Federal

LOAN Act

Source: Congress.gov · 17,645 words in original text

What This Bill Does

This bill makes several changes to federal student aid and loan programs. It increases the maximum Pell Grant award (money given to low-income students that does not need to be repaid) gradually over time and provides extra grants to students from very low-income families. The bill also changes how federal student loans work, including lowering interest rates, eliminating certain fees, and making it easier to get loans forgiven through the Public Service Loan Forgiveness program. ##

Who It Affects

- College and graduate students receiving federal financial aid - Borrowers with federal student loans - Public service workers (teachers, government employees, nonprofit workers) seeking loan forgiveness - Employers of public service workers - Colleges and universities that enroll students receiving federal aid - The Department of Education - The Internal Revenue Service (for income verification) ##

Key Provisions

- The maximum Pell Grant award increases from the current amount to $10,000 for the 2024-2025 school year, then increases by $1,000 per year until reaching $14,000 for the 2029-2030 school year, after which it adjusts annually based on inflation (Sec. 101) - Students with negative student aid indexes (very low family income) receive Pell Grants that exceed the maximum by an amount equal to how far below zero their family income falls (Sec. 102) - Undocumented immigrant students meeting certain criteria may become eligible for federal student aid (Sec. 103) - Students may receive federal Pell Grants for up to 18 semesters instead of the current limit (Sec. 104) - Schools must place struggling students on "financial aid warning" for one payment period automatically, allowing them to keep receiving aid while improving their grades, before stricter penalties apply (Sec. 105) - Graduate students become eligible to receive subsidized federal loans (loans where the government pays interest while the student is in school) beginning July 1, 2024 (Sec. 201) - Origination fees (upfront charges) on federal student loans are eliminated for loans made on or after July 1, 2024 (Sec. 202) - Borrowers making extra payments on loans must apply those payments first to their highest-interest loan, unless they request otherwise (Sec. 203) - Borrowers who are behind on loan payments are automatically enrolled in income-driven repayment plans (where monthly payments are based on income) without requiring them to apply, using tax return information (Sec. 211) - The Public Service Loan Forgiveness program is improved: the number of monthly payments required drops from 120 to 96 payments, certain deferment and forbearance periods (times when payments are delayed) now count toward forgiveness, and the process becomes automatic once requirements are met (Sec. 221) - Interest no longer accumulates (grows) on certain loans when payments are paused through deferment or forbearance (Sec. 301) ##

What Changes

If this bill becomes law, college students from low-income families would receive more grant money. Graduate students could borrow at lower cost. Federal student loan borrowers would pay no origination fees on new loans and would see interest stop accumulating during certain hardship periods. Teachers and other public service workers could have their loans forgiven after fewer years of payments. Struggling students would get more chances to improve academically before losing financial aid eligibility. ##

Important Definitions

- **Pell Grant**: A federal grant (money that does not need to be repaid) given to undergraduate students with financial need - **Student aid index**: A number calculated from family income and assets used to determine financial need - **Income-driven repayment plan**: A loan repayment option where monthly payments are based on the borrower's income and family size - **Public service job**: Work in government, education, emergency management, military service, or certain nonprofit organizations - **Deferment**: A period during which a borrower is allowed to pause or postpone loan payments - **Forbearance**: A period during which a borrower is temporarily allowed to make reduced or no payments - **Capitalization**: Adding unpaid interest to the loan's principal balance so interest begins accumulating on the interest - **Dreamer student**: An undocumented immigrant who entered the United States before age 18, earned a high school diploma, and meets other criteria, or who was eligible for deferred action under certain Department of Homeland Security policies - **Covered loan**: A federal Direct Loan or certain other federal student loans held by the Department of Education ##

Effective Date

Amendments to Pell Grants and certain loan provisions take effect as if included in the FAFSA Simplification Act, subject to that law's effective date (Sec. 1(b)). The repeal of scoring requirements takes effect July 1, 2024 (Sec. 101(b)(2)). Graduate student subsidized loans begin July 1, 2024 (Sec. 201). Loan origination fee eliminations apply to loans with first disbursement on or after July 1, 2024 (Sec. 202). Interest capitalization elimination and other provisions apply on the date of enactment or thereafter as specified (Sec. 301).

I 118TH CONGRESS 1ST SESSION H. R. 1731 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 MARCH 22, 2023 Ms. WILSON of Florida (for herself, Mrs. MCBATH, Mr. COURTNEY, Mr. SABLAN, Ms. BONAMICI, Mr. GRIJALVA, Ms. ADAMS, and Mr. TAKANO) introduced the following bill; which was referred to the Committee on Education and the 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 jurisdic- tion 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 Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 1731 IH SECTION 1. SHORT TITLE; EFFECTIVE DATE; TABLE OF 1 CONTENTS. 2 (a) SHORT TITLE.—This Act may be cited as the 3 ‘‘Lowering Obstacles to Achievement Now Act’’ or the 4 ‘‘LOAN Act’’. 5 (b) EFFECTIVE DATE.—Except as otherwise ex- 6 pressly provided herein, any amendment made by this Act 7 to section 401, 473, or 484 of the Higher Education Act 8 of 1965 (20 U.S.C. 1070a; 1087mm; 1091), as amended 9 by the FAFSA Simplification Act (title VII of division FF 10 of Public Law 116–260), shall take effect as if included 11 in the FAFSA Simplification Act and subject to the effec- 12 tive date of section 701(b) of such FAFSA Simplification 13 Act, as amended by section 102(a) of the FAFSA Sim- 14 plification Act Technical Corrections Act (division R of 15 Public Law 117–103) (including the authorization pro- 16 vided under section 102(c)(1)(A) of such Act). 17 (c) TABLE OF CONTENTS.—The table of contents of 18 this Act is as follows: 19 Sec. 1. Short title; effective date; 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 re- cipients 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. VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6211 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 1731 IH TITLE II—AMENDMENTS TO TERMS AND CONDITIONS OF LOANS AND REPAYMENT PLANS PART A—DIRECT LOANS Sec. 201. Subsidized loans for graduate and professional students. Sec. 202. Repeal of origination fees. Sec. 203. Prepayment amounts. PART B—AUTOMATIC ENROLLMENT IN INCOME-DRIVEN REPAYMENT FOR CERTAIN BORROWERS Sec. 211. Notification and automatic enrollment procedures for borrowers who are delinquent on loans. Sec. 212. Notification and automatic enrollment procedures for borrowers who are rehabilitating defaulted loans. Sec. 213. Covered loan, income-driven repayment plan, and non-covered loan defined. Sec. 214. Automatic recertification of income for income-driven repayment plans. Sec. 215. Procedure and requirement for requesting tax return information from the IRS. PART C—AMENDMENTS TO CERTAIN LOAN FORGIVENESS PROGRAMS Sec. 221. Amendments to terms and conditions of Public Service Loan Forgive- ness. Sec. 222. Loan forgiveness for teachers. 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, 2024. Sec. 402. Refinancing FFEL and Federal Direct Loans. Sec. 403. Refinancing private student loans. TITLE I—FEDERAL PELL 1 GRANTS 2 SEC. 101. DOUBLING FEDERAL PELL GRANTS AND PRO- 3 VIDING ALL FEDERAL PELL GRANTS 4 THROUGH MANDATORY FUNDING. 5 (a) AMOUNT OF MINIMUM FEDERAL PELL 6 GRANTS.—Section 401 of the Higher Education Act of 7 1965 (20 U.S.C. 1070a), as amended by title VII of divi- 8 VerDate Sep 11 2014 00:27 Apr 07, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 1731 IH sion FF of the FAFSA Simplification Act (Public Law 1 116–260), is amended— 2 (1) in subsection (a)(2)(F), by striking ‘‘10 per- 3 cent’’ and inserting ‘‘5 percent’’; 4 (2) in subsection (b)— 5 (A) in paragraph (1)(B)(i), by striking 6 ‘‘paragraph (5)(A)’’ and inserting ‘‘paragraph 7 (5)’’; 8 (B) by striking paragraph (5) and insert- 9 ing the following: 10 ‘‘(5) TOTAL MAXIMUM FEDERAL PELL 11 GRANT.— 12 ‘‘(A) AWARD YEAR 2024–2025.—For award 13 year 2024–2025, the total maximum Federal 14 Pell Grant award shall be $10,000. 15 ‘‘(B) AWARD YEAR 2025–2026.—For award 16 year 2025–2026, the total maximum Federal 17 Pell Grant award shall be $11,000. 18 ‘‘(C) AWARD YEAR 2026–2027.—For award 19 year 2026–2027, the total maximum Federal 20 Pell Grant award shall be $12,000. 21 ‘‘(D) AWARD YEAR 2027–2028.—For award 22 year 2027–2028, the total maximum Federal 23 Pell Grant award shall be $13,000. 24 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 1731 IH ‘‘(E) AWARD YEAR 2028–2029.—For award 1 year 2028–2029, the total maximum Federal 2 Pell Grant award shall be $14,000. 3 ‘‘(F) AWARD YEAR 2029–2030 AND SUBSE- 4 QUENT YEARS.—For award year 2029–2030, 5 and each subsequent award year, the total max- 6 imum Federal Pell Grant award shall be 7 $14,000— 8 ‘‘(i) increased by the adjustment per- 9 centage for the award year for which the 10 amount under this subparagraph is being 11 determined; and 12 ‘‘(ii) rounded to the nearest $50. 13 ‘‘(G) DEFINITION OF ADJUSTMENT PER- 14 CENTAGE.—In this paragraph, the term ‘adjust- 15 ment percentage,’ as applied to an award year, 16 is equal to the percentage increase in the Con- 17 sumer Price Index, as defined in section 478(f), 18 for the most recent calendar year ending prior 19 to the beginning of the award year.’’; 20 (C) by striking paragraphs (6) and (7) and 21 inserting the following: 22 ‘‘(6) APPROPRIATION OF FUNDS.—There are 23 authorized to be appropriated, and there are appro- 24 priated, out of any money in the Treasury not other- 25 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 1731 IH wise appropriated, such sums as may be necessary 1 for fiscal year 2024 and each subsequent fiscal year 2 to provide the total maximum Federal Pell Grant for 3 which a student shall be eligible under this section 4 during an award year.’’; and 5 (D) by redesignating paragraphs (8) and 6 (9) as paragraphs (7) and (8), respectively; 7 (3) in subsection (d)(5)(B)(ii)— 8 (A) in subclause (I)(bb), by striking ‘‘or’’ 9 after the semicolon; 10 (B) in subclause (II)(bb)(CC), by striking 11 the period and inserting ‘‘; or’’; and 12 (C) by adding at the end the following: 13 ‘‘(III) during a period for which 14 the student did not receive a loan 15 under this title but for which, if the 16 student had received such a loan, such 17 loan would have been discharged 18 under the circumstances described in 19 subclause (II)(bb)(CC).’’; 20 (4) by striking subsections (g) and (h); and 21 (5) by redesignating subsections (i) and (j) as 22 subsections (g) and (h), respectively. 23 (b) REPEAL OF SCORING REQUIREMENT.— 24 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 1731 IH (1) IN GENERAL.—Section 406 of H. Con. Res. 1 95 (109th Congress) is amended— 2 (A) by striking subsection (b); and 3 (B) by striking ‘‘(a) IN GENERAL.—Upon’’ 4 and inserting the following: ‘‘Upon’’. 5 (2) EFFECTIVE DATE.—The amendments made 6 by paragraph (1) shall take effect beginning on July 7 1, 2024. 8 (c) STUDENT SUPPORT SERVICES.—Section 9 402D(d)(1) of the Higher Education Act of 1965 (20 10 U.S.C. 1070a–14(d)(1)) is amended by striking ‘‘the min- 11 imum’’ and inserting ‘‘10 percent of the maximum’’. 12 (d) SCHOLARSHIP COMPONENT.—Section 404E(d) of 13 the Higher Education Act of 1965 (20 U.S.C. 1070a– 14 25(d)) is amended by striking ‘‘less than the minimum’’ 15 and inserting ‘‘less than 10 percent of the maximum’’. 16 SEC. 102. PROVIDING INCREASED FEDERAL PELL GRANTS 17 AND OTHER ASSISTANCE FOR RECIPIENTS 18 OF MEANS-TESTED BENEFITS. 19 (a) INCREASED AMOUNT OF MAXIMUM FEDERAL 20 PELL GRANTS FOR STUDENTS WITH NEGATIVE STU- 21 DENT AID INDEXES.—Section 401(b)(1) of the Higher 22 Education Act of 1965 (20 U.S.C. 1070a(b)(1)), as 23 amended by section 101 of this Act and section 703 of 24 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 1731 IH the FAFSA Simplification Act (Public Law 116–260), is 1 amended— 2 (1) in subparagraph (A)— 3 (A) in the matter preceding clause (i), by 4 striking ‘‘A student’’ and inserting ‘‘Except in 5 the case of a student with a student aid index 6 of less than zero, a student’’; 7 (B) by striking clause (i); and 8 (C) by redesignating clauses (ii) and (iii) 9 as clauses (i) and (ii), respectively; 10 (2) by redesignating subparagraphs (B) 11 through (E) as subparagraphs (C) through (F), re- 12 spectively; 13 (3) by inserting after subparagraph (A) the fol- 14 lowing: 15 ‘‘(B) A student with a student aid index of 16 less than zero shall be eligible for a Federal 17 Pell Grant award that exceeds the total max- 18 imum Federal Pell Grant by an amount equal 19 to the amount by which the student’s student 20 aid index is less than zero.’’; 21 (4) in subparagraph (C), as redesignated by 22 paragraph (2)— 23 (A) in the matter preceding clause (i), by 24 striking ‘‘subparagraph (A) for an academic 25 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 1731 IH year,’’ and inserting ‘‘subparagraph (A), or an 1 increased Federal Pell Grant under subpara- 2 graph (B), for an academic year,’’; and 3 (B) in clause (ii), by striking ‘‘, except that 4 a student aid index of less than zero shall be 5 considered to be zero for the purposes of this 6 clause’’; 7 (5) in subparagraph (D), as redesignated by 8 paragraph (2), by striking ‘‘(A) or (B)’’ and insert- 9 ing ‘‘(A), (B), or (C)’’; 10 (6) in subparagraph (E), as redesignated by 11 paragraph (2), by inserting ‘‘or an increased Federal 12 Pell Grant under subparagraph (B)’’ after ‘‘subpara- 13 graph (A)’’; or 14 (7) in subparagraph (F), as redesignated by 15 paragraph (2), by striking ‘‘or a minimum Federal 16 Pell Grant under subparagraph (C)’’ and inserting 17 ‘‘an increased Federal Pell Grant under subpara- 18 graph (B), or a minimum Federal Pell Grant under 19 subparagraph (D)’’. 20 (b) SPECIAL STUDENT AID INDEX RULE FOR RE- 21 CIPIENTS OF MEANS-TESTED BENEFITS.—Section 473 of 22 the Higher Education Act of 1965 (20 U.S.C. 1087mm), 23 as amended by section 702(b) of the FAFSA Simplifica- 24 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 1731 IH tion Act (Public Law 116–260), is amended by adding at 1 the end the following: 2 ‘‘(d) SPECIAL RULE FOR MEANS-TESTED BENEFIT 3 RECIPIENTS.—Notwithstanding subsection (b), for an ap- 4 plicant (or, as applicable, an applicant and spouse, or an 5 applicant’s parents) who, at any time during the previous 6 24-month period, received a benefit under a means-tested 7 Federal benefit program (or whose parent or spouse re- 8 ceived such a benefit, as applicable), the Secretary shall 9 for the purposes of this title consider the student aid index 10 as equal to –$1,500 for the applicant.’’. 11 SEC. 103. FEDERAL AID ELIGIBILITY FOR DREAMER STU- 12 DENTS. 13 Section 484 of the Higher Education Act of 1965 (20 14 U.S.C. 1091), as amended by section 702(n) of the 15 FAFSA Simplification Act (Public Law 116–260), is 16 amended— 17 (1) in subsection (a)(5), by inserting ‘‘, or be a 18 Dreamer student, as defined in subsection (u)’’ after 19 ‘‘becoming a citizen or permanent resident’’; and 20 (2) by adding at the end the following: 21 ‘‘(u) DREAMER STUDENTS.— 22 ‘‘(1) IN GENERAL.—In this section, the term 23 ‘Dreamer student’ means an individual who— 24 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 1731 IH ‘‘(A)(i) is not a citizen or national of the 1 United States; and 2 ‘‘(ii) is inadmissible or deportable under 3 the Immigration and Nationality Act (8 U.S.C. 4 1101 et seq.)); and 5 ‘‘(B)(i) in the case of such an individual 6 who was younger than 18 years of age on the 7 date on which the individual initially entered 8 the United States— 9 ‘‘(I) has earned a high school diploma, 10 the recognized equivalent of such diploma 11 from a secondary school, or a high school 12 equivalency diploma recognized by State 13 law, or is scheduled to complete the re- 14 quirements for such a diploma or equiva- 15 lent before the next academic year begins; 16 ‘‘(II) is enrolled at an institution of 17 higher education pursuant to subsection 18 (d); 19 ‘‘(III) has served in the uniformed 20 services (as such term is defined in section 21 101 of title 10, United States Code) for 22 not less than 2 years and, if discharged, 23 received an honorable discharge; 24 VerDate Sep 11 2014 05:16 Apr 06, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1731.IH H1731 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 1731 IH ‘‘(IV) has acquired a degree, certifi- 1 cate, or recognized postsecondary creden- 2 tial from an institution of higher education 3 or area career and technical education 4 school (as such term is defined in section 5 3 of the Carl D. Perkins Career and Tech- 6 nical Education Act of 2006 (20 U.S.C. 7 2302)); or 8 ‘‘(V) has completed not less than 2 9 years in a postsecondary program at an in- 10 stitution of higher education, or area [Text truncated for display. Full text available on Congress.gov.]

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