H.R. 4862 — LOAN Act

This section reinstates authority to make interest-subsidized Federal Direct Stafford Loans to graduate and professional students enrolled in eligible programs at covered institutions of higher education (i.e., institutions defined in 20 USC 101 or 102(a)(1)(C), excluding graduate medical, nursing, or veterinary schools outside the U.S. that do not meet 20 USC 101(a)(4) requirements), beginning July 1, 2026 (previously terminated for such students on or after July 1, 2012). (Thus, eligible students may receive subsidized loans in addition to Federal Direct Unsubsidized Stafford Loans, reducing interest accrual during enrollment.)

This section reduces the origination fee on Federal Direct Loans to 0.0% (from 4.0%) for loans for which the first disbursement of principal is made on or after July 1, 2026. (Origination fees are upfront charges deducted from loan proceeds to cover federal administrative costs of the Direct Loan Program.)

This section establishes rules for prepayment amounts on loans under the Federal Family Education Loan (FFEL) Program (part B) or Direct Loan Program (part D) of title IV of the Higher Education Act of 1965. Prepayments may be made without penalty and are applied first to fees (including collection costs and authorized late charges), then outstanding principal, and then outstanding interest; excess amounts over the monthly payment advance the next due date unless the borrower requests otherwise, with notification to the borrower. For borrowers without fee balances prepaying on two or more such loans, prepayments apply first to principal on the highest-interest-rate loan (or highest-principal-balance loan if rates are the same), then fees, then interest on that loan, unless the borrower submits a written request for different application; for borrowers with fee balances, the standard order applies.

This section establishes default requirements in new section 494B for loans made under the Federal Family Education Loan (FFEL) Program (part B) or William D. Ford Federal Direct Loan (Direct Loan) Program (part D). Upon default, the entire unpaid balance and accrued interest becomes immediately due and payable, and the Secretary of Education must assess collection charges. The Secretary may pursue any authorized collection actions—including lawsuits against the borrower, reporting the default to consumer reporting agencies, tax refund offsets via the Internal Revenue Service, and wage garnishment—or designate the borrower for an income-driven repayment plan under section 455A(c).

This section directs the Secretary of Education, in coordination with the Director of the Consumer Financial Protection Bureau, to undertake a campaign beginning on the date of enactment notifying all borrowers of Direct Loans under part D of title IV of the Higher Education Act of 1965 of their eligibility to change repayment plans and enroll in either (1) the fixed repayment plan under section 455A(b), as added by section 212, or (2) the Income-Driven Repayment plan under section 455A(c), as added by section 212. The campaign requires (1) developing consumer information materials on these options and (2) directing loan servicers to provide such materials to borrowers.

This section sunsets repayment plans under section 455(d)(1)-(5) of the Higher Education Act of 1965 for Federal Direct Loans made on or after July 1, 2026 (previously available indefinitely). (1) It establishes, beginning July 1, 2026, two repayment plans for such loans—(a) a fixed repayment plan, with monthly payments based on outstanding principal and interest, interest rates, and a fixed period (consistent with prior standard 10-year plan except as specified); and (b) an Income-Driven Repayment Plan (details in new section 455A(c), text not provided). (2) For loans made on or after July 1, 2026, borrowers must select one plan (or receive the fixed plan by default); all such loans to a borrower must use the same plan; changes are permitted from fixed to income-driven at any time or from income-driven to fixed (with recalculated payments); and pre-2026 loans may remain on prior plans or switch to a new plan (with post-2026 loans unified separately). (Thus, existing borrowers with pre-2026 Direct Loans, including parent PLUS loans, retain their June 30, 2026, plans but lose ability to switch among legacy options after that date.)

This section expands the exclusions from the maximum repayment period under the Income-Contingent Repayment (ICR) plan (20 U.S.C. 1087e(e)(7)(B)) and Income-Based Repayment (IBR) plan (20 U.S.C. 1098e(b)(7)(B))—periods which do not count toward the 20- or 25-year forgiveness thresholds—by adding (1) payments under the Income-Driven Repayment Plan under section 455A(c) and (2) payments under the fixed repayment plan under section 455A(b). (Thus, time on these plans pauses the forgiveness clock if a borrower later enrolls in ICR or IBR.)

This section amends student eligibility requirements for federal grants, loans, and work-study under the Higher Education Act of 1965 by conditioning ineligibility under subsection (a)(6) for fraud convictions on a Secretary of Education determination under new subsection (u). Subsection (u) directs the Secretary to deem a borrower ineligible if, without the knowledge of the institution or Secretary at the time of the loan, the borrower (or student, for a parent loan) provided false information, was convicted of or pled guilty to fraud in obtaining Title IV funds, or took actions causing receipt of (1) a wholly or partially ineligible loan, (2) ineligible interest benefits, or (3) loan proceeds for an ineligible enrollment period. (Thus, upon such determination, the Secretary must issue a demand letter requiring repayment within 30 days of ineligible principal plus accrued interest—including subsidized interest—through the prior quarter; failure to repay results in default on the entire loan, and such loans may not be consolidated.)

This section establishes notification and automatic enrollment procedures for borrowers at least 31 days delinquent on Federal Direct Loans who are not repaying under the Income-Driven Repayment Plan and have not been subject to these procedures for such loans in the preceding 62 days. The Secretary of Education must (1) use IRS return information, pursuant to section 6103(l)(13) of the Internal Revenue Code, to determine the borrower's income and family size (with opt-out and update options); (2) notify the borrower of delinquency status, all covered (i.e., Direct) and noncovered loans, eligible repayment plans, estimated monthly payments under each (based on available income data), selection instructions, and potential auto-enrollment; and (3) for borrowers 80 days delinquent whose existing plan payments exceed Income-Driven Repayment Plan payments, automatically enroll them in the Income-Driven Repayment Plan under section 455A(c) while authorizing a switch to the fixed-repayment plan under section 455A(b) per specified rules. (Thus, these procedures aim to steer delinquent borrowers into affordable income-based repayment to reduce defaults on Direct Loans, which comprise the majority of new federal student loans.)

This section establishes notification and automatic enrollment procedures for borrowers rehabilitating defaulted Direct Loans pursuant to section 428F(d) of the Higher Education Act. Specifically, the Secretary of Education must (1) use IRS return information (disclosed under IRC section 6103(l)(13) and approved under section 494 of this Act) to determine the borrower's (and spouse's, if applicable) income and family size—with opt-out and update options; (2) notify the borrower of the process within 30 days after the borrower's sixth required rehabilitation payment; and (3) after the ninth such payment, select an income-driven repayment plan for the borrower using procedures specified in section 455(d)(6)(C). (Thus, rehabilitated loans are automatically placed in an affordable repayment plan based on verified income data.)

This section establishes definitions in the Direct Loan loan rehabilitation provisions (20 U.S.C. 1087e(d)) for a "covered loan" as (i) a loan made under Direct Loans, (ii) a loan purchased under section 459A, or (iii) a loan assigned to the Secretary under specified FFEL provisions (sections 428(c)(8), 428(j)(3)(B), 428F(a)(1)(A)(ii), or 428F(a)(1)(G)); and a "noncovered loan" as any other loan made, insured, or guaranteed under title IV of the Higher Education Act.

This section revises income recertification requirements for income-contingent repayment (ICR) plans under Direct Loans and eligible loans for income-based repayment (IBR) plans. (1) For ICR plans, it exempts borrowers whose definition of discretionary income results in a calculated monthly payment of $0 from providing updated income or family size information to the Secretary and ensures their payment remains $0. (2) For IBR plans, it expands eligible loans to any covered loan (as defined in section 455(d)(8)) from any loan made under part D (other than an excepted PLUS loan or excepted consolidation loan). (As background, ICR and IBR plans cap Direct Loan payments as a percentage of a borrower's discretionary income, with payments recertified annually; a $0 payment applies to borrowers with income below 150% or 225%—depending on the plan—of the federal poverty guideline for their family size.)

This section revises notification and approval requirements for IRS disclosure of tax return information by expanding income-contingent and income-based repayment plan applicability from loans under part D to covered loans (as defined in section 455(d)(8)); and adds requirements for (1) borrowers at least 31 days delinquent on a loan under this part, conditioning eligibility for notification and automatic enrollment procedures under section 455(d)(6) on either approving disclosures (with ongoing effect until opt-out) or providing alternative information; and (2) loan rehabilitation applicants under section 428F(d), similarly conditioning eligibility under section 428F(a) on approval (ongoing until opt-out under section 455(d)(7)) or alternative information. (Thus, these changes enable streamlined access to tax data for delinquency resolution and rehabilitation while requiring affirmative consent.)

This section modifies the Public Service Loan Forgiveness (PSLF) program, which forgives the remaining balance on eligible Federal Direct Loans after 120 qualifying monthly payments under a qualifying repayment plan while employed full-time in public service, as follows: (1) reduces the required qualifying monthly payments to 96 (from 120), beginning after October 1, 2007, while requiring public service employment during those payments; (2) permits forgiveness without regard to the borrower's employment status at the time of cancellation; and (3) defines qualifying monthly payments to include payments under specified repayment plans (i.e., income-based, standard 10-year, income-contingent, Income-Driven Repayment Plan, or fixed plans not less than the 10-year standard amount) or during specified deferments or forbearances (e.g., cancer treatment, military service, economic hardship, Peace Corps, AmeriCorps). This section further establishes rules for prepayments, under which excess payments count toward up to three subsequent months' required payments (with any remainder applied to principal), and redesignates certain paragraphs.

This section amends the Public Service Loan Forgiveness (PSLF) program to (1) treat work as an independent contractor in a public service job as employment for PSLF eligibility purposes; and (2) define, for public service jobs, "full-time" as a minimum average of 30 hours per week during the certification period, a minimum of 30 hours per week throughout a contractual or employment period of at least 8 months in a 12-month period, or—for nontenure-track employment at an institution of higher education—the equivalent of 30 hours per week as determined by multiplying credit or contact hours taught per week by a factor set by the Secretary; and (3) define "independent contractor" as a non-employee providing services in a public service job position that, under applicable state law, cannot be filled or provided by an employee of that employer. (PSLF forgives the remaining balance on a borrower's Direct Loans after 120 qualifying monthly payments made while employed full-time by a qualifying public service employer, such as a government agency or nonprofit organization.)

This section establishes an online portal for borrowers of eligible Federal Direct Loans under the Public Service Loan Forgiveness (PSLF) program (i.e., forgiveness of the remaining balance on Direct Loans after 120 qualifying monthly payments made under a qualifying repayment plan while employed full-time in a public service job) and a publicly accessible, searchable database of public service jobs. The portal provides (1) instructions for borrowers to access the database and verify public service employment; (2) identification of the borrower's eligible loans, qualifying repayment plans, qualifying payments made, and estimated payments remaining; (3) explanations for ineligible loans and steps to qualify them; (4) electronic submission of loan cancellation forms; (5) denial notices, reconsideration forms and notices (including 90-day forbearance details); (6) buyback payment explanations and request forms under PSLF's buyback provision; and (7) consolidation impact explanations; and allows employer contacts to electronically sign and submit forms, with all information kept up-to-date. The Secretary of Education, in consultation with the Secretary of Labor, must establish and regularly update the database and make it available on the Department's website.

This section requires the Secretary, for Public Service Loan Forgiveness (PSLF) purposes, to determine the number of qualifying monthly payments for a borrower seeking forgiveness under section 455(m) who consolidates one or more Direct Loans—including a Direct PLUS Loan made to a parent borrower—into a Direct Consolidation Loan by using the weighted average of payments made on the underlying Direct Loans prior to consolidation that met PSLF criteria. (As background, PSLF forgives the remaining balance on eligible Direct Loans after 120 separate qualifying monthly payments made under a qualifying repayment plan while the borrower is employed full-time by a qualifying public service employer.)

This section revises eligibility for the Federal Family Education Loan (FFEL) Teacher Loan Forgiveness program and Federal Perkins Loan teacher cancellation program by striking subparagraph (B)—one prior loan forgiveness exclusion—from the list of disqualifying conditions in each program's subsection (g)(2). It also amends Public Service Loan Forgiveness to limit disqualifying prior loan forgiveness to amounts received under the service-in-areas-of-national-need program or child welfare worker forgiveness program (to sections 428K or 428L, from sections 428J, 428K, 428L, or 460).

This section directs the Comptroller General of the United States to conduct a study on the feasibility of data matching agreements for Public Service Loan Forgiveness (PSLF) under section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 1087e(m)) that would allow borrowers to forgo requesting employment certification from public service employers. The study must examine progress by the Departments of Education and Defense on automatic data matching for military and veteran borrowers, requires a report with findings and recommendations to the House Committee on Education and Workforce and the Senate Committee on Health, Education, Labor, and Pensions within one year of enactment, and mandates cooperation from relevant federal agencies (including the Departments of Education, Defense, and the Treasury).

This section requires the Secretary of Education, guaranty agency, or other holder of a defaulted federal student loan under title IV of the Higher Education Act of 1965, upon the borrower's full repayment of the loan, to request any consumer reporting agency to remove the related adverse information from the borrower's credit history. (Thus, borrowers who repay defaulted federal student loans in full will have the default record removed from their credit reports.)

This section requires the Secretary of Education, a guaranty agency, or other loan holder, upon a borrower's obtaining a Federal Direct Consolidation Loan (i.e., a Direct Loan Program loan combining multiple federal student loans) that discharges liability on a defaulted Title IV loan, to request consumer reporting agencies to remove any adverse default information on that loan from the borrower's credit history. (Thus, borrowers rehabilitate their credit after consolidating out of default.)

This section establishes a default reduction program, effective July 1, 2026 and notwithstanding current law, for defaulted loans made, insured, or guaranteed under the Federal Family Education Loan (FFEL) program or Direct Loan program. (As background, FFEL and Direct Loans are the primary federal student loan programs; loan rehabilitation returns a defaulted loan to good standing, removes the default from the borrower's credit history, and restores eligibility for future federal student aid.) Under the program, such a defaulted loan (except one with a judgment obtained or obtained by fraud for which the borrower was convicted or pled guilty/nolo contendere) is eligible for rehabilitation if the borrower makes nine voluntary, reasonable, and affordable monthly payments within 20 days of the due date during 10 consecutive months, with a borrower permitted no more than two rehabilitations per loan. (1) The Secretary determines the reasonable and affordable payment based on the borrower's total financial circumstances, generally equal to the minimum payment under an income-driven repayment plan (but not less than $5), and may not base it on a percentage of the loan balance or other unrelated criteria; (2) the Secretary provides a written rehabilitation agreement within 15 business days, permits oral documentation initially with later confirmation, limits contact during rehabilitation to legally required collection activities or those supporting rehabilitation, and allows borrower objections with recalculation considering disposable income, family size, and reasonable expenses (e.g., food, housing, utilities, medical costs); and (3) failure to provide requested documentation voids the agreement.