S. 801 — Higher Education Reform and Opportunity Act

This section terminates authority to make or fund new Federal Direct Stafford Loans (i.e., subsidized and unsubsidized loans under part D of title IV of the Higher Education Act of 1965) after specified dates, with phase-out for existing borrowers. Specifically, (1) no new loans may be made to new borrowers for first disbursements after June 30, 2025; (2) borrowers with outstanding balances as of July 1, 2025, may continue borrowing non-simplification loans through September 30, 2028, for the same education level as their prior loans (undergraduate, graduate/professional, or dependent undergraduate), but lose that eligibility if they borrow a simplification loan before that date; and (3) no new non-simplification loans may be made or funded after September 30, 2028. This section establishes Federal Direct simplification loans under new section 460A, available beginning July 1, 2025 (except as provided in section 451(e)). These loans (1) have interest rates equal to the lesser of the 10-year Treasury note high yield plus 2.05% (capped at 8.25%) for undergraduates or plus 3.6% (capped at 9.5%) for graduates/professionals, with interest accruing from disbursement; (2) have annual/aggregate limits of $7,500/$30,000 for dependent undergraduates, $15,000/$60,000 for independent undergraduates, and $18,500/$74,000 for graduates/professionals; and (3) require repayment over 15 years (undergraduates) or 25 years (graduates/professionals), beginning after 125% of the program's normal time or upon withdrawal.

This section excludes Federal Direct simplification loans from income-based repayment under section 455(d) of the Higher Education Act (HEA), income-contingent repayment under section 455(e), and public service loan forgiveness (PSLF) under section 455(m)—which forgives the remaining balance on a borrower's Direct Loans after 120 qualifying monthly payments under an income-driven repayment plan while employed full-time by an eligible public service employer. It further eliminates PSLF and teacher loan forgiveness—which provides up to $17,500 in forgiveness for teachers with five consecutive years of service in low-income schools—for loans made on or after July 1, 2025, subject to an exception allowing the Secretary to forgive balances on subsequent loans for the same program of study for borrowers whose first loan for that program was made before July 1, 2025, if those loans are made before program completion or July 1, 2028 (whichever is earlier). (Thus, forgiveness phases out over approximately three years for students enrolled before July 1, 2025.)

This section revises the definition of "institution of higher education" for title IV student assistance programs to include, as a new subparagraph (B), (i) institutions providing postsecondary education, (ii) postsecondary apprenticeship programs, or (iii) postsecondary education courses or programs provided by institutions of postsecondary education, nonprofit organizations, or for-profit organizations or businesses—if accredited by an authorized authority in a state with an alternative accreditation agreement with the Secretary (newly established in section 498C). (As background, title IV programs provide federal grants and loans to students attending eligible institutions of higher education, which generally require accreditation by agencies recognized by the Secretary of Education.) This section further establishes a state alternative accreditation system in new section 498C, authorizing states to submit plans to the Secretary to accredit such entities for title IV eligibility; requires the Secretary to review and approve qualifying plans within 30 days and notify Congress; and specifies required plan elements, including (1) designation and selection of state authorized accreditors, (2) initial and ongoing accreditation standards, (3) appeals processes, (4) public disclosure policies (e.g., job placement rates), (5) assurances limiting accreditation to providers of postsecondary certifications, credentials, or degrees (or credits toward them), (6) state definitions of such credentials, and (7)-(9) agreements supplanting certain federal requirements on learning/labor outcomes, instructional time, and credit/clock hours.

This section requires institutions of higher education participating in Title IV programs (i.e., federal student aid programs under the Higher Education Act of 1965) to annually publish on their websites and in an alternative format specified student aid receipt percentages and numbers (e.g., Federal Pell Grants, Federal Direct Loans, state and institutional grants), enrollment status categories (e.g., first-time full-time), program completion and transfer rates, average time to completion, postsecondary continuation rates, post-graduation employment rates at 2, 4, and 6 years, median earnings at 5, 10, and 15 years post-enrollment (disaggregated by program of study and for degree/credential earners versus all aid recipients), average Federal student loan debt at graduation or departure, and Federal loan default and non-repayment rates (disaggregated by enrollment status and completion/transfer/non-completion status)—all for the institution as a whole and each program of study, using available data and in compliance with the Family Educational Rights and Privacy Act (FERPA, 20 U.S.C. 1232g). It prohibits sharing personally identifiable information or using published data against individuals, with penalties including monetary fines and up to 5 years imprisonment, and clarifies that it does not authorize the Secretary of Education to control institutional curriculum or practices. This section further directs the Government Accountability Office (GAO) to compile the published data and submit a report to congressional committees by October 1 of the fourth fiscal year after enactment.

This section requires each institution participating in federal student aid programs to pay an annual default rate fine equal to the applicable percentage—15% minus the average U.S. unemployment rate (as determined by the Secretary of Labor)—of outstanding loans (i.e., loans issued for attendance at the institution not in regular on-time payments, defined as at least the fixed monthly amount to repay within the borrower's repayment plan term). (Thus, institutions receive a $400 credit per fiscal year for each graduate who received a Federal Pell Grant while enrolled that year; the Secretary must also grant flexibility to counsel students on aid, including awarding less than the maximum eligible amount if institutional tuition, room, and board costs are lower.) This section further authorizes institutions to require Direct Loan borrowers to receive financial counseling—including financial literacy counseling—at or prior to loan disbursement.