LOAN Act

What Would Change

Currently, the maximum Federal Pell Grant is lower than what this bill proposes, and eligibility is more limited. There are multiple federal student loan repayment plans, and interest capitalization can increase the total amount owed. Public Service Loan Forgiveness requires 120 qualifying payments and has stricter rules about what counts. Interest rates on federal student loans can be higher than 5.0%, and refinancing options for federal and private loans are more limited. Defaulted loans have a lasting negative impact on credit history. If this bill becomes law, the maximum Federal Pell Grant would significantly increase over several years, and more students, including certain 'Dreamer students' and graduate students, would be eligible. Federal student loan repayment would be simplified to two plans, with a new Income-Driven Repayment Plan offering $0 monthly payments for low-income borrowers and faster loan forgiveness. Interest would no longer be added to the principal balance of most federal student loans. Public Service Loan Forgiveness would be easier to get, requiring only 96 payments, and more types of payments would count. New federal student loans would have interest rates capped at 5.0% (or the 10-year Treasury note rate, whichever is lower), and borrowers could refinance existing federal and eligible private loans to this lower rate. Records of default would be removed from credit history once a loan is fully repaid or consolidated.