# Plain Language Summary of the LOAN Act

This bill makes major changes to federal student aid programs, with the biggest impact being a significant increase in Pell Grants, which are need-based grants that don't have to be repaid. Starting in the 2026-2027 school year, the maximum Pell Grant will jump from around $7,000 to $10,000, then gradually increase to $14,000 by 2031-2032. After that, it will grow each year with inflation. This means low-income students will have substantially more money available to pay for college without taking on debt. The bill also makes these grants permanent through mandatory funding, so they won't depend on Congress approving them each year.

Beyond Pell Grants, the bill overhauls student loan repayment to make it more manageable. It eliminates origination fees that currently add extra costs to loans, removes the practice of "interest capitalization" (where unpaid interest gets added to your loan balance, making you pay interest on interest), and lowers interest rates on new federal student loans starting in 2026. The bill also simplifies repayment plans and automatically enrolls struggling borrowers into income-driven repayment plans, which cap monthly payments based on what you actually earn. For people in default, the bill allows them to remove the default mark from their credit history if they consolidate their loans or rehabilitate them.

The bill significantly improves the Public Service Loan Forgiveness program, which forgives remaining loan balances for people who work in public service jobs like teaching, nursing, or government work for ten years. It makes the program easier to navigate by creating an online database of qualifying jobs and streamlining the application process. The bill also adds new loan forgiveness specifically for teachers and makes it easier for people who've already made qualifying payments to get credit for them. Additionally, the bill makes federal student aid available to undocumented students (often called "Dreamers") and extends Pell Grants to graduate students, expanding access to higher education for groups previously excluded from federal aid.

LOAN Act

Scott, Robert C. "Bobby"

Lowering Obstacles to Achievement Now Act or the LOAN ActThis bill revises federal student aid programs, including the Federal Pell Grant program and the Public Service Loan Forgiveness (PSLF) program. It also repeals the education provisions that were enacted under <a href="https://www.congress.gov/bill/119th-congress/house-bill/1?s=7&amp;r=1">P.L. 119-21</a> (commonly known as the One Big Beautiful Bill Act).Among other provisions, the bill revises the Federal Pell Grant program by (1) providing funding to increase the maximum award for each eligible student, and (2) allowing income-eligible graduate students to utilize their remaining Pell Grant eligibility toward their first graduate degree.<ul></ul>Changes to the&nbsp;PSLF program include (1) reducing the number of monthly loan payments required for loan forgiveness, and (2) removing the requirement that a borrower must be employed in a public service job at the time of forgiveness.<ul></ul>The bill makes Dreamer students (i.e., students who have been granted Deferred Action for Childhood Arrivals status and who entered the United States before the age of 18) who meet certain educational criteria eligible for federal financial aid.The bill also (1) establishes refinancing programs for federal and private student loans; (2) creates a new income-driven repayment plan;&nbsp;and (3) repeals origination fees for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.The bill repeals the education provisions that were enacted under P.L. 119-21. For example, the act addressed the amount of federal financial aid available to students by changing the mix and availability of student loans. (For more information, see CRS Report <a href="https://www.congress.gov/crs-product/R48727">R48727</a>.)