LOAN Act

Key Points

• The bill would double the maximum Pell Grant from roughly $7,395 today to $14,000 by the 2031-2032 school year, phasing in over five years starting at $10,000 in 2026-2027. After 2031, the amount would rise automatically with inflation. All Pell Grant funding would become mandatory, meaning Congress would no longer need to approve it each year.
• Interest rates on all new federal student loans made on or after July 1, 2026, would be capped at 5%, tied to the 10-year Treasury note rate. Borrowers with older federal or private loans above 5% could refinance into new federal loans at the lower rate.
• Public Service Loan Forgiveness would require only 96 qualifying monthly payments (about 8 years) instead of the current 120 (10 years). Borrowers would no longer need to be employed in a public service job at the time of forgiveness, and a new buyback option would let borrowers count past months they missed.
• A new Income-Driven Repayment Plan would cap undergraduate loan payments at 5% of income above 225% of the poverty line. Borrowers earning below that threshold would owe $0 per month. Remaining balances would be forgiven after 20 years for undergrads or 25 years for graduate borrowers, with faster forgiveness for those with small balances.
• The bill eliminates interest capitalization, which is the practice of adding unpaid interest to a borrower's principal balance. It also repeals loan origination fees, removing the upfront charge currently deducted from every disbursement.
• Dreamer students who were brought to the U.S. as children would become eligible for federal student aid, including Pell Grants, for the first time. The bill defines eligibility criteria including having earned a high school diploma, being enrolled in college, or having served in the military.

Votes

No votes have been recorded for this legislation yet.