The "Lowering Obstacles to Achievement Now Act" (LOAN Act) proposes comprehensive reforms to the Higher Education Act of 1965, aiming to make college more affordable and student loan repayment more manageable. A central provision involves doubling the maximum Federal Pell Grant award incrementally to $14,000 by 2030-2031, with future increases tied to inflation, and mandating its funding. The bill also expands Pell Grant eligibility to include graduate students and certain "Dreamer students," while restoring the total semesters of eligibility from 12 to 18. To support students facing academic challenges, the bill revises satisfactory academic progress (SAP) rules, introducing financial aid warnings and probation periods. It also allows for a "reset" of eligibility for students who re-enroll after a two-year break, aiming to reduce financial aid penalties. Furthermore, the legislation provides increased Pell Grant amounts for recipients of means-tested benefits by assigning them a negative Student Aid Index (SAI) of -$1,500. Significant changes are introduced for federal student loans, effective July 1, 2026. The bill eliminates loan origination fees and allows for subsidized loans for graduate and professional students. It also establishes new rules for prepayment amounts, ensuring excess payments are applied strategically to reduce principal and interest. The legislation streamlines repayment options by offering two plans for new loans: a fixed repayment plan and a simplified Income-Driven Repayment (IDR) plan . The new IDR plan bases payments on income, with 0% of discretionary income below 225% of the poverty line, 5% for undergraduate loans, and 10% for graduate loans. Crucially, under this IDR plan, unpaid interest will not be charged or capitalized , and remaining balances will be forgiven after 10, 20, or 25 years depending on the original loan amount and type of study. To prevent defaults, the bill mandates automatic enrollment in the IDR plan for borrowers who are delinquent on their loans or rehabilitating defaulted loans, utilizing IRS data for income verification with an opt-out option. It also improves the Public Service Loan Forgiveness (PSLF) program by reducing the required qualifying payments to 96 (8 years) and removing the requirement for employment at the time of cancellation. The bill expands what counts as a qualifying payment, introduces a "buyback" process for past non-qualifying months, and establishes an online portal and database for public service jobs. The bill also addresses loan defaults by ensuring the removal of default records from credit histories upon full repayment or consolidation. It creates a new default reduction program allowing rehabilitation after 9 affordable monthly payments. A key reform is the elimination of interest capitalization across various federal loan types and during forbearance periods, which will prevent loan balances from growing due to unpaid interest. Finally, the LOAN Act sets new, lower interest rates for federal student loans disbursed on or after July 1, 2026, capping them at the lesser of the 10-year Treasury note yield or 5.0%. It also creates programs allowing borrowers to refinance existing federal student loans and, for the first time, eligible private student loans into new federal direct loans at these lower, fixed rates, aiming to provide significant financial relief to a broad range of borrowers.