance
under this title;
``(ii) the basis on which the student may
file an appeal, including because of the death
of a relative, an injury or illness of the
student, or another special circumstance; and
``(iii) information the student is required
to submit regarding why the student failed to
make satisfactory academic progress, and what
has changed in the student's situation that
will allow the student to demonstrate
satisfactory academic progress at the next
evaluation;
``(I) if the institution does not permit a student
to appeal a determination by the institution that the
student is not making satisfactory academic progress,
the policy describes how the student may reestablish
the student's eligibility to receive assistance under
this title;
``(J) the policy provides for notification to
students of the results of an evaluation that impacts
the student's eligibility for assistance under this
title; and
``(K) the policy does not impose satisfactory
progress limitations on need-based institutional aid
that are more stringent than the standard applied under
this subsection without demonstrating to the Secretary
the effectiveness of such limitations on improving
student persistence in, and completion of,
postsecondary study.
``(3) Regaining eligibility.--
``(A) Students who remain in school.--Whenever a
student fails to meet the eligibility requirements of
subsection (a)(2) as a result of the application of
this subsection and, subsequent to that failure, the
student has academic standing for any grading period
consistent with the requirements for staying on track
to graduate within 150 percent of the published length
of the educational program, as determined by the
institution, the student shall again be eligible under
subsection (a)(2) for a grant, loan, or work assistance
under this title, as long as the student maintains
satisfactory academic progress under paragraph (2)
beginning on and after the date that the student
regains eligibility.
``(B) Students who leave school.--
``(i) In general.--If a student has not
been enrolled in any institution of higher
education for the immediately preceding 2
years, any previous failure to meet the
eligibility requirements of subsection (a)(2)
shall not be used in any determination of
eligibility of such student under such
subsection. Such student shall, on the date of
enrollment subsequent to such 2-year period,
have the student's eligibility for a grant,
loan, or work assistance under this title reset
and be deemed as meeting the requirements
described in paragraph (2). Beginning on and
after such date, the student's satisfactory
academic progress shall be determined in
accordance with paragraph (2)(E)(ii).
``(ii) Maximum number of resets.--A student
shall be eligible for a reset of eligibility
pursuant to this subparagraph not more than 2
times.
``(C) Duties of the secretary.--The Secretary
shall--
``(i) send, to each student who failed to
meet the eligibility requirements of subsection
(a)(2) and who has not regained eligibility for
a grant, loan, or work assistance under
subparagraph (A), a notice, two years after
such failure, that includes--
``(I) a notification that, if the
student has not been enrolled in any
institution of higher education for the
preceding two years and has not
received two resets of eligibility
under subparagraph (B), the student may
use grant, loan, or work assistance
under this title for enrollment at any
eligible institution, including an
institution other than the institution
in which the student was previously
enrolled;
``(II) a notification that, if the
student has remained enrolled, or
resumed enrollment, at an institution
of higher education, the student may be
eligible for a grant, loan, or work
assistance under this title subject to
the requirements of subparagraph (A);
``(III) information on how many
semesters of eligibility for a grant,
loan, or work assistance under this
title to which the student still has
access; and
``(IV) a notification that the
student should ask any prospective
eligible institution how many of the
student's previously completed credits
the student would be able to transfer;
and
``(ii) submit an annual report to Congress
on the outcomes of students who have received a
reset of eligibility pursuant to this
paragraph, including--
``(I) the number of students who
reenroll in an eligible institution
after such reset, disaggregated by race
or ethnicity, sex, age, socioeconomic
status, and disability status;
``(II) the 250 eligible
institutions with the highest numbers
of enrolled students receiving grant,
loan, or work assistance under this
title after such a reset;
``(III) the 250 eligible
institutions with the highest share of
enrolled students receiving grant,
loan, or work assistance under this
title after such a reset; and
``(IV) the average completion rate
and time to completion for students who
reenroll in an eligible institution
after such reset, disaggregated by
institution.
``(4) Evaluation of academic progress.--
``(A) In general.--An institution that determines
that a student is not making satisfactory academic
progress under its policy may disburse funds provided
through student financial assistance programs under
this title (including work-study programs under
subtitle C) to the student in accordance with
subparagraphs (B), (C), and (D).
``(B) Payment period following not making
satisfactory academic progress.--For the payment period
following the payment period in which a student did not
make satisfactory academic progress, the institution
shall place the student on financial aid warning and
disburse funds under this title to the student.
``(C) Payment period following financial aid
warning.--For the payment period following a payment
period during which a student was on financial aid
warning, the institution may place the student on
financial aid probation, and disburse funds under this
title to the student if--
``(i) the institution evaluates the
student's progress and determines that student
did not make satisfactory academic progress
during the payment period the student was on
financial aid warning;
``(ii) the student appeals the
determination; and
``(iii)(I) the institution determines that
the student should be able to meet the
institution's satisfactory academic progress
standards by the end of the subsequent payment
period; or
``(II) the institution develops an academic
plan for the student that, if followed, will
ensure that the student is able to meet the
institution's satisfactory academic progress
standards by a specific point in time.
``(D) Payment period following financial aid
probation.--A student on financial aid probation for a
payment period may not receive funds under this title
for the subsequent payment period unless the student
makes satisfactory academic progress or the institution
determines that the student met the requirements
specified by the institution in the academic plan for
the student developed under subparagraph (C)(iii)(II).
``(E) Frequency of academic progress evaluation and
communication.--
``(i) In general.--Subject to clause (ii),
for the purpose of determining whether
presently enrolled students are maintaining
satisfactory progress, each institution of
higher education that enrolls students who
receive any grant, loan, or work assistance
under this title shall review the progress of
such students at the end of each payment
period.
``(ii) Shorter payment periods.--For each
institution described in clause (i) that has
payment periods that are shorter than on the
semester system basis (such as on a quarterly
or trimester system basis or by clock hour
program or non-term program), such institution
shall review the progress of presently enrolled
students at the end of each semester or
equivalent period of 12 to 18 weeks.
``(iii) Financial aid warning.--At the end
of each payment period (or, in the case of an
institution described in clause (ii), at the
end of each semester or equivalent period),
each institution shall send a financial aid
warning to presently enrolled students that do
not meet the grade point average requirement
described in paragraph (2), or its equivalent
or academic standing consistent with the
requirements for graduation, as determined by
the institution, that informs the students of
their risk of being determined to not be
maintaining satisfactory progress and therefore
losing eligibility for grant, loan, or work
assistance under this title and provides
information on--
``(I) the specific criteria of the
institution's academic requirements
that the student is not meeting and the
specific improvements needed to meet
the requirements; and
``(II) how to meet with the
student's academic advisor to get the
academic support the student needs.
``(5) Detailing requirements to students.--Each institution
of higher education that enrolls students who receive any
grant, loan, or work assistance under this title shall detail
the institution's requirements regarding students maintaining
satisfactory academic progress--
``(A) to such students before the students begin
classes at the institution through a detailed
communication that may be separate from a financial aid
offer; and
``(B) on the financial aid webpage of the website
of the institution.
``(6) Consumer testing.--The Secretary--
``(A) shall conduct consumer testing to develop
exemplary practices and templates--
``(i) to support institutions of higher
education in carrying out paragraph (5); and
``(ii) which shall be available as
resources for institutions of higher education;
and
``(B) shall not require the use of such practices
and templates by institutions of higher education.''.
SEC. 106. FEDERAL PELL GRANTS FOR GRADUATE STUDENTS.
Section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a)
is amended--
(1) in subsection (b)(8)(A), by inserting ``or as a
postbaccalaureate student in accordance with subsection
(d)(1)'' after ``as an undergraduate''; and
(2) in subsection (d)--
(A) by amending paragraph (1) to read as follows:
``(1) In general.--The period during which a student may
receive Federal Pell Grants shall be the period required for
the completion of the first undergraduate baccalaureate course
of study being pursued by that student at the institution at
which the student is in attendance except that--
``(A) any 1-year period during which the student is
enrolled in a noncredit or remedial course of study as
defined in paragraph (2) shall not be counted for the
purpose of this paragraph; and
``(B) the period during which a student may receive
Federal Pell Grants shall also include the period
required for the completion of the first
postbaccalaureate course of study in a case in which--
``(i) the student received a Federal Pell
Grant during the period required for the
completion of the student's first undergraduate
baccalaureate course of study for at least 1
but fewer than 18 semesters, or the equivalent
of at least 1 but fewer than 18 semesters, as
determined under paragraph (5);
``(ii) the student would otherwise be
eligible for a Federal Pell Grant, but for the
completion of such baccalaureate course of
study; and
``(iii) the period during which the student
receives Federal Pell Grants does not exceed
the student's duration limits under paragraph
(5).''; and
(B) in paragraph (2), by striking ``or
certificate'' and inserting ``, certificate, or first
postbaccalaureate degree''.
TITLE II--AMENDMENTS TO TERMS AND CONDITIONS OF LOANS AND REPAYMENT
PLANS
PART A--GENERAL TERMS AND CONDITIONS
SEC. 201. SUBSIDIZED LOANS FOR GRADUATE AND PROFESSIONAL STUDENTS.
Section 455(a)(3) of the Higher Education Act of 1965 (20 U.S.C.
1087e(a)(3)) is amended--
(1) in subparagraph (A), in the matter preceding clause
(i), by striking ``subparagraph (B)'' and inserting
``subparagraphs (B) and (C)''; and
(2) by adding at the end the following:
``(C) Authority to make interest subsidized loans
to graduate and professional students.--
``(i) In general.--Beginning on or after
July 1, 2026, a graduate or professional
student shall be eligible to receive a Federal
Direct Stafford loan under this part for a
graduate or professional program at a covered
institution of higher education.
``(ii) Covered institution of higher
education.--In this subparagraph, the term
`covered institution of higher education'--
``(I) means an institution of
higher education defined in section 101
or section 102(a)(1)(C); and
``(II) does not include a graduate
medical school, nursing school, or a
veterinary school, located outside the
United States that does not meet the
requirements of section 101(a)(4).''.
SEC. 202. REPEAL OF ORIGINATION FEES.
Section 455(c)(2) of the Higher Education Act of 1965 (20 U.S.C.
1087e(c)(2)) is amended--
(1) by striking ``and'' at the end of subparagraph (D); and
(2) by adding at the end the following:
``(E) by substituting `0.0 percent' for `4.0
percent' with respect to loans for which the first
disbursement of principal is made on or after July 1,
2026.''.
SEC. 203. PREPAYMENT AMOUNTS.
Part G of title IV of the Higher Education Act of 1965 (20 U.S.C.
1088) is amended by adding at the end the following:
``SEC. 494A. PREPAYMENT AMOUNTS.
``(a) Prepayments Authorized.--A borrower may pay, without penalty,
an amount in excess of the amount due on an outstanding loan made under
part B or D, and such excess amount shall be referred to as a
`prepayment amount' for purposes of this subsection. Except as provided
in subsection (b) a prepayment amount shall be applied first toward the
fees (including any collection costs and authorized late charges) owed
by the borrower on such loan, next on outstanding principal, and then
on outstanding interest. If the prepayment amount exceeds the monthly
payment amount owed on such loan, the due date of the next payment
shall be advanced, unless the borrower requests otherwise, and the
Secretary shall notify the borrower of such revised due date for the
next payment.
``(b) Application of Prepayment Amounts.--
``(1) Borrowers without fee balances.--
``(A) In general.--Subject to subparagraph (B),
with respect to a borrower who does not owe an
outstanding balance of fees (including collection costs
and authorized late charges) on any loan made under
part B or D, and who makes a prepayment on 2 or more
loans made under this part--
``(i) if such loans have different
applicable rates of interest, the holder of
such loans shall apply the borrower's
prepayment amount, first toward the outstanding
balance of principal due on the loan with the
highest applicable rate of interest among such
loans, next on any fees owed on such loan, and
then on outstanding interest owed on such loan;
or
``(ii) if such loans have the same
applicable rates of interest, the holder of
such loans shall apply the borrower's
prepayment amount, first toward the outstanding
balance of principal due on the loan with the
highest principal balance among such loans,
next on any fees on such loan, and then on
outstanding interest owed on such loan.
``(B) Written exception.--A borrower described in
subparagraph (A) who does not want prepayment amounts
applied in the manner described in clause (i) or (ii)
of such subparagraph shall provide to the Secretary, a
written request for a different application of
prepayment amounts.
``(2) Borrowers with fee balances.--With respect to a
borrower who owes fees (which may include collection costs and
authorized late charges) on a loan made under part B or part D,
a prepayment amount made by the borrower shall be applied first
toward the fees (including any collection costs and authorized
late charges) owed by the borrower on such loan, next on
outstanding principal, and then on outstanding interest.''.
SEC. 204. DEFAULT REQUIREMENTS.
Part G of title IV of the Higher Education Act of 1965 (20 U.S.C.
1088), as amended by the preceding section, is further amended by
adding at the end the following:
``SEC. 494B. DEFAULT REQUIREMENTS.
``(a) In General.--If a borrower defaults on a loan made under part
B or D--
``(1) the entire unpaid balance and accrued interest shall
be immediately due and payable; and
``(2) the Secretary shall assess collection charges.
``(b) Collection of a Defaulted Loan.--The Secretary may, with
respect to a borrower who defaults on a loan made under part B or D--
``(1) take any action authorized by law to collect such
loan, including filing a lawsuit against the borrower,
reporting the default to nationwide consumer reporting
agencies, requesting the Internal Revenue Service to offset the
borrower's Federal income tax refund, and garnishing the
borrower's wages; and
``(2) may designate the Income-Driven Repayment Plan under
section 455A(c) for the borrower.''.
PART B--ONE INCOME-CONTINGENT REPAYMENT PLAN AND ONE FIXED REPAYMENT
PLAN
SEC. 211. NOTIFICATION TO BORROWERS.
(a) In General.--Beginning on the date of enactment of this Act,
the Secretary of Education, in coordination with the Director of the
Consumer Financial Protection Bureau, shall undertake a campaign to
alert all borrowers of loans made under part D of title IV of the
Higher Education Act of 1965 that they are eligible to change repayment
plans and to enroll in one of the following repayment plans:
(1) The fixed repayment plan under section 455A(b) of the
Higher Education Act of 1965, as added by section 212.
(2) The Income-Driven Repayment plan under section 455A(c)
of the Higher Education Act of 1965, as added by section 212.
(b) Campaign Activities.--The campaign shall include the following
activities:
(1) Developing consumer information materials about the
opportunity to change repayment plans and to enroll in one of
the repayment plans described in paragraphs (1) and (2) of
subsection (a).
(2) Requiring servicers of loans made under part D of title
IV of the Higher Education Act of 1965 to provide such consumer
information to borrowers in a manner determined appropriate by
the Secretary.
SEC. 212. NEW REPAYMENT PLANS.
(a) Sunset of Repayment Plans Available Before July 1, 2026.--
Section 455(d)(1) of the Higher Education Act of 1965 (20 U.S.C.
1087e(d)(1)) is amended, in the matter preceding subparagraph (A), by
inserting ``, before July 1, 2026'' after ``may choose''.
(b) Repayment Plans Available on and After July 1, 2026.--Part D of
title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.)
is amended by inserting after section 455 the following:
``SEC. 455A. REPAYMENT PLANS AVAILABLE ON AND AFTER JULY 1, 2026.
``(a) Repayment Plans for Loans Made on or After July 1, 2026.--
``(1) Sunset of repayment plans available before july 1,
2026.--Paragraphs (1) through (5) of section 455(d) shall only
apply to loans made under this part before July 1, 2026.
``(2) Prohibitions.--The Secretary may not, for any loan
made under this part on or after July 1, 2026--
``(A) authorize a borrower of such a loan to repay
such loan pursuant to a repayment plan that is not
described in paragraph (3); or
``(B) carry out or modify a repayment plan that is
not described in such paragraph.
``(3) Design and selection.--Notwithstanding section
455(d), beginning on July 1, 2026, the Secretary shall offer a
borrower of a loan made under this part on or after such date
(including a Federal Direct Stafford Loan, a Federal Direct
PLUS Loan (including such a loan made on behalf of a dependent
student), a Federal Direct Consolidation Loan (including such a
loan that discharged the liability on a Federal Direct PLUS
Loan made on behalf of a dependent student), and a Federal
Direct Unsubsidized Stafford Loan) two plans for repayment of
such loan in accordance with subsection (d), including
principal and interest on the loan. The borrower shall be
entitled to accelerate, without penalty, repayment on the
borrower's loan under this part. The borrower may choose--
``(A) a fixed repayment plan under subsection (b);
or
``(B) the Income-Driven Repayment Plan under
subsection (c).
``(4) Selection by secretary.--If a borrower of a loan made
under this part on or after July 1, 2026, does not select a
repayment plan described in paragraph (3), the Secretary shall
provide the borrower with the fixed repayment plan described in
subsection (b).
``(5) Selection available for each new loan.--Each time a
borrower receives a new loan made under this part on or after
July 1, 2026, the borrower may select either the fixed
repayment plan under subsection (b) or the Income-Driven
Repayment Plan under subsection (c), which shall apply to all
such loans of the borrower in accordance with paragraph (6).
``(6) Same repayment plan required.--
``(A) Loans made on or after july 1, 2026.--All
loans made to a borrower under this part on or after
July 1, 2026, must be repaid together under the same
repayment plan.
``(B) Loans made before and on or after july 1,
2026.--A borrower with a loan made under this part
before July 1, 2026, and with a loan made on or after
July 1, 2026, (including a Federal Direct PLUS loan
made on behalf of a dependent student made before, on,
or after such date) may repay such loans on different
repayment plans, provided that--
``(i) all such loans made on or after July
1, 2026, are repaid under the same repayment
plan in accordance with subparagraph (A); and
``(ii) all such loans made before July 1,
2026, are repaid under the repayment plan that
the borrower was enrolled in with respect to
each such loan on June 30, 2026.
``(7) Permissible changes of repayment plan.--
``(A) Change from fixed repayment plan.--A borrower
may change the borrower's selection of a fixed
repayment plan under subsection (b), or the Secretary's
selection of such plan for the borrower under paragraph
(4), as applicable, to the Income-Driven Repayment Plan
under subsection (c) at any time.
``(B) Change from the income-driven repayment
plan.--A borrower may change the borrower's selection
of the Income-Driven Repayment Plan under subsection
(c) to a fixed repayment plan under subsection (b),
provided that the required fixed monthly payment amount
of the borrower under such plan is determined based
on--
``(i) the total amount of the outstanding
principal and interest and fees on the loans of
the borrower to be repaid under such fixed
plan, as of the date on which the borrower's
change in selection takes effect;
``(ii) the interest rates on such loans;
and
``(iii) the applicable repayment period
determined under subsection (b)(2).
``(8) Treatment of borrowers with loans made before july 1,
2026.--With respect to an outstanding loan made under this part
(including a Federal Direct PLUS loan made on behalf of a
dependent student) before July 1, 2026, a borrower with such a
loan--
``(A) shall not be eligible to change the
borrower's selection of a repayment plan under
paragraph (1) of section 455(d), or the Secretary's
selection of a plan for the borrower under paragraph
(2) of such section, as applicable, to another
repayment plan under such paragraph (1) on or after
July 1, 2026;
``(B) may, at any time, change the borrower's
selection of a repayment plan to a repayment plan
described in paragraph (3); and
``(C) upon changing the borrower's selection of a
repayment plan in accordance with subparagraph (B),
shall make any such subsequent change in selection in
accordance with paragraphs (6) and (7).
``(b) Fixed Repayment Plan.--
``(1) In general.--The fixed repayment plan made available
to borrowers in accordance with this section shall be a
repayment plan consistent with subsection (a)(1) of section 455
and section 428(b)(9)(A)(i), except as expressly provided in
this subsection, with a fixed annual repayment amount paid over
a fixed period of time. Except as provided in paragraph (3),
the required fixed monthly payment amount of a borrower shall
be determined based on the total amount of the outstanding
principal and interest of the Federal Direct Loans of the
borrower to be repaid pursuant to such plan, the interest rates
on such loans, and the applicable repayment period determined
under this subsection.
``(2) Applicable repayment period.--
``(A) Direct loans other than consolidation
loans.--The applicable repayment period of a Federal
Direct loan under this part, other than a Federal
Direct Consolidation Loan, shall be 10 years.
``(B) Direct consolidation loans.--The applicable
repayment period for a Federal Direct Consolidation
loan made on or after July 1, 2026, repaid pursuant to
a fixed repayment plan with a total outstanding amount
of principal and interest on all of the borrower's
Federal Direct Loans, including such Consolidation loan
(as of the day before entering repayment on such
Consolidation loan) is--
``(i) less than $7,500, shall be 10 years;
``(ii) equal to or greater than $7,500 but
less than $10,000, shall be 12 years;
``(iii) equal to or greater than $10,000
but less than $20,000, shall be 15 years;
``(iv) equal to or greater than $20,000 but
less than $40,000, shall be 20 years;
``(v) equal to or greater than $40,000 but
less than $60,000, shall be 25 years; and
``(vi) equal to or greater than $60,000,
shall be 30 years.
``(C) Minimum period.--No fixed repayment plan may
require a borrower to repay a loan in less than 10
years unless the borrower, during the 6 months
immediately preceding the start of the repayment
period, specifically requests that repayment be made
over a shorter period.
``(3) Minimum monthly payment.--The minimum monthly payment
amount of a borrower under a fixed repayment plan shall be $50
per month, except that the final payment of the borrower
pursuant to such plan may be less than $50.
``(4) Periods of deferment and forbearance.--The fixed
repayment plan period applicable to a borrower shall not
include periods when the borrower is in authorized deferment or
forbearance.
``(5) Adjustments for variable interest rates.--The number
of payments or the fixed monthly repayment amount may be
adjusted to reflect changes in the variable interest rate
identified in section 685.202(a) of title 34, Code of Federal
Regulations (as in effect on July 1, 2026).
``(c) Income-Driven Repayment Plan.--
``(1) Terms and conditions.--Notwithstanding any other
provision of this Act, beginning on July 1, 2026, the Secretary
shall carry out an income-contingent repayment plan, to be
known as the `Income-Driven Repayment Plan', that shall have
the following terms and conditions:
``(A) A borrower of any loan made under this part
may elect to have the borrower's total monthly payment
amount owed for all of the loans of the borrower made
under this part that are repaid under the Income-Driven
Repayment Plan not exceed the applicable monthly
payment of the borrower.
``(B) The Secretary shall apply the borrower's
applicable monthly payment first towards principal due,
next toward any fees due on the loan, and then toward
the interest due on the loan.
``(C) In the case of an applicable monthly payment
that does not fully cover the amount of interest that
has accrued on the borrower's loans for the month to
which such applicable monthly payment applies, the
Secretary shall not charge such remaining interest to
the borrower and such remaining interest shall not be
capitalized.
``(D) The Secretary shall have the discretion to
determine--
``(i) how a borrower's applicable monthly
payment is applied to each outstanding loan of
the borrower repayed under the Income-Driven
Repayment Plan; and
``(ii) the amount of principal, fees, and
interest due on each outstanding loan of the
borrower repayed under the Income-Driven
Repayment Plan.
``(E) The Secretary shall cancel any outstanding
balance of principal and interest due on all loans of
the borrower repaid under the Income-Driven Repayment
Plan by a borrower, without the need for an application
or other documentation from the borrower, on the
earlier of--
``(i) in the case of a borrower who does
not have at least one outstanding loan under
this part attributable to a graduate or
professional course of study, the date that the
borrower has made 240 qualifying payments over
a period of at least 20 years;
``(ii) in the case of a borrower who has at
least one outstanding loan under this part
attributable to a graduate or professional
course of study, the date that the borrower has
made 300 qualifying payments over a period of
at least 25 years; or
``(iii) the date that the borrower has
made--
``(I) in the case of a borrower
with a total original balance of
principal due on all such loans that is
equal to or less than $12,000, 120
qualifying payments over a period of at
least 10 years; or
``(II) in the case of a borrower
with a total original balance of
principal due on all such loans that is
greater than $12,000--
``(aa) 120 qualifying
payments over a period of at
least 10 years; plus
``(bb) for each increment
of $1 to $1,000 above $12,499
of such total original
principal balance, 12
additional qualifying payments
over a period of at least 1
year.
``(2) Annual income verification.--
``(A) In general.--The procedures established by
the Secretary under section 455(e)(8) shall apply for
annually determining the borrower's eligibility for the
Income-Driven Repayment Plan, including verification of
a borrower's annual income and the annual amount due on
the total amount of loans eligible to be repaid under
this subsection, and such other procedures as are
necessary to effectively implement the Income-Driven
Repayment Plan. With respect to carrying out section
494(a)(2) for the Income-Driven Repayment Plan, an
individual may elect to opt out of the disclosures
required under section 494(a)(2)(A)(ii) in accordance
with the procedures established under 455(e)(8).
``(B) Additional procedures.--In addition to
carrying out the procedures described in subparagraph
(A), the Secretary shall establish and implement--
``(i) in the case that the Secretary
receives the return information disclosed under
section 6103(l)(13) of the Internal Revenue
Code of 1986, pursuant to approval provided
under section 494, to determine the repayment
obligation of the borrower but is unable to
determine the repayment obligation of the
borrower, procedures to require the borrower to
provide such information as the Secretary may
require to determine such repayment obligation
under the Income-Driven Repayment Plan; and
``(ii) such other procedures as are
necessary to implement effectively the Income-
Driven Repayment Plan.
``(C) Reconsideration.--
``(i) In general.--In the case that a
borrower believes that the annual repayment
obligation of the borrower determined pursuant
to this paragraph is not reflective of the
borrower's income or family size, the borrower
may request that the Secretary recalculate such
annual repayment obligation. Such request shall
include documentation of income or family size
not based on tax information to account for a
decrease in income since the borrower last
filed a tax return, the borrower's separation
from a spouse with whom the borrower had
previously filed a joint tax return, the birth
or impending birth of a child, or other
comparable circumstances.
``(ii) Adjustment to repayment
obligation.--If the Secretary determines that
the annual repayment obligation of the borrower
determined pursuant to this paragraph is not
reflective of the borrower's income or family
size based on a request described in clause
(i), the Secretary shall adjust the annual
repayment obligation of the borrower as
determined appropriate by the Secretary and in
a manner consistent with this subsection.
``(D) Forbearance.--In the case that a borrower
provides information or documentation pursuant to
subparagraph (B)(i) or subparagraph (C)(i), the
Secretary shall grant the borrower administrative
forbearance for a period of up to 60 days in order for
the Secretary to collect and process such information
or documentation.
``(3) Repayment disclosure.--After the Secretary obtains
sufficient information to calculate a borrower's annual
repayment obligation under the Income-Driven Repayment Plan
pursuant to paragraph (2) and not later than 3 months before
any payments in accordance with such annual repayment
obligation are due, the Secretary shall provide to the borrower
a repayment disclosure that--
``(A) specifies the borrower's applicable monthly
payment amount;
``(B) explains how such applicable monthly payment
amount was calculated;
``(C) informs the borrower of the terms and
conditions of the Income-Driven Repayment Plan; and
``(D) informs the borrower of how to contact the
Secretary if the calculated applicable monthly payment
amount is not reflective of the borrower's current
income or family size.
``(4) Failure to provide information.--In the case that the
Secretary requires information from the borrower to determine
the annual repayment obligation of the borrower and the
borrower does not provide the necessary information to the
Secretary in accordance with the procedures described in
paragraph (2), the Secretary shall remove the borrower from the
Income-Driven Repayment Plan and provide the borrower with the
fixed repayment plan described in subsection (b).
``(5) Treatment of consolidation loans.--With respect to
cancelling any outstanding balance of principal and interest
due on all loans of the borrower repaid under the Income-Driven
Repayment Plan pursuant to paragraph (1)(E), the Secretary
shall--
``(A) for a borrower with an outstanding Federal
Direct Consolidation Loan that discharges the liability
on loans with more than one period of qualifying
payments, determine the number of qualifying payments
made towards such Direct Consolidation Loan based on
the weighted average of the number of qualifying
payments made on each such discharged loan.
``(B) for a borrower with an outstanding joint
consolidation loan that is separated into individual
Federal Direct Consolidation Loans, determine the
number of qualifying payments made towards each such
separated loan based on the number of qualifying
payments that the borrower made prior to the
separation.
``(6) Definitions.--In this subsection:
``(A) Applicable monthly payment.--
``(i) In general.--The term `applicable
monthly payment' means, when used with respect
to a borrower and except as provided in clause
(ii), the amount equal to--
``(I) $0 for the portion of the
borrower's income (and the borrower's
spouse's income, if applicable) that is
less than or equal to 225 percent of
the poverty line applicable to the
borrower's family size (as determined
under section 673(2) of the Community
Services Block Grant Act (42 U.S.C.
9902(2))); plus
``(II) in the case of a borrower
with an outstanding loan made under
this part for an undergraduate program
of study, 5 percent of the portion of
the borrower's income (and the
borrower's spouse's income, if
applicable) that is greater than 225
percent of the poverty line applicable
to the borrower's family size (as
determined under section 673(2) of the
Community Services Block Grant Act (42
U.S.C. 9902(2))), prorated by the
percentage that is the result of
dividing--
``(aa) the borrower's total
outstanding balance of loans
that is attributable to loans
made under this part for an
undergraduate program of study,
determined at the time the
borrower enters into repayment
for such loans; by
``(bb) the result of
dividing--
``(AA) the
borrower's total
outstanding balance of
loans made under this
part, determined at the
time the borrower
enters into repayment
for such loans; by
``(BB) 12; plus
``(III) in the case of a borrower
with an outstanding loan made under
this part not described in subclause
(II), 10 percent of the portion of the
borrower's income (and the borrower's
spouse's income, if applicable) that is
greater than 225 percent of the poverty
line applicable to the borrower's
family size (as determined under
section 673(2) of the Community
Services Block Grant Act (42 U.S.C.
9902(2))), prorated by the percentage
that is the result of dividing--
``(aa) the difference
between--
``(AA) the
borrower's total
outstanding balance of
loans made under this
part, determined at the
time the borrower
enters into repayment
for such loans; and
``(BB) the balance
of loans subject to
subclause (II); by
``(bb) the result of
dividing--
``(AA) the
borrower's total
outstanding balance of
loans made under this
part, determined at the
time the borrower
enters into repayment
for such loans; by
``(BB) 12.
``(ii) Adjustments to applicable monthly
payment.--Notwithstanding clause (i), the
applicable monthly payment of a borrower shall
be--
``(I) in the case that the amount
calculated for such borrower pursuant
to clause (i) is less than $5, $0;
``(II) in the case that the amount
calculated for such borrower pursuant
to clause (i) is greater than $5 but
less than $10, $10; or
``(III) in the case of a married
borrower who is not an exempted
borrower, the amount resulting by
multiplying--
``(aa) the amount
calculated for such borrower
pursuant to clause (i); by
``(bb) the result of
dividing--
``(AA) the
outstanding balance of
principal and interest
due on all loans of the
borrower made under
this part; by
``(BB) the sum of
the amount described in
subitem (AA) plus the
outstanding balance of
principal and interest
due on all loans of the
borrower's spouse made
under this part.
``(B) Income.--The term `income', when used with
respect to a borrower, means--
``(i) the borrower's (and the borrower's
spouse, if applicable) adjusted gross income as
reported to the Internal Revenue Service; or
``(ii) the amount calculated based on
alternative documentation of all forms of
taxable income received by the borrower (and
the borrower's spouse, if applicable) and
provided to the Secretary.
``(C) Adjusted gross income.--The term `adjusted
gross income', when used with respect to a borrower,
means--
``(i) in the case of an exempted borrower,
the borrower's adjusted gross income (as such
term is defined in section 62 of the Internal
Revenue Code of 1986) of such borrower for the
most recent taxable year; and
``(ii) in the case of a married borrower
who is not an exempted borrower, the sum of the
adjusted gross income (as such term is defined
in section 62 of the Internal Revenue Code of
1986) of the borrower and of the borrower's
spouse for the most recent taxable year.
``(D) Exempted borrower.--The term `exempted
borrower' means a borrower--
``(i) who is unmarried;
``(ii) who is married and files a Federal
income tax return separately from the
borrower's spouse; or
``(iii) who is married, files a Federal
income tax return jointly with the borrower's
spouse, and certifies at the time the borrower
applies for a repayment plan or submits
information for annual income verification
that--
``(I) the borrower is separated
from the borrower's spouse; or
``(II) the borrower is unable to
reasonably assess the income of the
borrower's spouse.
``(E) Qualifying payment.--The term `qualifying
payment', when used with respect to a borrower, means
any of the following:
``(i) An applicable monthly payment.
``(ii) A monthly payment made under the
fixed repayment plan described in subsection
(b).
``(iii) A monthly payment made under a
repayment plan described in paragraph (1) of
section 455(d).
``(iv) A payment under a repayment plan
with payments that are as least as much as they
would have been under a standard repayment plan
for a term of 10 years consistent with
subsection (a)(1) of section 455 and section
428(b)(9)(A)(i), except that, in the case of a
borrower who was moved by the Secretary to such
a repayment plan due to the borrower's failure
to submit information for annual income
verification or their failure to provide other
necessary information, no more than 12 payments
made under such a repayment plan may be counted
as qualifying payments.
``(v) A forbearance or deferment of an
applicable monthly payment otherwise due under
the Income-Driven Repayment Plan pursuant to
any of the following:
``(I) Cancer treatment deferment
under section 455(f)(3), section
428(b)(1)(M)(v), or section
427(a)(2)(C)(iv).
``(II) Rehabilitation training
program deferment under section
455(f)(2)(A)(ii), section
428(b)(1)(M)(i)(II), or section
427(a)(2)(C)(i)(II).
``(III) Deferment relating to a
period of unemployment under section
455(f)(2)(B) or section
428(b)(1)(M)(ii).
``(IV) Deferment due to an economic
hardship described in section 435(o),
section 428(b)(1)(M)(iv), or section
427(a)(2)(C)(iii).
``(V) Deferment provided in
connection with services in the Peace
Corps.
``(VI) Military service deferment
under section 455(f)(2)(C) or section
428(b)(1)(M)(iii).
``(VII) Post-active-duty student
deferment under section 493D.
``(VIII) Forbearance provided under
section 428(c)(3)(A)(i)(III) on or
after July 1, 2024, because the
borrower is serving in a national
service position for which the borrower
receives a national service educational
award under the National and Community
Service Trust Act of 1993 (42 U.S.C.
12501 et seq.).
``(IX) National Guard Duty
forbearance under section
682.211(h)(2)(iii) or section
685.205(a)(7) of title 34, Code of
Federal Regulations (or successor
regulations), on or after July 1, 2024.
``(X) Department of Defense student
loan repayment program forbearance
under section 428(c)(3)(A)(i)(IV) on or
after July 1, 2024.
``(XI) Administrative forbearance
or mandatory administrative forbearance
under section 428(c)(3)(D) or section
428H(e)(7) on or after July 1, 2024.
``(XII) Forbearance granted by the
Secretary while the Secretary
determines whether the borrower is
eligible for the Secretary to discharge
the borrower's liability on a loan due
to the borrower's bankruptcy.
``(vi) A payment for any month in which the
borrower was in a period of deferment or
forbearance not described in clause (iv) (other
than an in-school deferment) if such payment--
``(I) is made not later than 3
years after such period of deferment or
forbearance ended; and
``(II) is equal to or greater than
the applicable monthly payment of the
borrower.''.
SEC. 213. MAXIMUM REPAYMENT PERIOD FOR INCOME-CONTINGENT REPAYMENT AND
INCOME-BASED REPAYMENT.
(a) ICR.--Section 455(e)(7)(B) of the Higher Education Act of 1965
(20 U.S.C. 1087e(e)(7)(B)) is further amended--
(1) by striking ``or'' at the end of clause (iv);
(2) by striking the period at the end of clause (v) and
inserting a semicolon; and
(3) by adding at the end the following:
``(vi) makes payments under the Income-
Driven Repayment Plan under section 455A(c); or
``(vii) makes payments under the fixed
repayment plan under section 455A(b);''.
(b) IBR.--Section 493C(b)(7)(B) of the Higher Education Act of 1965
(20 U.S.C. 1098e(b)(7)(B)) is amended--
(1) in clause (iv), by striking ``or'';
(2) in clause (v), by adding ``or'' at the end; and
(3) by adding at the end the following:
``(vi) makes payments under the Income-
Driven Repayment Plan under section 455A(c); or
``(vii) makes payments under the fixed
repayment plan under 455A(b);''.
SEC. 214. BORROWERS INELIGIBLE FOR LOANS.
(a) Ineligible Borrowers.--Section 484 of the Higher Education Act
of 1965 (20 U.S.C. 1091) is amended--
(1) in subsection (a)(6), by striking ``if the'' and
inserting ``if, in accordance with subsection (u), the''; and
(2) by adding at the end the following:
``(u) Ineligible Borrowers.--
``(1) In general.--The Secretary determines that a borrower
is ineligible pursuant to subsection (a)(6) if, at the time the
loan was made and without the knowledge of the institution of
higher education or the Secretary, the borrower (or the student
on whose behalf a parent borrowed) provided false or erroneous
information, has been convicted of, or has pled nolo contendere
or guilty to, a crime involving fraud in obtaining funds under
this title, or took actions that caused the borrower or
student--
``(A) to receive a loan for which the borrower is
wholly or partially ineligible;
``(B) to receive interest benefits for which the
borrower was ineligible; or
``(C) to receive loan proceeds for a period of
enrollment for which the borrower was not eligible.
``(2) Demand letter.--
``(A) In general.--If the Secretary makes the
determination described in paragraph (1), the Secretary
shall send an ineligible borrower a demand letter that
requires that, within 30 days from the date the letter
is mailed, the borrower repay any principal amount for
which the borrower is ineligible and any accrued
interest, including interest subsidized by the
Secretary, through the previous quarter.
``(B) Default.--If a borrower fails to comply with
the demand letter described in paragraph (2), the
borrower shall be in default on the entire loan.
``(3) Prohibition on consolidation.--A borrower may not
consolidate a loan under this part for which the borrower is
wholly or partially ineligible.''.
PART C--AUTOMATIC ENROLLMENT IN THE INCOME-DRIVEN REPAYMENT PLAN FOR
CERTAIN BORROWERS
SEC. 221. NOTIFICATION AND AUTOMATIC ENROLLMENT PROCEDURES FOR
BORROWERS WHO ARE DELINQUENT ON LOANS.
Section 455(d) of the Higher Education Act of 1965 (20 U.S.C.
1087e(d)), as amended by this Act, is further amended by adding at the
end the following:
``(6) Notification and automatic enrollment procedures for
borrowers who are delinquent on loans.--
``(A) Authority to obtain income information.--The
Secretary shall establish and implement, with respect
to any borrower described in subparagraph (B),
procedures to--
``(i) use return information of the
borrower (and the borrower's spouse, if
applicable) disclosed under section 6103(l)(13)
of the Internal Revenue Code of 1986, pursuant
to approval provided under section 494, to
determine the income and family size of the
borrower (and the borrower's spouse, if
applicable) without further action by the
borrower;
``(ii) allow the borrower (or the spouse of
the borrower), at any time, to opt out of
disclosure under such section 6103(l)(13) and
instead provide such information as the
Secretary may require to determine the income
and family size of the borrower (and the
borrower's spouse, if applicable); and
``(iii) provide the borrower with an
opportunity to update the return information so
disclosed before the determination of the
income and family size of the borrower for
purposes of this paragraph.
``(B) Borrower notification.--With respect to each
borrower of a loan made under this part who is not
repaying such loan pursuant to the Income-Driven
Repayment Plan under section 455A(c), who is at least
31 days delinquent on such loan, and who has not been
subject to the procedures under this paragraph for such
loan in the preceding 62 days, the Secretary shall, as
soon as practicable after such 31-day delinquency,
provide to the borrower the following:
``(i) Notification that the borrower is at
least 31 days delinquent on at least 1 loan
made under this part, and a description of all
delinquent covered loans, nondelinquent covered
loans, and noncovered loans of the borrower.
``(ii) A brief description of the repayment
plans for which the borrower is eligible and
the covered loans and noncovered loans of the
borrower that may be eligible for such plans,
based on information available to the
Secretary.
``(iii) The amount of monthly payments for
the covered and noncovered loans under each
repayment plan identified under clause (ii),
based on information available to the
Secretary, including, if the income information
of the borrower is available to the Secretary
under subparagraph (A), the income, family
size, tax filing status, and tax year
information on which each such monthly payment
is based.
``(iv) Clear and simple instructions on how
to select the repayment plans.
``(v) An explanation that the Secretary
shall take the actions under subparagraph (C)
with respect to such borrower, if--
``(I) the borrower is 80 days
delinquent on 1 or more loans made
under this part and has not selected
the Income-Driven Repayment Plan under
section 455A(c) for borrower's loans
made under this part; and
``(II) in the case of such a
borrower whose existing repayment plan
for the borrower's loans made under
this part is not such Income-Driven
Repayment Plan, the monthly payments
under such existing repayment plan are
higher than such monthly payments would
be under such Income-Driven Repayment
Plan.
``(vi) Instructions on updating the
information of the borrower obtained under
subparagraph (A).
``(C) Secretary's selection of a plan.--With
respect to each borrower described in subparagraph
(B)(v) who has not selected the Income-Driven Repayment
Plan under section 455A(c) for the borrower's loans
made under this part that are delinquent and who is at
least 80 days delinquent on such a loan, the Secretary
shall, as soon as practicable--
``(i) enroll the borrower in such Income-
Driven Repayment Plan; and
``(ii) authorize the borrower to change the
Secretary's selection of the Income-Driven
Repayment Plan to the fixed-repayment plan
under section 455A(b), as long as such
selection is made in accordance with paragraphs
(6) and (7) of section 455A(a).''.
SEC. 222. NOTIFICATION AND AUTOMATIC ENROLLMENT PROCEDURES FOR
BORROWERS WHO ARE REHABILITATING DEFAULTED LOANS.
Section 455(d) of the Higher Education Act of 1965 (20 U.S.C.
1087e(d)), as amended by this Act, is further amended by adding at the
end the following:
``(7) Notification and automatic enrollment procedures for
borrowers who are rehabilitating defaulted loans.--
``(A) Authority to obtain income information.--The
Secretary shall establish and implement, with respect
to any borrower who is rehabilitating a loan made under
this part pursuant to section 428F(d), procedures to--
``(i) use return information of the
borrower (and the borrower's spouse, if
applicable) disclosed section 6103(l)(13) of
the Internal Revenue Code of 1986, pursuant to
approval provided under section 494, to obtain
such information as is reasonably necessary
regarding the income and family size of the
borrower (and the borrower's spouse, if
applicable);
``(ii) allow the borrower (or the spouse of
the borrower), at any time, to opt out of
disclosure under such section 6103(l)(13) and
instead provide such information as the
Secretary may require to obtain such
information; and
``(iii) provide the borrower with an
opportunity to update the return information so
disclosed before the determination of income
and family size of the borrower (and the
borrower's spouse, if applicable) for purposes
of this paragraph.
``(B) Borrower notification.--Not later than 30
days after a borrower makes the 6th payment required on
such loan pursuant to section 428F(d), the Secretary
shall notify the borrower of the process under
subparagraph (C) with respect to such loan.
``(C) Secretary's selection of plan.--With respect
to each borrower who has made the 9th payment required
on such loan pursuant to section 428F(d), the Secretary
shall, as soon as practicable after such payment, carry
out the procedures described in paragraph (6)(C) with
respect to such loan.''.
SEC. 223. COVERED LOAN AND NON-COVERED LOAN DEFINED.
Section 455(d) of the Higher Education Act of 1965 (20 U.S.C.
1087e(d)), as amended by this Act, is further amended by adding at the
end the following:
``(8) Definitions.--In this subsection:
``(A) Covered loan.--The term `covered loan'
means--
``(i) a loan made under this part;
``(ii) a loan purchased under section 459A;
or
``(iii) a loan that has been assigned to
the Secretary under subsection (c)(8) or
(j)(3)(B) of section 428, or subsection
(a)(1)(A)(ii) or (a)(1)(G) of section 428F.
``(B) Noncovered loan.--The term `noncovered loan'
means a loan made, insured, or guaranteed under this
title that is not a covered loan.''.
SEC. 224. AUTOMATIC RECERTIFICATION OF INCOME FOR INCOME-DRIVEN
REPAYMENT PLANS.
(a) Income-Contingent Repayment Plans.--Section 455(e)(8)(A) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(e)(8)(A)) is amended--
(1) by striking ``and'' at the end of clause (ii);
(2) by redesignating clause (iii) as clause (iv);
(3) in clause (iv) (as so redesignated), by striking the
period at the end and inserting ``; and''; and
(4) by inserting after clause (ii), the following:
``(iii) in the case of a borrower who has
selected to repay a loan made under this part
pursuant to an income contingent repayment plan
that defines discretionary income in such a
manner that the borrower would have a
calculated monthly payment equal to $0, not
require the borrower to provide the Secretary
the information described in clause (i) or
(ii), and ensure that the borrower will have a
calculated monthly payment of $0; and''.
(b) Income-Based Repayment Plans.--Section 493C(c)(2)(B) of the
Higher Education Act of 1965 (20 U.S.C. 1098e(c)(2)(B)) is amended by
striking ``any loan made under part D (other than an excepted PLUS loan
or excepted consolidation loan)'' and inserting ``any covered loan (as
defined in section 455(d)(8))''.
SEC. 225. PROCEDURE AND REQUIREMENT FOR REQUESTING TAX RETURN
INFORMATION FROM THE IRS.
Section 494(a) of the Higher Education Act of 1965 (20 U.S.C.
1098h(a)) is amended--
(1) in paragraph (2)--
(A) in subparagraph (A), in the matter preceding
clause (i), by striking ``a loan under part D'' and
inserting ``a covered loan (as defined in section
455(d)(8)''; and
(B) in subparagraph (B), by striking ``a loan under
part D'' and inserting ``a covered loan (as defined in
section 455(d)(8))''; and
(2) by adding at the end the following:
``(4) Loan delinquency and rehabilitation.--
``(A) Borrowers delinquent on loans.--In the case
of an individual who is a borrower of a loan made under
this part and who is at least 31 days delinquent on
such loan, the Secretary, with respect to such
individual and any spouse of such individual, shall--
``(i) provide to such individuals the
notification described in paragraph (1)(A)(i);
and
``(ii) require, as a condition of
eligibility for the notification and automatic
enrollment procedures under section 455(d)(6),
that such individuals--
``(I) affirmatively approve the
disclosure described in paragraph
(1)(A)(i) and agree that such approval
shall serve as an ongoing approval of
such disclosure until the date on which
the individual elects to opt out of
such disclosure under section
455(d)(6)(A)(ii); or
``(II) provide such information as
the Secretary may require to carry out
the procedures under section 455(d)(6)
with respect to such individual.
``(B) Loan rehabilitation.--In the case of any
written or electronic application by an individual for
the rehabilitation of a loan made under this part
pursuant to section 428F(d), the Secretary, with
respect to such individual and any spouse of such
individual, shall--
``(i) provide to such individuals the
notification described in paragraph (1)(A)(i);
and
``(ii) require, as a condition of
eligibility for loan rehabilitation pursuant to
section 428F(a), that such individuals--
``(I) affirmatively approve the
disclosure described in paragraph
(1)(A)(i) and agree that such approval
shall serve as an ongoing approval of
such disclosure until the date on which
the individual elects to opt out of
such disclosure under section
455(d)(7)(A)(ii); or
``(II) provide such information as
the Secretary may require to carry out
the procedures under section 455(d)(7)
with respect to such individual.''.
PART D--STREAMLINING PUBLIC SERVICE LOAN FORGIVENESS
SEC. 231. AMENDMENTS TO TERMS AND CONDITIONS OF PUBLIC SERVICE LOAN
FORGIVENESS.
(a) Number of Monthly Payments.--Paragraph (1) of section 455(m) of
the Higher Education Act of 1965 (20 U.S.C. 1087e(m)) is amended--
(1) in the matter preceding subparagraph (A), by striking
``a borrower who'' and inserting ``a borrower'';
(2) by amending subparagraph (A) to read as follows:
``(A) who--
``(i) has made 96 qualifying monthly
payments on the eligible Federal Direct Loan
after October 1, 2007; and
``(ii) has been employed in a public
service job during the period in which the
borrower makes each of the 96 qualifying
monthly payments; and''; and
(3) by amending subparagraph (B) to read as follows:
``(B) without regard to the employment status of
the borrower at the time of such cancellation.''.
(b) Redesignations.--Section 455(m) of the Higher Education Act of
1965 (20 U.S.C. 1087e(m)) is further amended by redesignating
paragraphs (2), (3), and (4), as paragraphs (3), (6), and (7),
respectively.
(c) Monthly Payments.--Section 455(m) of the Higher Education Act
of 1965 (20 U.S.C. 1087e(m)) is further amended--
(1) by inserting after paragraph (1), as so amended, the
following:
``(2) Monthly payments.--
``(A) Qualifying monthly payments.--For the purpose
of determining under paragraph (1) the number of
qualifying monthly payments made by a borrower on an
eligible Federal Direct Loan, the Secretary shall
consider the borrower to have made a qualifying monthly
payment for each month that--
``(i) the borrower pays (as a lump sum or
in multiple installments) an amount that is not
less than the monthly payment amount due on the
eligible Federal Direct Loan pursuant to any
one or a combination of the following--
``(I) payments under an income-
based repayment plan under section
493C;
``(II) payments under a standard
repayment plan under subsection
(d)(1)(A), based on a 10-year repayment
period;
``(III) monthly payments under a
repayment plan under subsection (d)(1)
or (g) of not less than the monthly
amount calculated under subsection
(d)(1)(A), based on a 10-year repayment
period;
``(IV) payments under an income
contingent repayment plan under
subsection (d)(1)(D);
``(V) payments under the Income-
Driven Repayment Plan under section
455A(c); or
``(VI) payments under the fixed
repayment plan under section 455A(b);
or
``(ii) in lieu of a payment described in
clause (i), the borrower is in one of the
following periods of deferment or forbearance--
``(I) cancer treatment deferment
under section 427(a)(2)(C)(iv),
428(b)(1)(M)(v), or 455(f)(3);
``(II) rehabilitation training
program deferment under section
427(a)(2)(C)(i)(II),
428(b)(1)(M)(i)(II), or
455(f)(2)(A)(ii);
``(III) military service deferment
under section 428(b)(1)(M)(iii) or
455(f)(2)(C);
``(IV) unemployment deferment under
section 427(a)(2)(C)(ii),
428(b)(1)(M)(ii), 428B(d)(1)(A)(i), or
455(f)(2)(B);
``(V) deferment due to an economic
hardship described in section
427(a)(2)(C)(iii), section
428(b)(1)(M)(iv), section
428B(d)(1)(A)(i), section 435(o), or
section 455(f)(2)(D);
``(VI) Peace Corps service
deferment under section
682.210(b)(2)(ii) or 682.210(k) of
title 34, Code of Federal Regulations
(or successor regulations), as made
applicable to Direct Loan borrowers
under section 685.204(j) of such title
34;
``(VII) post-active-duty student
deferment under section 493D;
``(VIII) AmeriCorps forbearance
under section 428(c)(3)(A)(i)(III);
``(IX) National Guard Duty
forbearance under section
682.211(h)(2)(iii) or 685.205(a)(7) of
title 34, Code of Federal Regulations
(or successor regulations);
``(X) Department of Defense student
loan repayment program forbearance
under section 428(c)(3)(A)(i)(IV);
``(XI) administrative forbearance
or mandatory administrative forbearance
under section 428(c)(3)(D) or
428H(e)(7); or
``(XII) student loan debt burden
forbearance under section
428(c)(3)(A)(i)(II).
``(B) Prepayments.--
``(i) In general.--Subject to clause (ii),
if, for any month, a borrower makes a
qualifying monthly payment on an eligible
Federal Direct Loan in an amount that exceeds
the monthly payment amount due on such loan for
such month, the Secretary shall--
``(I) if the excess amount is less
than the monthly payment amount due for
the subsequent month on such loan,
apply the excess amount toward the
monthly payment amount due for such
subsequent month;
``(II) if the excess amount is
equal to the monthly payment amount due
for the subsequent month on such loan,
treat the excess amount as the monthly
payment for such subsequent month;
``(III) if the excess amount is
greater than the monthly payment amount
due for the subsequent month on such
loan, but less than the total monthly
payment amounts due for the 2
subsequent months on such loan--
``(aa) treat the portion of
the excess amount that covers
the monthly payment amount due
for the subsequent month as the
monthly payment for such
subsequent month; and
``(bb) apply the remainder
of the excess amount toward the
monthly payment amount due for
the second subsequent month;
``(IV) if the excess amount is
equal to or greater than the monthly
payment amount due for the 2 subsequent
months on such loan, but less than the
total monthly payment amounts due for
the 3 subsequent months on such loan--
``(aa) treat the portion of
the excess amount that covers
the monthly payment amounts due
for the subsequent month and
the second subsequent month as
the monthly payments for such
months; and
``(bb) apply any remainder
of such excess amount toward
the monthly payment amount due
for the third subsequent month;
``(V) if the excess amount is equal
to the monthly payment amounts due for
the 3 subsequent months on such loan,
treat the excess amount as the monthly
payments for such months;
``(VI) if the excess amount is
greater than the monthly payment
amounts due for the 3 subsequent months
on such loan--
``(aa) treat the portion of
the excess amount that covers
the monthly payment amounts due
for the 3 subsequent months as
the monthly payments for such
months; and
``(bb) apply any remainder
of such excess amount to the
principal balance of the
eligible Federal Direct loan;
and
``(VII) notwithstanding subclauses
(I) through (VI), if the borrower has a
monthly payment amount due on such loan
for such month that is equal to $0,
apply any excess amount for such month
to the principal balance of the
eligible Federal Direct loan.
``(ii) Alternative application.--Prior to
or at the time of making a payment that exceeds
the monthly payment amount due on an eligible
Federal Direct Loan for such month, a borrower
may request that any excess amount for such
month be applied to the principal balance of an
eligible Federal Direct loan in lieu of such
excess amount being applied in accordance with
clause (i).
``(C) Buyback payment process.--
``(i) In general.--The Secretary shall
establish a buyback payment process under which
a qualified borrower of an eligible Federal
Direct Loan may make a buyback payment in order
to have eligible months of the borrower's
public service employment period during which
the borrower did not make a qualifying monthly
payment on such loan be treated as if the
borrower had made a qualifying monthly payment
on such loan.
``(ii) Qualified borrower.--A borrower is a
qualified borrower for the purposes of making a
buyback payment in accordance with this
subparagraph if the borrower--
``(I) has an eligible Federal
Direct Loan that is not in default;
``(II) has been employed in a
public service job for not less than a
96 month employment period, but during
such employment period has made fewer
than 96 qualifying monthly payments on
an eligible Federal Direct Loan; and
``(III) requests to make a buyback
payment in accordance with this
subparagraph.
``(iii) Eligible month.--For the purposes
of this subparagraph, an eligible month means a
month during which a qualified borrower was
employed in a public service job, was not in an
in-school deferment or grace period, and did
not make a qualifying monthly payment on an
eligible Federal Direct Loan for such month--
``(I) because the borrower made a
monthly payment on such eligible
Federal Direct Loan pursuant to a
repayment plan that is not a qualifying
repayment plan;
``(II) because the borrower was in
a period of deferment or forbearance
other than a period described in clause
(ii) of subparagraph (A); or
``(III) for another reason
determined appropriate by the
Secretary.
``(iv) Buyback payment requirements.--A
buyback payment made in accordance with this
subparagraph--
``(I) shall be made by a qualified
borrower as a lump sum payment amount,
and in an amount that equals the total
amount the borrower would have paid in
qualifying monthly payments on the
eligible Federal Direct Loan for all
eligible months the borrower is
requesting to buyback, pursuant to a
qualifying repayment plan applicable to
the borrower, in accordance with
section 685.219(g)(6) of title 34, Code
of Federal Regulations (as such section
is in effect on the date of enactment
of this paragraph) or any other
relevant regulations in effect on such
date;
``(II) may not be made with respect
to an eligible Federal Direct Loan that
has been paid off, discharged, or
cancelled; and
``(III) with respect to an eligible
Federal Direct Loan that is a
consolidation loan, may not be used to
buyback eligible months that occurred
before the date of the consolidation of
such loan.
``(D) Hold harmless against retroactive
determinations.--For purposes of determining under
paragraph (1) the number of qualifying monthly payments
made by a borrower, any payment or period of deferment
or forbearance that is determined to be a qualifying
monthly payment may not, at a later time, be determined
not to be a qualifying monthly payment.''; and
(2) in paragraph (6), as redesignated by subsection (b), by
adding at the end the following:
``(C) Qualifying repayment plan.--The term
`qualifying repayment plan' means any of the repayment
plans listed in clause (i) of paragraph (2)(A).''.
(d) Loan Cancellation.--Paragraph (3) of section 455(m) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(m)), as redesignated by
subsection (b), is amended to read as follows:
``(3) Loan cancellation amount.--Upon certification by a
borrower of completion of 96 qualifying monthly payments by the
borrower, the Secretary shall determine whether the borrower
meets each of the requirements of paragraph (1), and--
``(A) if the Secretary determines that the borrower
does meet such requirements, cancel the obligation to
repay the balance of principal and interest due as of
the time of such cancellation on the eligible Federal
Direct Loans made to the borrower under this part,
without further action by the borrower; or
``(B) if the Secretary determines that the borrower
does not meet such requirements, notify the borrower of
such determination in accordance with paragraph (4).''.
(e) Reconsideration Process.--Section 455(m) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(m)), as redesignated by
subsection (b), is further amended by inserting after paragraph (3), as
so amended, the following:
``(4) Initial determination of ineligibility for loan
cancellation.--In a case in which the Secretary determines that
a borrower has not met the requirements of paragraph (1), the
Secretary shall--
``(A) notify the borrower that--
``(i) the borrower's application has been
denied, including the basis for such denial;
``(ii) the borrower is in a 90-day
forbearance period described in subparagraph
(B); and
``(iii) the Secretary will resume
collection of the eligible Federal Direct Loans
for which the borrower was seeking loan
cancellation under this subsection after such
90-day forbearance period, unless the borrower
opts to extend such forbearance period under
paragraph (5)(A)(ii); and
``(B) grant the borrower a 90-day forbearance
period, beginning on the date of the notice described
in subparagraph (A) provided to the borrower, and
during which--
``(i) payments of principal and interest
need not be made on the eligible Federal Direct
Loans for which the borrower was seeking loan
cancellation under this subsection; and
``(ii) any interest accrued and not paid
may not be capitalized.
``(5) Reconsideration process.--
``(A) Request for reconsideration.--Not later than
90 days after the date of the notice described in
paragraph (4)(A) provided to the borrower--
``(i) the borrower may request, on a form
approved by the Secretary, that the Secretary
reconsider the basis for the Secretary's denial
under paragraph (4)(A)(i); and
``(ii) if the Secretary grants the
borrower's reconsideration request, offer the
borrower an extension of the 90-day forbearance
period described in paragraph (4)(B), which
shall--
``(I) begin on the date of the
borrower's reconsideration request
under this subparagraph; and
``(II) end on the date of the
notice provided to the borrower under
subparagraph (C)(i)(I) of the
Secretary's reconsideration decision.
``(B) Consideration of reconsideration request.--In
evaluating a reconsideration request from a borrower,
the Secretary shall consider any relevant evidence or
supporting documentation that may assist the Secretary
in determining whether the borrower meets each of the
requirements of paragraph (1) to qualify for loan
cancellation under this subsection.
``(C) Decision by the secretary.--
``(i) In general.--Not later than 6 months
after receipt of a borrower's reconsideration
request, the Secretary shall--
``(I) notify the borrower of the
reconsideration decision and the reason
for the Secretary's determination;
``(II) in a case in which the
reconsideration request is granted,
adjust the borrower's number of
qualifying monthly payments under
paragraph (1) or cancel the loan under
paragraph (3); and
``(III) in a case in which the
Secretary denies the reconsideration
request, with respect to a borrower who
agrees to the forbearance extension
described in subparagraph (A)(ii),
include in the notice provided to the
borrower under subclause (I), a
reminder that the Secretary will resume
collection of the eligible Federal
Direct Loans for which the borrower was
seeking loan cancellation under this
subsection as of the date of such
notice.
``(ii) Final decision.--After the Secretary
makes a decision on the borrower's
reconsideration request, the Secretary's
decision is final, and the borrower will not
receive additional reconsideration.''.
SEC. 232. TERMS AND CONDITIONS OF EMPLOYMENT.
(a) Independent Contractors.--Section 455(m) is further amended by
adding at the end the following:
``(8) Treatment of independent contractors.--For purposes
of this subsection, each reference to `employment' and
`employed' shall be treated as including work as an independent
contractor.''.
(b) Definitions.--Paragraph (6) of section 455(m) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(m)), as redesignated by section
231(b), is further amended by adding at the end the following:
``(D) Full-time.--The term `full-time' means, with
respect to a public service job, working 1 or more such
jobs--
``(i) a minimum average of 30 hours per
week during the period being certified;
``(ii) a minimum of 30 hours per week
throughout a contractual or employment period
of at least 8 months in a 12-month period; and
``(iii) with respect to an individual who
is in nontenure track employment at an
institution of higher education, the equivalent
of 30 hours per week as determined by
multiplying each credit or contact hour taught
by such individual per week by a number to be
determined by the Secretary.
``(E) Independent contractor.--The term
`independent contractor' means an individual who is not
an employee and who is working in a public service job
in a position or providing services which, under
applicable State law, cannot be filled or provided by
an employee of the public service job.''.
SEC. 233. ONLINE PORTAL AND DATABASE OF PUBLIC SERVICE JOBS.
Section 455(m) of the Higher Education Act of 1965 is further
amended by adding at the end the following:
``(9) Online portal and database of public service jobs.--
``(A) Online portal.--
``(i) Borrowers.--The Secretary shall
establish an online portal that provides to
borrowers of eligible Federal Direct Loans the
following information:
``(I) Instructions on how to access
the database established under
subparagraph (B) so that the borrower
can determine whether the borrower is
employed in a public service job.
``(II) An identification of the
loans of the borrower that are eligible
Federal Direct Loans, and an
identification of the qualifying
repayment plans for which such eligible
Federal Direct Loans qualify.
``(III) With respect to each such
eligible Federal Direct Loan--
``(aa) the number of
qualifying monthly payments the
borrower has made in accordance
with paragraph (1); and
``(bb) the estimated number
of qualifying monthly payments
under such paragraph remaining
on such loan before the
borrower may be eligible for
loan cancellation under this
subsection.
``(IV) With respect to each loan of
the borrower that is not eligible for
loan cancellation under paragraph (3)
of this subsection, an explanation of
why the loan is not so eligible and
instructions on how what, if anything,
the borrower may do to make the loan so
eligible.
``(V) Instructions for the
submission of any forms associated with
such loan cancellation, and an ability
for the borrower to use the portal to
electronically sign and submit such
forms.
``(VI) In a case in which a
borrower submits to the Secretary an
application for loan cancellation under
this subsection that is denied by the
Secretary--
``(aa) a notice of such
denial that meets each of the
requirements of paragraph
(4)(A), including an
explanation of the 90-day
forbearance period;
``(bb) a form that meets
each of the requirements of
paragraph (5)(A), which the
borrower may use to request
reconsideration of such denial,
including accepting an
extension of the 90-day
forbearance period; and
``(cc) a notice of the
Secretary's reconsideration
decision, which meets each of
the requirements of paragraph
(5)(C).
``(VII) An explanation of the
buyback payment process described in
paragraph (2)(C), and a form to request
such a buyback, including the eligible
months for which the borrower may
request a buyback, and the amount that
the borrower would be required to pay
for such buyback.
``(VIII) An explanation of how
consolidating one or more Direct Loans
into a Direct Consolidation Loan,
including a Direct PLUS Loan made to a
parent borrower, will affect the number
of qualifying monthly payments
attributed to the borrower.
``(ii) Appropriate contacts.--The Secretary
shall ensure that an appropriate contact for a
public service job of a borrower has the option
to electronically sign and submit any forms
associated with loan cancellation under
paragraph (3) of this subsection.
``(iii) Information.--The Secretary shall
ensure that any information provided through
the online portal described in this
subparagraph contains up-to-date information.
``(B) Database of public service jobs.--
``(i) In general.--The Secretary, in
consultation with the Secretary of Labor, shall
establish and regularly update a database that
lists public service jobs.
``(ii) Public availability.--The database
established under clause (i) shall be made
available on a publicly accessible website of
the Department of Education in an easily
searchable format.''.
SEC. 234. TREATMENT OF CONSOLIDATED AND REFINANCED LOANS.
Section 455(m)(2) of the Higher Education Act of 1965 (20 U.S.C.
1087e(m)(2)), as amended by the preceding provisions of this Act, is
further amended by inserting after subparagraph (D) the following:
``(E) Determination of number of qualifying monthly
payments for consolidation loans.--With respect to
determining the number of qualifying monthly payments
for a borrower seeking loan forgiveness under this
subsection who consolidates one or more Direct Loans
into a Direct Consolidation Loan, including a Direct
PLUS Loan made to a parent borrower, the Secretary
shall use the weighted average of the payments the
borrower made on the Direct Loans prior to
consolidating that met the criteria under this
subsection.''.
SEC. 235. LOAN FORGIVENESS FOR TEACHERS.
(a) In General.--The Higher Education Act of 1965 (20 U.S.C. 1001
et seq.) is further amended--
(1) in section 428J(g)(2) (20 U.S.C. 1078-10(g)(2))--
(A) in subparagraph (A), by inserting ``or'' after
the semicolon at the end;
(B) by striking subparagraph (B); and
(C) by redesignating subparagraph (C) as
subparagraph (B); and
(2) in section 460(g)(2) (20 U.S.C. 1087j(g)(2))--
(A) in subparagraph (A), by inserting ``or'' after
the semicolon at the end;
(B) by striking subparagraph (B); and
(C) by redesignating subparagraph (C) as
subparagraph (B).
(b) Conforming Amendment.--Section 455(m)(7) of the Higher
Education Act of 1965, as redesignated by section 231(b) of this Act,
is amended by striking ``section 428J, 428K, 428L, or 460'' and
inserting ``section 428K or 428L''.
SEC. 236. GAO STUDY ON DATA MATCHING AGREEMENTS FOR PUBLIC SERVICE LOAN
FORGIVENESS.
(a) In General.--The Comptroller General of the United States shall
conduct a study on the feasibility of establishing data matching
agreements for public service loan forgiveness under section 455(m) of
the Higher Education Act of 1965 (20 U.S.C. 1087e(m)) that would allow
a borrower to forego requesting certification of employment from the
appropriate contact for the public service job of the borrower. The
study shall include an examination of the Department of Education and
the Department of Defense's progress towards automatic data matching
for military and veteran borrowers.
(b) Report.--Not later than 1 year after the date of enactment of
this Act, the Comptroller General shall submit a report to the
Committee on Education and Workforce of the House of Representatives
and the Committee on Health, Education, Labor, and Pensions of the
Senate containing the findings and recommendations resulting from the
study required under subsection (a).
(c) Cooperation.--The head of each relevant Federal agency,
including the Secretary of Education, Secretary of Defense, and
Commissioner of Internal Revenue, shall cooperate with the Comptroller
General to facilitate the completion of the study required under
subsection (a).
PART E--SUPPORT FOR BORROWERS IN DEFAULT
SEC. 241. REMOVAL OF RECORD OF DEFAULT.
Part G of title IV of the Higher Education Act of 1965 (20 U.S.C.
1088 et seq.), as amended by this Act, is further amended by adding at
the end the following:
``SEC. 494C. REMOVAL OF RECORD OF DEFAULT.
``Upon repaying in full the amount due on a defaulted loan made,
insured, or guaranteed under this title, the Secretary, guaranty
agency, or other holder of the loan shall request any consumer
reporting agency to which the Secretary, guaranty agency, or holder, as
applicable, reported the default of the loan, to remove any adverse
item of information relating to such loan from the borrower's credit
history.''.
SEC. 242. REMOVAL OF RECORD OF DEFAULT FROM CREDIT HISTORY UPON LOAN
CONSOLIDATION.
Section 455(g) of the Higher Education Act of 1965 (20 U.S.C.
1087e(g)) is amended by adding at the end the following:
``(3) Consumer reporting agencies.--Upon obtaining a
Federal Direct Consolidation Loan that discharges the liability
on a defaulted loan made, insured, or guaranteed under this
title, the Secretary, guaranty agency, or other holder of the
loan shall request any consumer reporting agency to which the
Secretary, guaranty agency or holder, as applicable, reported
the default of the loan, to remove any adverse item of
information relating to such loan from the borrower's credit
history.''.
SEC. 243. DEFAULT REDUCTION PROGRAM.
Section 428F of the Higher Education Act of 1965 (20 U.S.C. 1078-
6(a)) is amended by adding at the end the following:
``(d) Default Reduction Program.--Notwithstanding subsection (a),
beginning on July 1, 2026, with respect to a defaulted loan made,
insured, or guaranteed under this part or part D, the following shall
apply:
``(1) Rehabilitation authorized.--
``(A) In general.--Such a defaulted loan (other
than a loan described in subparagraph (B)) shall be
rehabilitated if the borrower makes 9 voluntary,
reasonable and affordable monthly payments within 20
days of the due date during 10 consecutive months. The
Secretary determines the amount of a borrower's
reasonable and affordable payment on the basis of a
borrower's total financial circumstances.
``(B) Ineligible loans.--A defaulted loan may not
be eligible for rehabilitation under this subsection
if--
``(i) a judgment has been obtained on such
loan; or
``(ii) such loan has been obtained by fraud
for which the borrower has been convicted of,
or has pled nolo contendere or guilty to, a
crime involving fraud in obtaining financial
assistance under this title.
``(C) Limitation on borrower.--A borrower may
obtain the benefits available under this subsection
with respect to rehabilitating a loan not more than two
times per loan.
``(D) Limitation on the secretary.--During the
rehabilitation period described in this paragraph, the
Secretary shall limit contact with the borrower on the
loan being rehabilitated to collection activities that
are required by law or regulation and to communications
that support the rehabilitation.
``(2) Determination of reasonable and affordable payment.--
``(A) In general.--Subject to subparagraphs (A)
through (H), the Secretary shall consider the
borrower's reasonable and affordable payment amount to
be an amount equal to the minimum payment required
under the Income-Driven Repayment Plan, except that if
such amount is less than $5, the borrower's monthly
payment shall be $5.
``(B) Documentation requirement.--The Secretary may
calculate the payment amount based on information
provided orally by the borrower or the borrower's
representative and provide the borrower with a
rehabilitation agreement using that amount. The
Secretary requires the borrower to provide
documentation to confirm the borrower's adjusted gross
income and family size. If the borrower does not
provide the Secretary with any documentation requested
by the Secretary to calculate or confirm the reasonable
and affordable payment amount within a reasonable time
deadline set by the Secretary, the rehabilitation
agreement provided is null and void. A borrower may
request that the monthly payment amount be adjusted due
to a change in the borrower's total financial
circumstances only upon providing the documentation
specified in paragraph (3).
``(C) Prohibitions.--For purposes of subparagraph
(A), a reasonable and affordable payment amount shall
not--
``(i) be a required minimum loan payment
amount if the Secretary determines that a
smaller amount is reasonable and affordable;
``(ii) a percentage of the borrower's total
loan balance; or
``(iii) based on other criteria unrelated
to the borrower's total financial
circumstances.
``(D) Rehabilitation payment agreement.--
``(i) In general.--Not later than 15
business days of the Secretary's determination
of the borrower's loan rehabilitation payment
amount, the Secretary shall provide the
borrower with a written rehabilitation
agreement which shall include--
``(I) the borrower's reasonable and
affordable payment amount, a prominent
statement that the borrower may object
orally or in writing to the reasonable
and affordable payment amount with the
method and timeframe for raising such
an objection;
``(II) a statement that the
rehabilitation is null and void if the
borrower does not provide the
documentation required to calculate the
reasonable and affordable payment
amount;
``(III) an explanation of any other
terms and conditions applicable to the
required series of payments that must
be made; and
``(IV) information on the effects
of having the loans rehabilitated.
``(ii) Acceptance by the borrower.--To
accept the agreement, the borrower shall sign
and return the agreement or accept the
agreement electronically under a process
provided by the Secretary.
``(iii) Prohibition.--The Secretary may not
impose any other conditions unrelated to the
amount or timing of the rehabilitation payments
in the rehabilitation agreement.
``(E) Statement confirming reasonable and
affordable payment amount.--The Secretary shall provide
the borrower with a written statement that--
``(i) confirms the borrower's reasonable
and affordable payment amount, as determined by
the Secretary;
``(ii) explains any other terms and
conditions applicable to the required series of
payments that shall be made before the
borrower's account can be rehabilitated;
``(iii) informs the borrower that the
borrower may object to the terms and conditions
of the rehabilitation agreement; and
``(iv) explains the method and timeframe
for objecting to the terms and conditions of
the rehabilitation agreement.
``(F) Objection by borrower.--If the borrower
objects to the monthly payment amount described in the
statement under subparagraph (E), the Secretary shall
recalculate the payment based solely on information
provided on a form approved by the Secretary and, if
requested, supporting documentation from the borrower
and other sources, and shall consider each of the
following:
``(i) The borrower's, and if applicable,
the spouse's current disposable income,
including public assistance payments, and other
income received by the borrower and the spouse,
such as welfare benefits, Social Security
benefits, Supplemental Security Income, and
workers' compensation. Spousal income is not
considered if the spouse does not contribute to
the borrower's household income.
``(ii) Family size.
``(iii) Reasonable and necessary expenses,
which shall include--
``(I) Food.
``(II) Housing.
``(III) Utilities.
``(IV) Basic communication
expenses.
``(V) Necessary medical and dental
costs.
``(VI) Necessary insurance costs.
``(VII) Transportation costs.
``(VIII) Dependent care and other
work-related expenses.
``(IX) Legally required child and
spousal support.
``(X) Other student loan payments
for loans made, insured, or guaranteed
under this title, or any other Federal
law.
``(XI) Other expenses approved by
the Secretary.
``(G) New rehabilitation agreement.--The Secretary
shall provide the borrower with a new written
rehabilitation agreement confirming the borrower's
recalculated reasonable and affordable payment amount.
To accept the agreement, the borrower must sign and
return the agreement or accept the agreement
electronically under a process provided by the
Secretary.
``(H) Change in circumstances.--A borrower may
request that the monthly payment amount be adjusted due
to a change in the borrower's total financial
circumstances only upon providing the documentation
specified in subparagraph (F).
``(3) Administrative wage garnishment.--
``(A) In general.--If a borrower's loan is being
collected by administrative wage garnishment while the
borrower is also making monthly payments on the same
loan under a loan rehabilitation agreement, the
Secretary shall continue collecting the loan by
administrative wage garnishment until the borrower
makes five qualifying monthly payments under the
rehabilitation agreement, unless the Secretary is
otherwise precluded from doing so.
``(B) Suspension.--After the borrower makes the
fifth qualifying monthly payment, the Secretary, unless
otherwise directed by the borrower, suspends the
garnishment order issued to the borrower's employer.
``(C) Limitation.--A borrower may only obtain the
benefit of a suspension of administrative wage
garnishment while also attempting to rehabilitate a
defaulted loan once.
``(4) Instruction to consumer reporting agency.--If a
defaulted loan is rehabilitated, the Secretary shall instruct
any consumer reporting agency to which the default was reported
to remove the default, and any adverse item of information
relating to such loan, from the borrower's credit history.
``(e) Removal From Default.--Beginning on July 1, 2026, the
Secretary shall not consider a borrower in default on a loan if--
``(1) the borrower provides information necessary to
calculate a payment under an income-contingent or income-based
repayment plan under this part or;
``(2) the payment calculated pursuant to such a repayment
plan is $0; and
``(3) the income information used to calculate such payment
covers the date on which the loan defaulted.''.
TITLE III--INTEREST CAPITALIZATION
SEC. 301. ELIMINATION OF INTEREST CAPITALIZATION.
(a) Federal PLUS Loans.--Section 428B(d)(2) of the Higher Education
Act of 1965 (20 U.S.C. 1078-2(d)(2)) is amended to read as follows:
``(2) No capitalization of interest.--Interest on loans
made under this section for which payments of principal are
deferred pursuant to paragraph (1) shall be paid by the
borrower and shall not be capitalized.''.
(b) Federal Consolidation Loans Deferrals.--Section
428C(b)(4)(C)(ii)(III) of the Higher Education Act of 1965 (20 U.S.C.
1078-3(b)(4)(C)(III)) is amended by striking ``or capitalized,''.
(c) Default Reduction Program.--Section 428F(a)(1)(E) of such Act
of 1965 (20 U.S.C. 1078-6(a)(1)(E)) is amended to read as follows:
``(E) Duties upon assignment.--With respect to a
loan assigned under subparagraph (A)(ii)--
``(i) the guaranty agency shall add to the
principal and interest outstanding at the time
of the assignment of such loan an amount equal
to the amount described in subparagraph
(D)(i)(II)(aa);
``(ii) the Secretary shall pay the guaranty
agency, for deposit in the agency's Operating
Fund established pursuant to section 422B, an
amount equal to the amount added to the
principal and interest outstanding at the time
of the assignment in accordance with clause
(i);
``(iii) for a loan assigned on or after the
date of enactment of the LOAN Act, the interest
outstanding at the time of the assignment of
such loan, and any interest accruing after such
time, shall not be capitalized; and
``(iv) beginning on the date of enactment
of LOAN Act, interest shall only accrue on the
percentage of such a loan that is equal to--
``(I) the amount of the outstanding
principal on the original loan on the
date it was assigned; divided by
``(II) the total amount of such
assigned loan, including interest
outstanding at the time of the
assignment of such loan and the amount
added by the guaranty agency in
accordance with clause (i), on the date
such loan was assigned.''.
(d) Loan Limits for Unsubsidized Stafford Loans.--Section
428H(d)(5) of the Higher Education Act of 1965 (20 U.S.C. 1078-8(d)(5))
is amended by inserting ``before the date of enactment of the LOAN
Act'' after ``Interest capitalized''.
(e) Unsubsidized Stafford Loans for Middle Income Borrowers.--
Section 428H(e)(2) of the Higher Education Act of 1965 (20 U.S.C. 1078-
8(e)(2)) is amended--
(1) in the header, by striking ``Capitalization'' and
inserting ``No capitalization'';
(2) in subparagraph (A), in the matter before clause (i),
by striking ``, if agreed upon by the borrower and the lender''
and all that follows through clause (ii)(IV) and inserting ``be
paid by the borrower and shall not be capitalized.'';
(3) by striking subparagraph (B); and
(4) by redesignating subparagraph (C) as subparagraph (B).
(f) Income Contingent Repayment.--Section 455(e)(5) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(e)(5)) is amended by striking
the last sentence and inserting ``No interest may be capitalized on
such loan on or after the date of the enactment of the LOAN Act, and
the Secretary shall promulgate regulations with respect to the
treatment of accrued interest that is not capitalized''.
(g) Deferment and Forbearance.--
(1) In general.--Section 455(f) of the Higher Education Act
of 1965 (20 U.S.C. 1087e(f)) is amended--
(A) in the subsection heading, by inserting at the
end the following: ``and Forbearance'';
(B) in subparagraph (B), by striking ``capitalized
or''; and
(C) by adding at the end the following:
``(6) Forbearance.--At the expiration of a period of
forbearance, interest shall not be capitalized on any loans
made under this part.''.
(2) Application of amendment.--The amendments made by
paragraph (1) shall apply to any deferment or forbearance
period in effect on the date of enactment of this Act, or any
deferment or forbearance period beginning on or after such date
of enactment.
(h) Income-Based Repayment Program.--Section 493C(b)(3) of the
Higher Education Act of 1965 (20 U.S.C. 1098e(b)(3)) is amended to read
as follows:
``(3) on subsidized loans, any interest due and not paid
under paragraph (2) shall be paid by the Secretary for a period
of not more than 3 years after the date of the borrower's
election under paragraph (1), except that such period shall not
include any period during which the borrower is in deferment
due to an economic hardship described in section 435(o);''.
(i) Notes and Insurance Certificates in Combined Payment Plans.--
Section 485A(f) of the Higher Education Act of 1965 (20 U.S.C.
1092a(f)) is amended by adding at the end the following new paragraph:
``(3) Treatment of interest.--Not withstanding paragraphs
(1) and (2), beginning on the date of enactment of the LOAN
Act, interest on a loan reissued under subsection (e) shall not
be capitalized, and interest shall only accrue on the
percentage of such reissued loan that is equal to--
``(A) the amount of the outstanding principal on
the original loan on the date it was reissued; divided
by
``(B) the total amount of such reissued loan on the
date such loan was reissued.''.
SEC. 302. ELIMINATION OF DISCLOSURE REQUIREMENTS RELATING TO
CAPITALIZATION.
(a) Insurance Program Agreements To Qualify Loans for Interest
Subsidies.--Section 428(b)(1)(Y) of the Higher Education Act of 1965
(20 U.S.C. 1078(b)(1)(Y)) is amended--
(1) in clause (i)(IV), by inserting ``and'' after the
semicolon;
(2) in clause (ii), by striking ``; and'' and inserting a
period; and
(3) by striking clause (iii).
(b) Forbearance.--Section 428(c)(3)(C) of such Act of 1965 (20
U.S.C. 1078(c)(3)(C)) is amended--
(1) in clause (ii), by inserting ``and'' after the
semicolon; and
(2) by striking clauses (iii) and (iv) and inserting the
following:
``(iii) the lender shall contact the
borrower not less often than once every 180
days during the period of forbearance to inform
the borrower of--
``(I) the amount of unpaid
principal and the amount of interest
that has accrued since the last
statement of such amounts provided to
the borrower by the lender;
``(II) the fact that interest will
accrue on the loan for the period of
forbearance;
``(III) the responsibility of the
borrower to pay the interest that has
accrued; and
``(IV) the borrower's option to
discontinue the forbearance at any
time; and''.
(c) Required Disclosure Before Disbursement.--Section 433(a) of the
Higher Education Act of 1965 (20 U.S.C. 1083(a)) is amended--
(1) by amending paragraph (6) to read as follows:
``(6) for loans made under section 428H or to a student
borrower under section 428B, an explanation that the borrower
has the option to pay the interest that accrues on the loan
while the borrower is a student at an institution of higher
education;''; and
(2) in paragraph (7)--
(A) in subparagraph (A), by inserting ``and'' after
the semicolon;
(B) by striking subparagraph (B); and
(C) by redesignating subparagraph (C) as
subparagraph (B).
(d) Required Disclosure Before Repayment.--Section 433(b)(3) of the
Higher Education Act of 1965 (20 U.S.C. 1083(b)(3)) is amended by
striking ``(including, if applicable, the estimated amount of interest
to be capitalized)''.
(e) Special Disclosure Rules on PLUS Loans and Unsubsidized
Loans.--Section 433(d) of the Higher Education Act of 1965 (20 U.S.C.
1083(d)) is amended--
(1) in the matter preceding paragraph (1)--
(A) by striking ``resulting from capitalization of
interest''; and
(B) by striking ``borrower of--'' and inserting
``borrower of paying the interest as the interest
accrues.''; and
(2) by striking paragraphs (1) and (2).
(f) Disclosure Required Prior to Perkins Repayment.--Section
463A(b)(3) of the Higher Education Act of 1965 (20 U.S.C. 1087cc-
1(b)(3)) is amended by striking ``(including, if applicable, the
estimated amount of interest to be capitalized)''.
(g) Departmental Publication of Descriptions of Assistance
Programs.--Section 485(d)(1) of the Higher Education Act of 1965 (20
U.S.C. 1092(d)(1)) is amended by striking ``, including the increase in
debt that results from capitalization of interest''.
(h) Information To Be Provided During Entrance Counseling for
Borrowers.--Section 485(l)(2)(C) of the Higher Education Act of 1965
(20 U.S.C. 1092(l)(2)) is amended by striking ``and is capitalized''.
TITLE IV--INTEREST RATES
SEC. 401. INTEREST RATE PROVISIONS FOR NEW FEDERAL STUDENT LOANS ON OR
AFTER JULY 1, 2026.
Section 455(b) of the Higher Education Act of 1965 (20 U.S.C.
1087e(b)) is amended--
(1) in paragraph (8)--
(A) in the paragraph heading, by inserting ``, and
before july 1, 2026'' before the period; and
(B) by inserting ``and before July 1, 2026,'' after
``July 1, 2013,'' each place it appears;
(2) by redesignating paragraphs (9) and (10) as paragraphs
(10) and (11), respectively; and
(3) by inserting after paragraph (8) the following new
paragraph:
``(9) Interest rate provisions for new loans on or after
july 1, 2026.--
``(A) Rate for fdsl, fdusl, and plus loans.--
Notwithstanding the preceding paragraphs of this
subsection, for Federal Direct Stafford Loans, Federal
Direct Unsubsidized Stafford Loans, and Federal Direct
PLUS Loans, for which the first disbursement is made on
or after July 1, 2026, the applicable rate of interest
shall, for loans disbursed during any 12-month period
beginning on July 1 and ending on June 30, be
determined on the preceding June 1 and be equal to the
lesser of--
``(i) a rate equal to the high yield of the
10-year Treasury note auctioned at the final
auction held prior to such June 1; or
``(ii) 5.0 percent.
``(B) Consolidation loans.--Notwithstanding the
preceding paragraphs of this subsection, any Federal
Direct Consolidation Loan for which the application is
received on or after July 1, 2026, shall--
``(i) bear interest at an annual rate on
the unpaid principal balance of the loan that
is equal to the lesser of--
``(I) the weighted average of the
interest rates on the loans
consolidated, rounded to the nearest
higher one-eighth of one percent; or
``(II) 5.0 percent; and
``(ii) only accrue interest on the
percentage of such Federal Direct Consolidation
Loan that is equal to--
``(I) the amount of the sum of the
unpaid principal on the loans
consolidated; divided by
``(II) the total amount of such
Federal Direct Consolidation Loan.
``(C) Consultation.--The Secretary shall determine
the applicable rate of interest under this paragraph
after consultation with the Secretary of the Treasury
and shall publish such rate in the Federal Register as
soon as practicable after the date of determination.
``(D) Fixed rate.--The applicable rate of interest
determined under this paragraph for a Federal Direct
Stafford Loan, a Federal Direct Unsubsidized Stafford
Loan, a Federal Direct PLUS Loan, or a Federal Direct
Consolidation Loan shall be fixed for the period of the
loan.''.
SEC. 402. REFINANCING FFEL AND FEDERAL DIRECT LOANS.
Part D of title IV of the Higher Education Act of 1965 (20 U.S.C.
1087a et seq.) is amended by adding at the end the following:
``SEC. 460A. REFINANCING FFEL AND FEDERAL DIRECT LOANS.
``(a) In General.--The Secretary shall establish a program under
which the Secretary, upon the receipt of an application from a
qualified borrower, makes a loan under this part, in accordance with
the provisions of this section, in order to permit the borrower to
obtain the interest rate provided under subsection (c).
``(b) Refinancing Direct Loans.--
``(1) Federal direct loans.--Upon application of a
qualified borrower, the Secretary shall repay a Federal Direct
Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a
Federal Direct PLUS Loan, or a Federal Direct Consolidation
Loan of the qualified borrower, for which the first
disbursement was made, or the application for the consolidation
loan was received, before July 1, 2026, with the proceeds of a
refinanced Federal Direct Stafford Loan, a Federal Direct
Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a
Federal Direct Consolidation Loan, respectively, issued to the
borrower in an amount equal to the sum of the unpaid principal,
accrued unpaid interest, and late charges of the original loan.
``(2) Refinancing ffel program loans as refinanced federal
direct loans.--Upon application of a qualified borrower for any
loan that was made, insured, or guaranteed under part B and for
which the first disbursement was made, or the application for
the consolidation loan was received, before July 1, 2010, the
Secretary shall make a loan under this part, in an amount equal
to the sum of the unpaid principal, accrued unpaid interest,
and late charges of the original loan to the borrower in
accordance with the following:
``(A) The Secretary shall pay the proceeds of such
loan to the eligible lender of the loan made, insured,
or guaranteed under part B, in order to discharge the
borrower from any remaining obligation to the lender
with respect to the original loan.
``(B) A loan made under this section that was
originally--
``(i) a loan originally made, insured, or
guaranteed under section 428 shall be a Federal
Direct Stafford Loan;
``(ii) a loan originally made, insured, or
guaranteed under section 428B shall be a
Federal Direct PLUS Loan;
``(iii) a loan originally made, insured, or
guaranteed under section 428H shall be a
Federal Direct Unsubsidized Stafford Loan; and
``(iv) a loan originally made, insured, or
guaranteed under section 428C shall be a
Federal Direct Consolidation Loan.
``(C) The interest rate for each loan made by the
Secretary under this paragraph shall be the rate
provided under subsection (c).
``(c) Interest Rates.--
``(1) In general.--The interest rate for the refinanced
Federal Direct Stafford Loans, Federal Direct Unsubsidized
Stafford Loans, Federal Direct PLUS Loans, and Federal Direct
Consolidation Loans, shall be a rate equal to--
``(A) in any case where the original loan was a
loan under section 428, 428B, 428H, a Federal Direct
Stafford loan, a Federal Direct Unsubsidized Stafford
Loan, or a Federal Direct PLUS Loan, a rate equal to
the interest rate determined under section 455(b)(9)(A)
for the date on which the refinanced loan is made; and
``(B) in any case where the original loan was a
loan under section 428C or a Federal Direct
Consolidation Loan, a rate calculated in accordance
with paragraph (2).
``(2) Interest rates for consolidation loans.--
``(A) Method of calculation.--In order to determine
the interest rate for any refinanced Federal Direct
Consolidation Loan under paragraph (1)(B), the
Secretary shall--
``(i) determine each of the component loans
that were originally consolidated in the loan
under section 428C or the Federal Direct
Consolidation Loan, and calculate the
proportion of the unpaid principal balance of
the loan under section 428C or the Federal
Direct Consolidation Loan that each component
loan represents;
``(ii) use the proportions determined in
accordance with clause (i) and the interest
rate applicable for each component loan, as
determined under subparagraph (B), to calculate
the weighted average of the interest rates on
the loans consolidated into the loan under
section 428C or the Federal Direct
Consolidation Loan; and
``(iii) make the applicable interest rate
for the refinanced Federal Direct Consolidation
Loan the lesser of--
``(I) the weighted average
calculated under clause (ii); or
``(II) 5.0 percent.
``(B) Interest rates for component loans.--The
interest rates for the component loans of a loan made
under section 428C or a Federal Direct Consolidation
Loan shall be the following:
``(i) The interest rate for any loan under
section 428, 428B, 428H, Federal Direct
Stafford Loan, Federal Direct Unsubsidized
Stafford Loan, or Federal Direct PLUS Loan
shall be a rate equal to the lesser of--
``(I) the interest rate determined
under section 455(b)(9)(A) for the date
on which the component loan is made; or
``(II) the original interest rate
of the component loan.
``(ii) The interest rate for any component
loan that is a loan under section 428C or a
Federal Direct Consolidation Loan shall be the
lesser of--
``(I) the weighted average of the
interest rates that would apply under
this subparagraph for each loan
comprising the component consolidation
loan; or
``(II) 5 percent.
``(iii) The interest rate for any eligible
loan that is a component of a loan made under
section 428C or a Federal Direct Consolidation
Loan and is not described in clauses (i) or
(ii) shall be the lesser of--
``(I) the interest rate on the
original component loan; or
``(II) 5 percent.
``(3) Fixed rate.--The applicable rate of interest
determined under paragraph (1) for a refinanced loan under this
section shall be fixed for the period of the loan.
``(4) Capitalized interest and fees excluded.--With respect
to a refinanced loan under this section, interest shall only
accrue on the percentage of such refinanced loan that is equal
to--
``(A) the amount of the unpaid principal of the
original loan, or in the case of a refinanced Federal
Direct Consolidation Loan, the sum of the unpaid
principal of all the component loans, comprising the
refinanced loan; divided by
``(B) the total amount of such refinanced loan.
``(d) Terms and Conditions of Loans.--
``(1) In general.--A loan that is refinanced under this
section shall have the same terms and conditions as the
original loan, except as otherwise provided in this section.
``(2) No automatic extension of repayment period.--
Refinancing a loan under this section shall not result in the
extension of the duration of the repayment period of the loan,
and the borrower shall retain the same repayment term that was
in effect on the original loan. Nothing in this paragraph shall
be construed to prevent a borrower from electing a different
repayment plan at any time in accordance with section 455A(a).
``(e) Definition of Qualified Borrower.--For purposes of this
section, the term `qualified borrower' means a borrower--
``(1) of a loan under this part or part B for which the
first disbursement was made, or the application for a
consolidation loan was received, before July 1, 2026; and
``(2) who has one or more loans described in paragraph (1)
or (2) of subsection (b) with an interest rate that exceeds 5
percent.
``(f) Notification to Borrowers.--The Secretary, in coordination
with the Director of the Bureau of Consumer Financial Protection, shall
undertake a campaign to alert borrowers of loans that are eligible for
refinancing under this section that the borrowers are eligible to apply
for such refinancing. The campaign shall include the following
activities:
``(1) Developing consumer information materials about the
availability of Federal student loan refinancing.
``(2) Requiring servicers of loans under this part or part
B to provide such consumer information to borrowers in a manner
determined appropriate by the Secretary, in consultation with
the Director of the Bureau of Consumer Financial Protection.''.
SEC. 403. REFINANCING PRIVATE STUDENT LOANS.
Part D of title IV of the Higher Education Act of 1965 (20 U.S.C.
1087a et seq.), as amended by section 402, is further amended by adding
at the end the following:
``SEC. 460B. FEDERAL DIRECT REFINANCED PRIVATE LOAN PROGRAM.
``(a) Definitions.--In this section:
``(1) Eligible private education loan.--The term `eligible
private education loan' means a private education loan, as
defined in section 140(a) of the Truth in Lending Act (15
U.S.C. 1650(a)), that--
``(A) was disbursed to the borrower before July 1,
2026; and
``(B) was for the borrower's own postsecondary
educational expenses for an eligible program at an
institution of higher education participating in the
loan program under this part, as of the date that the
loan was disbursed.
``(2) Federal direct refinanced private loan.--The term
`Federal Direct Refinanced Private Loan' means a loan issued
under subsection (b)(1).
``(3) Private educational lender.--The term `private
educational lender' has the meaning given the term in section
140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)).
``(4) Qualified borrower.--The term `qualified borrower'
means an individual who--
``(A) has an eligible private education loan;
``(B) has been current on payments on the eligible
private education loan for the 6 months prior to the
date of the qualified borrower's application for
refinancing under this section, and is in good standing
on the loan at the time of such application;
``(C) is not in default on the eligible private
education loan or on any loan made, insured, or
guaranteed under this part or part B or E; and
``(D) meets the eligibility requirements described
in subsection (b)(2).
``(b) Program Authorized.--
``(1) In general.--The Secretary, in consultation with the
Secretary of the Treasury, shall carry out a program under
which the Secretary, upon application by a qualified borrower
who has an eligible private education loan, shall issue such
borrower a loan under this part in accordance with the
following:
``(A) The loan issued under this program shall be
in an amount equal to the sum of the unpaid principal,
accrued unpaid interest, and late charges of the
private education loan.
``(B) The Secretary shall pay the proceeds of the
loan issued under this program to the private
educational lender of the private education loan, in
order to discharge the qualified borrower from any
remaining obligation to the lender with respect to the
original loan.
``(C) The Secretary shall require that the
qualified borrower undergo loan counseling that
provides all of the relevant information and counseling
required under section 485(l)(2) before the loan is
refinanced in accordance with this section, and before
the proceeds of such loan are paid to the private
educational lender.
``(D) The Secretary shall issue the loan as a
Federal Direct Refinanced Private Loan, which shall
have the same terms, conditions, and benefits as a
Federal Direct Unsubsidized Stafford Loan, except as
otherwise provided in this section.
``(E) The interest rate for each loan made by the
Secretary under this section shall be the rate provided
under subsection (c).
``(2) Borrower eligibility.--The Secretary, in consultation
with the Secretary of the Treasury and the Director of the
Consumer Financial Protection Bureau, shall establish
eligibility requirements--
``(A) to ensure eligibility only for borrowers in
good standing;
``(B) to minimize inequities between Federal Direct
Refinanced Private Loans and other Federal student
loans;
``(C) to preclude windfall profits for private
educational lenders; and
``(D) to ensure full access to the program
authorized in this subsection for borrowers with
private loans who otherwise meet the criteria
established in accordance with subparagraph (A).
``(c) Interest Rate.--
``(1) In general.--The interest rate for a Federal Direct
Refinanced Private Loan is a rate equal to the interest rate
determined under section 455(b)(9)(A) for the date on which the
refinanced private loan is made.
``(2) Fixed rate.--The interest rate determined under this
subsection for a Federal Direct Refinanced Private Loan shall
be fixed for the period of the loan.
``(3) Capitalized interest and fees excluded.--With respect
to a Federal Direct Refinanced Private Loan under this section,
interest shall only accrue on the percentage of such Refinanced
Private Loan that is equal to--
``(A) the amount of the unpaid principal of the
original loan comprising the Refinanced Private Loan on
the date such original loan was refinanced; divided by
``(B) the total amount of such Refinanced Private
Loan.
``(d) No Inclusion in Aggregate Limits.--The amount of a Federal
Direct Refinanced Private Loan, or a Federal Direct Consolidated Loan
to the extent such loan was used to repay a Federal Direct Refinanced
Private Loan, shall not be included in calculating a borrower's annual
or aggregate loan limits under section 428 or 428H.
``(e) No Eligibility for Service-Related Repayment.--A Federal
Direct Refinanced Private Loan, or any Federal Direct Consolidation
Loan to the extent such loan was used to repay a Federal Direct
Refinanced Private Loan, shall not be eligible for any loan repayment
or loan forgiveness program under section 428K, 428L, or 460 or for the
loan cancellation repayment plan for public service employees under
section 455(m).
``(f) Private Educational Lender Reporting Requirement.--
``(1) Reporting required.--The Secretary, in consultation
with the Secretary of the Treasury and the Director of the
Bureau of Consumer Financial Protection, shall establish a
requirement that, in order to allow for an assessment of the
private education loan market, private educational lenders
report the data described in paragraph (2) to--
``(A) the Secretary;
``(B) the Secretary of the Treasury;
``(C) the Director of the Consumer Financial
Protection Bureau;
``(D) the Committee on Education and Workforce of
the House of Representatives;
``(E) the Committee on Financial Services of the
House of Representatives;
``(F) the Senate Committee on Health, Education,
Labor, and Pensions; and
``(G) the Senate Committee on Banking, Housing, and
Urban Affairs.
``(2) Contents of reporting.--The data that private
educational lenders shall report in accordance with paragraph
(1) shall include each of the following about private education
loans (as defined in section 140(a) of the Truth in Lending Act
(15 U.S.C. 1650(a))):
``(A) The total amount of private education loan
debt the lender holds.
``(B) The total number of private education loan
borrowers the lender serves.
``(C) The average interest rate on the outstanding
private education loan debt held by the lender.
``(D) The proportion of private education loan
borrowers who are in default on a loan held by the
lender.
``(E) The proportion of the outstanding private
education loan volume held by the lender that is in
default.
``(F) The proportions of outstanding private
education loan borrowers who are 30, 60, and 90 days
delinquent.
``(G) The proportions of outstanding private
education loan volume that is 30, 60, and 90 days
delinquent.
``(g) Notification to Borrowers.--The Secretary, in coordination
with the Secretary of the Treasury and the Director of the Consumer
Financial Protection Bureau, shall undertake a campaign to alert
borrowers about the availability of private student loan refinancing
under this section.''.
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