Big Changes Ahead? Understanding the House-Passed Higher Education Act Amendments
In late May, the U.S. House of Representatives passed a sweeping set of proposed changes to the Higher Education Act of 1965. These provisions, while significant, are not yet law. The legislative process is far from over, and all eyes now turn to the Senate, which is expected to introduce its own version of the bill. Whether the Senate will adopt, modify, or reject the House's language remains to be seen.
The proposals, if enacted, would mark a fundamental shift in the administration and structure of federal student aid. Key provisions, ranging from the elimination of certain loan programs to changes in institutional eligibility, have the potential to drastically reshape how colleges and universities operate and how students fund their education.
The financial aid community is already voicing serious concerns. Not only are institutions facing the possibility of a rapidly changing regulatory landscape, but they may be doing so without adequate support from the Department of Education. Recent retirements and the March 2025 reduction in force have significantly thinned the ranks at Federal Student Aid (FSA), leaving questions about how these potential changes would be implemented or supported in practice.
In the sections that follow, we’ll break down the proposed changes and discuss what institutions should be considering now to prepare, despite the uncertainty ahead.
Subtitle B—Loan Limits, Section 30011 of the draft legislation:
1. Termination of Loan Types Starting July 1, 2026
A. Subsidized Loans for Undergraduates
Authority to issue Federal Direct Subsidized Loans to undergraduates is terminated.
Undergraduates may only receive Unsubsidized Stafford Loans, limited by new caps.
B. Federal Direct PLUS Loans for Graduate/Professional Students
Authority to issue PLUS Loans to graduate/professional students is eliminated.
C. Federal Direct PLUS Loans for Parents
Parents of dependent students may no longer receive PLUS Loans unless:
The student has borrowed the maximum allowable Unsubsidized Loan amount, and
That amount is still less than the student’s cost of attendance.
2. Interim Exception for Current Borrowers (Grandfathering Provision)
Students enrolled by June 30, 2026, who already borrowed loans under their current program, may continue under the existing rules.
This protection lasts for the expected time to credential, defined as:
Up to 3 years, or
The remaining time in the academic program, whichever is less.
3. New Unsubsidized Loan Limits (Effective July 1, 2026)
A. Undergraduate Students
Annual Loan Limit:
Capped at the difference between the median cost of the program and the student’s Pell Grant.
Aggregate Limit:
$50,000 total in Unsubsidized Stafford Loans for undergraduate programs.
B. Graduate/Professional Students
Annual Limit:
Equal to the median cost of the program.
Aggregate Limit:
Graduate-only students: $100,000 (plus the $50,000 undergrad limit = $150,000 total).
Professional students (e.g., law, medicine):
Up to $150,000, minus any amount borrowed as a graduate student.
Students who were both:
Total combined limit = $150,000.
4. Additional Notes
The legislation includes technical conforming amendments to integrate these changes into the structure of the Higher Education Act.
Borrowing caps are tied to median cost of attendance, not institution-specific amounts, shifting the framework toward standardized borrowing and potentially reducing loan debt burdens.
Summary of Subtitle C—Loan Repayment in the Higher Education Act Amendments
This subtitle amends the Higher Education Act of 1965 to overhaul student loan repayment, deferment, forbearance, rehabilitation, public service forgiveness, and servicing. It transitions borrowers to new income-based plans, phases out older options, and introduces measures to limit deferments and enhance accountability, effective primarily from July 1, 2025–26. The changes aim to streamline repayment structures while providing relief for certain borrowers.
SEC. 30021: Loan Repayment
This section facilitates a transition for borrowers currently in income-contingent repayment plans to a new income-based Repayment Assistance Plan under Section 493C, with a deadline of 9 months post-enactment. It limits the Secretary of Education's ability to create new regulations except for transitional rules. Key amendments to Section 455(d):
Phases out pre-July 1, 2026 repayment plans, restricting them to existing loans.
For loans on or after July 1, 2026, offers only a standard repayment plan (with terms based on loan principal, ranging from 10 to 25 years) or the Repayment Assistance Plan.
The Repayment Assistance Plan requires payments based on income (e.g., a percentage of adjusted gross income minus deductions), with forgiveness after 360 qualifying payments, interest subsidies for distressed borrowers, and a minimum payment of $10.
Repeals income-contingent repayment plans and updates related sections to eliminate references to them, applying these changes retroactively.
SEC. 30022: Deferment; Forbearance
Amends Section 455(f) to restrict deferments and forbearances for loans made on or after July 1, 2025:
Eliminates eligibility for unemployment and economic hardship deferments.
Limits general forbearance to 9 months within any 24-month period.
For medical or dental internships/residencies, allows forbearance with no interest accrual for the first four 12-month intervals, then standard accrual.
SEC. 30023: Loan Rehabilitation
Updates loan rehabilitation provisions:
Increases the number of rehabilitations allowed from once to twice for FFEL, Direct, and Perkins loans.
Sets a minimum monthly payment of $10 for Direct Loans made on or after July 1, 2025.
Applies immediately upon enactment.
SEC. 30024: Public Service Loan Forgiveness (PSLF) - Expands PSLF eligibility:
Counts on-time payments under the new Repayment Assistance Plan toward the 120 required payments.
Defines "public service job" but excludes certain medical or dental internships/residencies for borrowers who haven't borrowed specific loans by June 30, 2025.
SEC. 30025: Student Loan Servicing
Provides additional mandatory funding ($500 million per year for fiscal years 2025 and 2026) for administrative costs, including servicing Direct Loans and FFEL programs, to support implementation of these changes.
Overall, this subtitle simplifies and restricts repayment options to promote faster loan resolution, with most provisions taking effect on or after July 1, 2025–2026, and some (like rehabilitation) applying immediately. It emphasizes income-based assistance while curbing deferments to encourage timely repayment.
Subtitle D — Pell Grants Summary
Section 30031: Eligibility Changes
1. Inclusion of Foreign Income in Pell Grant Calculations
For Pell eligibility, foreign income will now be added to adjusted gross income (AGI) when calculating a student’s need:
For dependent students: the parents’ AGI + foreign income.
For independent students: the student's (and spouse’s, if applicable) AGI + foreign income.
2. Sunset Clause
An existing provision related to Pell Grant eligibility will only apply to academic years before July 1, 2025.
3. Adjustment to Professional Judgment Criteria
Removes one clause from the list of special circumstances considered under professional judgment (likely narrowing aid officer discretion).
4. New Definition of “Full-Time” for Pell
For Pell Grant purposes (starting July 1, 2025), “full-time” enrollment requires students to be on track to complete at least 30 semester hours or 45 quarter hours per academic year—this differs from traditional 12 credit hour definitions.
5. Pell Grant Ineligibility Due to High Student Aid Index (SAI)
Students with a SAI that equals or exceeds twice the maximum Pell award for the year will be ineligible for Pell Grants.
6. No Pell for Less-Than-Half-Time Students
Students first receiving a Pell Grant on or after July 1, 2025 must be enrolled at least half-time to remain eligible.
Section 30032: Workforce Pell Grants
1. Introduction of Workforce Pell Grants
Starting in the 2026–27 award year, eligible students can receive Workforce Pell Grants for enrollment in eligible short-term workforce programs.
2. Student Eligibility
Must meet regular Pell requirements, except:
Must be enrolled in a program that meets Workforce Pell criteria.
Cannot already hold or be seeking a graduate credential.
3. Program Eligibility
A program qualifies if it:
It is 150–600 clock hours over 8 to 15 weeks.
Is not a correspondence course.
Is approved by the state governor as:
Aligned with high-skill, high-wage, or in-demand occupations.
Meeting employer hiring requirements.
Leading to a recognized credential that is stackable and portable, or to a job that has only one required credential.
Articulates into a longer-term certificate or degree program with credit recognition.
4. Administration
Grants are awarded like regular Pell Grants, but are prorated for programs shorter than a full academic year.
5. No Double-Dipping
Students cannot receive both a regular Pell Grant and a Workforce Pell Grant for the same period.
6. Duration Counts Toward Pell Lifetime Limit
Time spent receiving a Workforce Pell Grant counts toward the overall Pell duration limit.
Effective Dates:
Most changes apply starting July 1, 2025, for award year 2025–26.
Workforce Pell Grants begin with award year 2026–27.
Summary of Subtitle E—Accountability in the Higher Education Act Amendments
This subtitle amends the Higher Education Act of 1965 to introduce accountability measures for institutions participating in federal student loan programs and establishes a new grant program to promote affordability and student success. It consists of two main sections: SEC. 30041 on institutional agreements and SEC. 30042 on campus-based aid programs.
SEC. 30041: Agreements with Institutions
This section modifies Section 454 to require institutions in the direct student loan program to make annual reimbursements to the Secretary of Education starting in the award year 2028–29. Reimbursements are calculated based on "student cohorts" (groups of students who completed or did not complete programs) and factors like non-repayment loan balances (e.g., unpaid amounts, forgiven interest, or discharged principal). The reimbursement percentage is determined by comparing median value-added earnings (post-graduation earnings adjusted for factors like poverty level) to the total price of education, with special rules for high-risk or low-risk cohorts. Penalties for late payments include interest charges, loan ineligibility, or program exclusion, with relief options if institutions voluntarily cease certain loans. Funds collected from reimbursements are reserved for PROMISE grants.
SEC. 30042: Campus-Based Aid Programs
This section adds a new subpart to Title IV, Part A, creating PROMISE grants (Promoting Real Opportunities to Maximize Investments and Savings in Education). Starting in the award year 2028–29, eligible institutions (excluding proprietary ones) that guarantee a maximum total price for program completion can apply for noncompetitive, six-year grants. Institutions must demonstrate affordability commitments, use funds for activities like improving access, reducing costs, and enhancing student outcomes, and evaluate their effectiveness. Grant amounts are formula-based, considering factors like Pell Grant awards, completion rates, and low-income student success, with a cap per student. If funds are insufficient, grants may be reduced proportionally. Definitions include "value-added earnings" (adjusted post-graduation earnings minus a baseline) and "program length" (time to complete a program).
Overall, this subtitle aims to hold institutions accountable for student loan outcomes by requiring financial contributions and redirects those funds to support grants that enhance college affordability and success, effective from 2027–28 onward.
Summary of Subtitle F — Regulatory Relief (Section 30051):
1. Elimination of the 90/10 Rule
Action: Removes the 90/10 rule from the Higher Education Act.
Details:
Strikes paragraph (24) from Section 487(a).
Deletes subsection (d) entirely.
Re-labels the remaining subsections accordingly.
Implication: For-profit institutions would no longer be required to derive at least 10% of their revenue from non-Title IV sources.
2. Removal of Gainful Employment Requirements
Action: Strikes all references to “gainful employment” in multiple sections:
Section 101(b)(1)
Section 102(b)(1)(A)(i) and 102(c)(1)(A)
Section 481(b)(1)(A)(i)
Implication: Removes the statutory requirement that certain educational programs prepare students for “gainful employment in a recognized occupation,” potentially limiting the Department’s authority to enforce related accountability metrics.
3. Repeal of Specific 2022 Regulations
Repealed Regulations:
Closed School Discharges — 34 CFR 674.33(g), 682.402(d), and 685.214 (2022 rules).
Borrower Defense to Repayment — Subpart D of Part 685 (2022 rules).
Effect: These rules are voided and no longer have legal effect.
4. Restoration of Pre-July 1, 2023 Rules
Action: Any regulation repealed under this section that was in effect on or before June 30, 2023, is automatically reinstated.
5. Restriction on Future Regulatory Actions
Prohibition: The Secretary of Education is barred from reinstating or issuing substantially similar regulations, policies, or executive actions unless explicitly authorized by Congress.
Overall Impact
This section rolls back significant accountability and consumer protection regulations for institutions participating in federal student aid. It also limits the Department of Education's authority to reinstate such measures without legislative backing.
Summary of Subtitle G — Limitation on Authority (Section 30061):
This section creates a new statutory provision—Section 492A of the Higher Education Act of 1965—that restricts the authority of the Secretary of Education to issue regulations or executive actions related to Title IV programs if they are determined to be economically significant and increase federal subsidy costs.
Key Provisions:
1. Limitations on Draft Regulations (Subsection a)
Any economically significant draft regulation under Title IV must be evaluated for its impact on federal subsidy costs.
If the regulation would increase subsidy costs, the Secretary may not proceed with the regulation.
2. Limitations on Proposed and Final Regulations or Executive Actions (Subsection b)
Applies the same restriction to proposed rules, final regulations, and executive actions.
If they are both:
Economically significant
Increase subsidy costs
Then the Secretary is prohibited from issuing them.
3. Additional Analytical Requirements (Subsection c)
These cost analyses are in addition to any already required under other authorities such as:
Executive Order 12866 (Regulatory Planning and Review)
Executive Order 13563 (Improving Regulation and Regulatory Review)
4. Definition of “Economically Significant” (Subsection d)
A regulation or action is considered economically significant if it:
Has an annual economic effect of $100 million or more, or
Materially harms the economy, sectors of the economy, jobs, productivity, environment, public health/safety, or governments/communities.
Overall Impact:
This provision would impose a major constraint on the Department of Education’s ability to enact financially impactful regulations under Title IV without congressional approval. It effectively blocks any economically significant regulatory changes that raise subsidy costs, such as expansions of loan forgiveness programs or borrower protections, unless explicitly authorized by law.
Ending Thoughts:
It’s important to remember that all of the provisions discussed are preliminary and subject to change. As the Senate drafts its own version of the bill, negotiations and revisions are inevitable. Many of the details passed by the House may be altered, removed, or replaced entirely before any final legislation is signed into law. Institutions should monitor developments closely, remain flexible, and begin scenario planning, understanding that this is the beginning of what will likely be a complex and evolving legislative process.
