Loan Caps Coming? On May 22, as part of federal budget reconciliation, the House of Representatives approved H.R. 1, the One Big Beautiful Bill Act, that, if enacted, would eliminate GradPLUS loans, a primary vehicle for those pursuing a law degree, and place new annual and lifetime limits on federal student loan and loan repayment programs. For example, under the legislation, law students would only be permitted to borrow from the federal government up to the national median cost of attendance for law school rather than the actual cost of attendance at their chosen school. They would further be limited to a lifetime federal student loan maximum for graduate studies of $150,000. Amounts over the caps would need to come from other sources and therefore be ineligible for federal income-driven repayment or Public Service Loan Forgiveness (PSLF). Also under the bill, a new income-driven repayment plan would replace existing ones but with a slightly less generous formula and a 30-year repayment window, instead of 20-25 years under existing plans. The Senate will now take up House-passed H.R. 1 with an eye on getting a final package to the President’s desk for signature by August.
Changes Coming to PSLF Eligibility? More reforms to the PSLF program may be on their way. On May 8, the ABA wrote to the Department of Education Secretary Linda McMahon to voice concerns and opposition to a planned rulemaking by the Department to potentially change the program’s definition of “qualifying employer” in furtherance of Executive Order 14235 (EO). The EO aims to exclude employees of organizations that support a partial list of activities the Administration considers illegal. The ABA argued that 1) the Department lacks the statutory authority to make such changes; 2) the Department, alone, lacks the legal authorization and capacity to implement such changes; and 3) attempting such changes will undermine public confidence in the program and therefore hurt communities’ ability to recruit and retain the help they need. We expect the publication of official rulemaking sometime soon.
Looming Wave of Default. Both of these updates come at an already turbulent time for many borrowers. With the resumption of student loan payments after a COVID-19 era pause (and a year-long window of lesser penalties for late/missing payments), upwards of nine million borrowers have fallen behind in their payments and could default on their loans by the fall. It remains to be seen whether Congress or the Administration will take steps to address such a large number of cases in a single year.
For more than 20 years, access to student loans and fair repayment terms have been a priority for the ABA, taking center stage in the 2025 ABA Day digital program, previous ABA Days, and a Student Debt Week of Action.
For more information on student debt relief, please email Kenneth Goldsmith, Senior Legislative Counsel and Director for State Legislation at the ABA’s Governmental Affairs Office.
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