Student loan overhaul proposed in Congress
The U.S. House Committee on Education and Workforce has passed an overhaul of the student loan provisions in the Higher Education Act, called the Student Success and Taxpayer Savings Plan. The bill is part of the budget reconciliation process, where bills from many committees will be compiled into a large legislative package for consideration by the full House of Representatives.
Once passed, it will head to the Senate. However, the Senate is working through its own process, which many believe will differ from the House. Budget reconciliation is a unique congressional process that differs from the normal order for considering legislation. Exactly how this will play out remains to be seen.
The AVMA is closely engaged with lawmakers, working to communicate the importance of student loans for the veterinary community and the impact of the many changes under consideration.
Here are key provisions of the bill. See the bill's full text here.
Sec. 30002 Amount of Need; Cost of Attendance; Median Cost of College
- For 2026-2027 and going forward: Caps the total amount of federal student aid a student can receive annually at the "median cost of college," defined as the median cost of attendance for students enrolled in the same program of study nationally and calculated by the secretary of education using data from the previous award year
Sec. 30011 Loan Limits
- Terminates authority to make GradPLUS loans and subsidized loans for undergraduate students starting July 1, 2026; includes a three-year exception for students who were enrolled in a program of study as of June 30, 2026, and had received such loans for that program
- Amends the maximum annual loan limit for unsubsidized loans disbursed starting July 1, 2026, to the median cost of students' program of study; amends aggregate limits for such loans disbursed to students for an undergraduate program ($50,000), graduate program ($100,000), and professional program ($150,000)
- Requires undergraduate students to exhaust their unsubsidized loans before parents can use Parent PLUS to cover their remaining cost of attendance; establishes an aggregate limit for Parent PLUS loans of $50,000 for parents on behalf of their dependent child; includes a three-year exception for students who were enrolled in a program of study as of June 30, 2026, and had received such loans for the program
Sec. 30021 Loan Repayment
- Terminates all repayment plans authorized under income-contingent repayment (ICR); requires transfer of borrowers enrolled in an ICR plan or an administrative forbearance associated with such plans into the statutorily authorized income-based repayment (IBR) plan; prohibits the secretary of education from issuing or modifying regulations with respect to IBR and the Repayment Assistance Plan except for interim final rules with respect to transitioning borrowers to IBR, modifying IBR terms consistent with the amendments made under this section, and implementing the Repayment Assistance Plan established under this section; waives negotiated rulemaking with respect to transitioning borrowers to IBR and modifying the terms of such plan
- Maintains all current repayment options for borrowers with existing loans disbursed prior to July 1, 2026, with the exception of ICR; amends the terms of IBR to require borrowers to pay 15 percent of discretionary income, eliminates the standard repayment cap and partial financial hardship requirement, and requires borrowers to pay a maximum of 240 (20 years) or 300 (25 years) qualifying payments for undergraduate and graduate borrowers, respectively; allows borrowers with excepted PLUS loans who were enrolled in ICR to access IBR
- Repeals all plans authorized under ICR for current and new borrowers; terminates existing repayment plans for loans disbursed on or after July 1, 2026, and establishes the following new standard repayment plan and Repayment Assistance Plan for borrowers with such loans:
- Establishes a Standard Repayment Plan with fixed monthly payments and repayment terms that range from 10 to 25 years based on the amount borrowed
- Establishes a new Repayment Assistance Plan with payments calculated based on borrowers' total adjusted gross income, ranging from 1 to 10 percent depending on a borrower's income; includes a minimum monthly payment of $10; offers balance assistance to borrowers making their required on-time payments by waiving unpaid interest and providing a matching payment-to-principal of up to $50; allows borrowers currently in repayment to enroll in such plan; includes a maximum repayment term equal to 360 qualifying payments (30 years), which may include previous payments made under ICR, IBR, and other qualifying existing plans
Sec. 30022 Deferment; Forbearance
- Terminates economic hardship and unemployment deferments for loans disbursed on or after July 1, 2025
- Amends the terms of discretionary forbearances for loans disbursed on or after July 1, 2025, to prohibit use of such forbearances for more than nine months during a 24-month period
- Amends the terms of medical and dental residency deferments for loans disbursed on or after July 1, 2025, to allow for zero interest accrual for up to four years; Veterinary residencies are not included, and the AVMA will look to include them in the Senate.
Sec. 30023 Loan Rehabilitation
- Allows borrowers with existing and new defaulted loans to rehabilitate their loans twice instead of once, allowing these borrowers a smoother transition out of default and into repayment; requires payments for rehabilitation to be no less than $10 for loans disbursed on or after July 1, 2025
Sec. 30024 Public Service Loan Forgiveness
- Allows payments made under the Repayment Assistance Plan to count as qualifying payments for purposes of Public Service Loan Forgiveness (PSLF)
- Qualifying jobs: Clarifies that payments made by new borrowers on or after July 1, 2025, who are serving in a medical or dental residency do not count as a qualifying payment for purposes of PSLF
Sec. 30041 Agreements with Institutions
- Amends the terms of the Direct Loan program participation agreement to require institutions to reimburse the federal government for a percentage of the nonrepayment balance associated with loans disbursed on or after July 1, 2027; calculates the reimbursement percentage based on the total price the institution charges students for a program of study and the value-added earnings of students after they graduate or, in the case of students who do not graduate, the completion rate of the institution or program
- Penalties for late or missed payments: Establishes escalating penalties for late payments, starting with requiring institutions to pay interest on late payments and scaling up to loss of Title IV eligibility
Sec. 30042 Campus-Based Aid Programs
- Establishes a "PROMISE" program to provide performance-based grants to institutions
- Provides funds to institutions based on a formula that rewards colleges for strong earnings outcomes, low tuition, and enrolling and graduating low-income students; sets the maximum amount an institution can receive annually at $5,000 per federal student aid recipient
- Provides flexibility to use funds to meet the maximum price guarantee required under the program, as well as other initiatives to improve college affordability, college access, and student successes in ways that best suit the needs of the institution and its students; requires institutions to report and evaluate how funds are used and disseminate best practices based on those evaluations
- Requires that, as a condition of receiving PROMISE grants, institutions must provide prospective students a guaranteed maximum total price for a given program of study based on income and financial need categories established by the education secretary; requires such guarantee to be for a minimum period of enrollment (up to six years or the institution's median time to completion, whichever is less)
- Permanently repeals the gainful employment rule
- Repeals the regulations pertaining to borrower defense to repayment and closed school discharges