Amendments to the Higher Education Act - Made by P.L. 119-21, the FY2025 Budget Reconciliation Law - Updated January 8, 2026

Oct 15, 2026

Uploaded by Kyle

Title IV of the Higher Education Act authorizes federal student financial assistance, including Direct Loans and Pell Grants. P.L. 119-21, enacted July 4, 2025, amends HEA Title IV with estimated net mandatory savings of about $284 billion from FY2025 to FY2034. Key changes update Direct Loan availability by eliminating Direct PLUS for graduate/professional students and revising borrowing limits and lifetime maximums. It restricts repayment plans for new loans starting July 1, 2026, modifies deferments, rehabilitation timing, and need analysis, and introduces Workforce Pell Grants and a new statutory earnings test.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages35

Reading Time1 h 28 min

AccessFree to download

Introduction

Legislative History

Updates to the Direct Loan Program

Loan Types and Limits

Loan Repayment Plans

Implications

Deferment and Forbearance

Loan Rehabilitation

Amendments to the Higher Education Act Made by P.L. 119-21, the FY2025 Budget Reconciliation Law Updated January 8, 2026 Congressional Research Service [https://crsreports.congress.gov](https://crsreports.congress.gov)[ ](https://crsreports.congress.gov)R48727 Amendments to the Higher Education Act Made by P. L. 119-21, the FY2025 Budget Reconciliation Law Title IV of the Higher Education Act (HEA) authorizes the primary federal financial assistance programs to aid students and their families in gaining access to and financing a postsecondary education. These programs include the William D. Ford Federal Direct Loan (Direct Loan) program and the Pell Grant program. On July 4, 2025, P.L. 119-21, the FY2025 budget reconciliation law, was enacted. The law addresses a broad array of federal laws and programs, and Title VIII specifically amends several aspects of HEA Title IV. The Congressional Budget Office (CBO) estimates that P.L. 119-21’s amendments to the HEA will result in net mandatory savings of about $284 billion over the FY2025-FY2034 period. The majority of these savings are primarily derived from changes to the Direct Loan program, with amendments to the student loan repayment plans accounting for the bulk of the savings. P.L. 119-21 makes the following changes to the HEA Title IV programs: • It updates the mix and availability of Direct Loans by (1) eliminating Direct PLUS Loans to graduate and professional students, (2) amending borrowing limits for Direct Unsubsidized Loans to graduate and professional students and for Direct PLUS Loans to R48727 January 8, 2026 Alexandra Hegji, Coordinator Specialist in Social Policy Benjamin Collins Specialist in Labor Policy Cassandria Dortch Specialist in Education Policy Kyle D. Shohfi Analyst in Education Policy Rita R. Zota Analyst in Education Policy parents of dependent undergraduate students, and (3) instituting new lifetime maximum aggregate limits for all student loan borrowers and on the amount that may be borrowed on behalf of a dependent undergraduate student by their parents. In general, these changes are applicable to individuals who, as of June 30, 2026, are not enrolled in a program of study for which they received (or on whose behalf their parents borrowed) a Direct Loan. • For borrowers of new Direct Loans on or after July 1, 2026, it authorizes the availability of only two repayment plans: a new standard repayment plan with fixed monthly payments, and a new income-driven repayment (IDR) plan, known as the Repayment Assistance Plan (RAP). For qualifying borrowers with existing loans, all currently available repayment plants are to remain available through June 30, 2028. After that date, the only IDR plans available to such borrowers will be the two current income-based repayment plans and the RAP, with no changes to availability of fixed repayment plans or alternative repayment plans. • It amends other terms and conditions of Direct Loans, including eliminating economic hardship and unemployment deferments for loans made on or after July 1, 2027; permitting federal student loan borrowers to rehabilitate their defaulted loans twice, effective July 1, 2027; and delaying the effective date of regulations promulgated in 2022 relating to closed school discharge and borrower defense to repayment for all loans originated before July 1, 2035. • Effective July 1, 2026, it makes targeted changes to the need analysis system used to determine a student’s eligibility for need-based HEA Title IV programs, such as the Pell Grant. • It newly authorizes so-called Workforce Pell Grants for otherwise Pell-eligible students enrolled in shortterm undergraduate workforce programs (to be effective July 1, 2026) and provides additional funds in FY2026 for the Pell Grant program to help address an estimated funding shortfall. • It adds a statutory earnings test applicable to programs of study that participate in the Direct Loan progr

FAQs

What is the role of Title IV in the Higher Education Act?

Title IV authorizes primary federal financial assistance programs that help students and families access and finance postsecondary education, including the Direct Loan and Pell Grant programs.

What major changes does P.L. 119-21 make to Direct Loan availability and limits?

P.L. 119-21 eliminates Direct PLUS Loans to graduate and professional students, amends borrowing limits, and sets new lifetime maximum aggregate limits for student loan borrowers and for dependent undergraduate borrowing by parents.

How do repayment plan options change for new Direct Loans after July 1, 2026?

For new Direct Loans on or after July 1, 2026, only two repayment plans are authorized: a new standard fixed-payment plan and a new income-driven Repayment Assistance Plan (RAP). Existing loans retain current plans through June 30, 2028, after which only the two income-based plans and the RAP remain.

Oct 15, 2026

Uploaded by Kyle