Student loan allowance calculation for award year 2025–2026 and each succeeding award year

(a)

In general

Section 475(c) of the Higher Education Act of 1965 (20 U.S.C. 1087oo(c)), as amended by title VII of division FF of the FAFSA Simplification Act (Public Law 116–260), is further amended—(1)in paragraph (1)—(A)by striking and at the end of subparagraph (C);(B)by striking the period at the end of subparagraph (D) and inserting ; and; and(C)by adding at the end the following:

(E)beginning with award year 2025–2026, a student loan allowance, determined in accordance with paragraph (5).

; and

(2)by adding at the end the following:

(5)

Student loan allowance

(A)

In general

The student loan allowance is equal to the lesser of $4,000 or 15 percent of the single parent’s outstanding student loan debt or married parents’ combined outstanding student loan debt (as adjusted under section 478(i)).(B)

Exceptions

A single parent with an adjusted gross income of more than $200,000 (as adjusted under section 478(i)), or married parents with a combined adjusted gross income of more than $400,000 (as so adjusted), may not receive a student loan allowance under this paragraph.(C)

Definitions

In this paragraph:(i)

Federal student loan

The term Federal student loan means any loan made, insured, or guaranteed under this title. (ii)

Outstanding student loan debt

The term outstanding student loan debt, used with respect to a parent, means the total amount of principal, interest, and fees owed by such parent, as of the date of determination of the allowance under this paragraph, on Federal student loans.

(b)

Adjustment

Section 478 of the Higher Education Act of 1965 (20 U.S.C. 1087rr), as amended by title VII of division FF of the FAFSA Simplification Act (Public Law 116–260), is further amended by adding at the end the following:

(i)

Student loan expense allowance

For award year 2026–2027 and each succeeding award year, the Secretary shall publish in the Federal Register a revised table of student loan allowances for the purpose of section 475(c)(5). Such revised table shall be developed by increasing the dollar amounts specified in subparagraphs (A) and (B) of section 475(c)(5) by a percentage equal to the percentage increase in the Consumer Price Index, as defined in subsection (f), between April 2020 and the April in the year prior to the beginning of the award year and rounding the result to the nearest $10.

Report to Congress

(a)

In general

Not later than July 1, 2026, and on an annual basis thereafter, the Secretary of Education shall prepare and submit to Congress a report on the impacts of the amendments made by this Act, which shall include the following information with respect to the most recent award year for which information is available:(1)The number and percentage of dependent students whose student aid index computations under subsection (a) of section 475 of the Higher Education Act of 1965 (20 U.S.C. 1087oo) include the subtraction under subsection (c) of such section 475 of a student loan allowance determined under paragraph (5) of such subsection (c), as added by section 2, from the parents’ total income, disaggregated—(A)by students who are eligible for a Federal Pell Grant under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) for such award year; and(B)by students who are not eligible for such a Federal Pell Grant.(2)The average amount of the student loan allowance described in paragraph (1).