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Amends subsection (m) of 20 U.S.C. 1087e by adding a new subparagraph treating references to 'employment' and 'employed' as including work as an independent contractor, and further amends paragraph (6) of subsection (m) (as redesignated by section 2(b)) by adding definitions for 'Full-time' and 'Independent contractor' with specified criteria.
Alters the subparagraph structure of section 428J(g)(2) (20 U.S.C. 1078–10(g)(2)) by inserting additional text after the semicolon at the end of subparagraph (A), striking subparagraph (B), and redesignating subparagraph (C) as subparagraph (B).
Alters the subparagraph structure of section 460(g)(2) (20 U.S.C. 1087j(g)(2)) by inserting additional text after the semicolon at the end of subparagraph (A), striking subparagraph (B), and redesignating subparagraph (C) as subparagraph (B).
Makes a conforming amendment to Section 455(m)(7) as redesignated by section 2(b) of this Act by striking the cross-reference 'section 428J, 428K, 428L, or 460' and inserting 'section 428K or 428L'.
Amends section 455(m) of the Higher Education Act (20 U.S.C. 1087e(m)) to (a) revise the statutory text governing the number and treatment of qualifying monthly payments for public service loan forgiveness, (b) redesignate certain paragraphs, (c) add a detailed definition of qualifying monthly payments (including specified repayment plans and eligible deferments/forbearances), (d) add prepayment application rules and an option to apply excess payments to principal, (e) establish a buyback payment process and eligibility conditions, (f) add a hold-harmless clause against retroactive determinations, (g) define 'qualifying repayment plan,' (h) modify loan cancellation certification procedures, and (i) add an initial ineligibility notice and a reconsideration process with specified forbearance and decision timelines.
Revises how Public Service Loan Forgiveness (PSLF) works to give borrowers more credit for public service and more certainty about eligibility. It expands what counts as qualifying payments and employment (including certain independent contractor work), creates a buyback option for missed qualifying months, locks in already‑counted qualifying months so they can’t be later reversed, and requires a formal reconsideration process with short forbearance while decisions are made. Requires the Department of Education to build an online borrower portal that shows which Direct Loans qualify, displays qualifying repayment plans, accepts electronic certification and forms (including from employers), and hosts a public searchable database of public service jobs. It also stops capitalization of interest that accrues during forbearance, changes how prior payments count after consolidation (weighted average), makes technical teacher-loan edits, and directs a GAO study on using data matches to certify employment automatically for PSLF applicants.
Amend paragraph (1) of 20 U.S.C. 1087e(m) to change wording in the introductory matter and to require a borrower to have made 96 qualifying monthly payments after October 1, 2007 and to have been employed in public service during the period in which each of those 96 payments was made.
Amend subparagraph (B) to make cancellation apply “without regard to the employment status of the borrower at the time of such cancellation.”
Redesignate existing paragraphs (2), (3), and (4) of 20 U.S.C. 1087e(m) as paragraphs (3), (6), and (7), respectively.
Insert a new paragraph defining “Monthly payments” and specifying what counts as a qualifying monthly payment for the purpose of PSLF.
Define qualifying monthly payments to include payments not less than the monthly amount due under any one or a combination of: (I) income-based repayment under section 493C, (II) standard repayment under subsection (d)(1)(A) based on a 10-year period, (III) repayment under subsection (d)(1) or (g) equal to at least the 10-year standard amount, or (IV) income-contingent repayment under subsection (d)(1)(D).
Who is affected and how:
Federal Direct Loan borrowers seeking PSLF: Most directly affected. Many borrowers will gain clearer paths to forgiveness, more months counted (including certain deferments and independent‑contractor work), a buyback option to recover missed qualifying months, and protection from having already‑counted months later removed. Borrowers will also benefit from an online portal that shows eligibility, explains fixes (e.g., consolidation), and accepts electronic employer certification.
Public service workers (government employees, nonprofit workers, teachers, military and veterans): More work arrangements will count toward PSLF because independent contractor service and clearer full‑time definitions are included. Teachers gain clearer rules for converting hours to the full‑time standard.
Parent PLUS borrowers who consolidate: When parents consolidate, prior qualifying payments on the PLUS loan will be counted via a weighted average rule, affecting how much credit parents receive toward forgiveness.
Loan servicers and the Department of Education: Will need to implement the new portal, public job database, reconsideration procedures, reporting and recordkeeping, and apply new interest‑capitalization rules. Operational workload and IT development are likely to increase.
Department of Labor and other agencies (including DoD): Will be asked to cooperate on the job database and potential data matches; the GAO study may point to building or expanding automatic employment verification systems.
Practical effects:
Risks and tradeoffs:
Referred to the House Committee on Education and Workforce.
Introduced April 10, 2025 by Joe Courtney · Last progress April 10, 2025
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LOAN Act
Referred to the House Committee on Education and Workforce.
Introduced in House