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Creates a single new Federal Direct “simplification” loan program that begins July 1, 2025, limits other federal loan-making authority after September 30, 2028, and phases out many loan-forgiveness options for loans originated on/after July 1, 2025. Expands an alternate Title IV pathway so certain State-accredited schools can be treated as institutions of higher education, requires colleges that take federal aid to publish detailed annual student-, program-, and loan-outcome data, and imposes a new accountability regime that levies annual fines tied to institutions’ outstanding delinquent student loans while allowing counseling and limited offset credits for Pell graduates.
Amends section 451 of the Higher Education Act to prohibit expenditure of funds after September 30, 2028, for loans under this part whose first disbursement is after that date, except for Federal Direct simplification loans under new section 460A.
Terminates authority to make new loans under this part after September 30, 2028, except Federal Direct simplification loans under section 460A.
Prohibits authorization or expenditure of funds to make loans under this part for which the first disbursement is after September 30, 2028, except Federal Direct simplification loans under section 460A or loans expressly authorized by a later Act of Congress.
New borrowers may not receive loans under this part with first disbursement after June 30, 2025, except Federal Direct simplification loans under section 460A.
Borrowers who as of July 1, 2025, have outstanding balances on non-simplification loans may continue to borrow non-simplification loans for undergraduate, graduate/professional, or dependent-student on behalf of an undergraduate through September 30, 2028, subject to loss of eligibility rules.
Who is affected and how:
Students and future borrowers: Students who take federal loans on or after July 1, 2025 will generally receive loans under the new simplification program and will be ineligible for many existing federal loan forgiveness options for those new loans; students who began programs before July 1, 2025 may retain some protections/exceptions. Borrowing limits, interest-rate and repayment rules for new borrowers will come from the new statutory framework. Increased institutional transparency may help some students compare programs by earnings and debt outcomes.
Pell recipients and low‑income students: The law creates a per‑Pell‑graduate credit that reduces institutional penalties, which may indirectly affect institutional behavior toward Pell recipients; however, many forgiveness pathways that previously benefited low‑income borrowers would be curtailed for new loans.
Institutions of higher education (public, private, and for‑profit): Colleges that accept Title IV funds must publish extensive outcome data and will face new compliance costs and potential fines tied to outstanding delinquent loans. State‑accredited institutions that obtain an alternative accreditation agreement may gain Title IV eligibility under the new pathway and may be exempt from certain federal requirements, changing competitive dynamics.
State governments and state accreditors: States that license or accredit institutions can now, under approved agreements, enable those institutions to access Title IV funding, creating new regulatory responsibilities and potential oversight questions.
Department of Education and federal administrators: Must design and implement the new loan program, new reporting systems, enforcement and penalty formulas, approvals for alternative accreditation agreements, and manage transition for borrowers and institutions—requiring significant administrative work.
Taxpayers and federal budget: Concentrating lending in one program and restricting forgiveness could lower projected federal outlays for forgiveness but may increase administrative transition costs; impacts depend on rule specifics and implementation.
Loan servicers and private lenders: A shift in federal lending architecture and the end of other federal loan authorities may change servicing workloads, contract structures, and private‑market roles.
Overall impact: The legislation reorganizes federal student lending, narrows eligibility for forgiveness for new loans, increases institutional transparency and financial accountability, and creates new pathways for some state‑accredited providers to access Title IV funds. It will raise compliance and administrative costs for schools and the Department of Education and change incentives for institutions around enrollment, program quality, and borrower supports.
Adds a new requirement to institutions' program participation agreements (a new paragraph (31) in subsection (a)) that institutions pay an annual default rate fine and adds a new subsection (k) establishing the fine's calculation, definitions, a per-Pell-graduate credit, and counseling flexibility.
Adds a new paragraph (3) to subsection (l) permitting eligible institutions to require borrowers to receive specified information or financial counseling at or prior to disbursement of a part D loan.
Amends Title IV of the Higher Education Act by adding a new requirement to section 487(a) and by adding a new section (494B) to part G that requires institutions participating in Title IV programs to publish specified institutional and program-level data and establishes penalties for privacy violations.
Amends the program-authority provisions (section 451 of the HEA) to (1) add a prohibition on expenditures and new loans after specified dates except for newly created Federal Direct simplification loans, (2) add new termination and borrower-eligibility subsections, and (3) add a new Part D section (460A) establishing Federal Direct simplification loans with specified terms and limits.
Redesignates existing subparagraphs (B) and (C) as (C) and (D), respectively, and inserts a new subparagraph (B) that adds institutions accredited by an authorized accreditation authority in a State with an alternative accreditation agreement with the Secretary (including specified types of postsecondary entities) to the definition of 'institution of higher education' in 20 U.S.C. 1002(a)(1).
Adds a new section (494A) to Part G of title IV providing that an institution, program, or course that is eligible for Title IV funds under section 102(a)(1)(B) and meets the requirements of section 498C is not required to meet the requirements of section 496 or the requirements in subsections (a)(2) and (b) of section 481.
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Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
Introduced February 27, 2025 by Mike Lee · Last progress February 27, 2025
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
Introduced in Senate