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Proposed Rule2026-01912

Reimagining and Improving Student Education

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Published

January 30, 2026

Issuing agencies

Education Department

Abstract

The Secretary proposes to amend the regulations for the Federal student loan programs authorized under title IV of the Higher Education Act (HEA) of 1965, as amended (the title IV, HEA programs) to implement the statutory changes to the title IV, HEA programs included in the One Big Beautiful Bill Act (OBBB) signed into law by President Trump on July 4, 2025. These changes include establishing new loan limits for graduate students, professional students, and parents, and phasing out the Graduate PLUS Program. The Department notes that the term "professional student" as used in this Notice of Proposed Rulemaking (NPRM) is intended solely to distinguish those programs that we propose would be eligible for higher loan limits, as required by the OBBB. The designation, or lack thereof, of a program as "professional" does not reflect a value judgment by the Department regarding whether a borrower graduating from the program is considered a "professional." This NPRM only interprets the phrase "professional student" as used in the context of the loan limits established by the OBBB. The OBBB also simplifies the current broken and confusing myriad of Federal student loan repayment plans by phasing out the existing Income-Contingent Repayment (ICR) plans, creating a new tiered standard repayment plan option, and implementing a new income-driven repayment plan known as the Repayment Assistant Plan. The OBBB also enables borrowers in default who have previously rehabilitated a defaulted loan a second chance to rehabilitate their loan(s) and resume repayment.

Full Text

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<title>Federal Register, Volume 91 Issue 20 (Friday, January 30, 2026)</title>
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[Federal Register Volume 91, Number 20 (Friday, January 30, 2026)]
[Proposed Rules]
[Pages 4254-4346]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-01912]

[[Page 4253]]

Vol. 91

Friday,

No. 20

January 30, 2026

Part III

Department of Education

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34 CFR Parts 674, 682, and 685

Reimagining and Improving Student Education; Proposed Rule

Federal Register / Vol. 91, No. 20 / Friday, January 30, 2026 /
Proposed Rules

[[Page 4254]]

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DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682, and 685

[Docket ID ED-2025-OPE-0944]
RIN 1840-AD98

Reimagining and Improving Student Education

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the regulations for the
Federal student loan programs authorized under title IV of the Higher
Education Act (HEA) of 1965, as amended (the title IV, HEA programs) to
implement the statutory changes to the title IV, HEA programs included
in the One Big Beautiful Bill Act (OBBB) signed into law by President
Trump on July 4, 2025. These changes include establishing new loan
limits for graduate students, professional students, and parents, and
phasing out the Graduate PLUS Program. The Department notes that the
term ``professional student'' as used in this Notice of Proposed
Rulemaking (NPRM) is intended solely to distinguish those programs that
we propose would be eligible for higher loan limits, as required by the
OBBB. The designation, or lack thereof, of a program as
``professional'' does not reflect a value judgment by the Department
regarding whether a borrower graduating from the program is considered
a ``professional.'' This NPRM only interprets the phrase ``professional
student'' as used in the context of the loan limits established by the
OBBB. The OBBB also simplifies the current broken and confusing myriad
of Federal student loan repayment plans by phasing out the existing
Income-Contingent Repayment (ICR) plans, creating a new tiered standard
repayment plan option, and implementing a new income-driven repayment
plan known as the Repayment Assistant Plan. The OBBB also enables
borrowers in default who have previously rehabilitated a defaulted loan
a second chance to rehabilitate their loan(s) and resume repayment.

DATES: We must receive your comments on or before March 2, 2026.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal
at <a href="http://www.regulations.gov">www.regulations.gov</a>. The Department of Education (Department) will
not accept comments submitted by fax or by email or comments submitted
after the comment period closes. To make sure that the Department does
not receive duplicate copies, please submit your comment only once.
Additionally, please include the Docket ID at the top of your comments.
Information on using <a href="http://Regulations.gov">Regulations.gov</a>, including instructions for
submitting comments, is available on the site under ``FAQ.'' If you
require an accommodation or cannot otherwise submit your comments via
<a href="http://Regulations.gov">Regulations.gov</a>, please contact <a href="/cdn-cgi/l/email-protection#2d5f484a58414c594442435e4548415d49485e466d4a5e4c034a425b">[email&#160;protected]</a> or by phone
at 1-866-498-2945. If you are deaf, hard of hearing, or have a speech
disability and wish to access telecommunications relay services, please
dial 7-1-1.
Privacy Note: The Department's policy is to make all comments
received from members of the public available for public viewing in
their entirety on the Federal eRulemaking at <a href="http://www.regulations.gov">www.regulations.gov</a>.
Therefore, commenters should include in their comments only information
that they wish to make publicly available. Additionally, commenters
should not include in their comments any personally identifiable
information (PII) in comments about other individuals. For example, if
your comment describes an experience of someone other than yourself,
please do not identify that individual or include any personal
information that identifies that individual. The Department reserves
the right to redact a portion of a comment or the entire comment at any
time if any PII about other individuals is included.

FOR FURTHER INFORMATION CONTACT: Tamy Abernathy, Office of
Postsecondary Education, 400 Maryland Ave. SW, 5th Floor, Washington,
DC 20202. Telephone: (202) 245-4595. Email: <a href="/cdn-cgi/l/email-protection#440a21231621230a1416090c2128340421206a232b32">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

The Secretary proposes to implement the amendments made to the HEA
relating to the Federal student loan programs made by the OBBB through
these regulations.
These proposed regulations would revise the Direct Loan Program
under 34 CFR part 685 by amending annual and aggregate loan limits for
graduate, professional, and parent loan borrowers. The proposed
regulations would also implement two new streamlined student loan
repayment plans for new borrowers, the ``Repayment Assistance Plan''
and the ``Tiered Standard'' repayment plan. The proposed regulations
also make conforming amendments to current regulations on
consolidation, deferment, forbearance, and Public Service Loan
Forgiveness (PSLF). The proposed regulations also provide borrowers in
default a second opportunity to rehabilitate their loans and resume
repayment, even if they previously rehabilitated a defaulted loan.
A brief summary of these proposed regulations is available at
<a href="https://www.regulations.gov/document/ED-2025-OPE-0944">https://www.regulations.gov/document/ED-2025-OPE-0944</a>.

II. Summary of the Major Provisions of This Regulatory Action

These proposed regulations would:
<bullet> Amend Sec. Sec. 674.39, 682.215, and 682.405 to allow
loan rehabilitation twice per each loan borrowed under the Federal
Perkins Program, Federal Family Education Loan Program, and the Direct
Loan Program.
<bullet> Amend Sec. 685.102 to include new definitions for the
following terms: expected time to credential, graduate student,
professional student, and program length.
<bullet> Amend Sec. 685.200 to include Direct PLUS Loan
eligibility for graduate and professional students.
<bullet> Amend Sec. 685.201 to establish the limited Direct PLUS
Loan eligibility for a graduate or professional student.
<bullet> Amend Sec. 685.203 to include new Direct Loan annual and
aggregate limits, create a new lifetime maximum aggregate limit,
establish less than full-time reduction of annual loan limits, and
permit institutions to limit borrowing for specific programs.
<bullet> Amend Sec. 685.204 to clarify conditions and borrower
eligibility for the unemployment deferment and the economic hardship
deferment.
<bullet> Amend Sec. 685.205 to establish the modified eligibility
criteria for borrowers to receive a forbearance.
<bullet> Amend Sec. 685.208 to establish the terms for the Tiered
Standard repayment plan, set the minimum payment for the Tiered
Standard repayment plan, and restructure each Fixed repayment plan's
terms under their respective plan.
<bullet> Amend Sec. 685.209 to establish terms for the Repayment
Assistance Plan and sunset ICR plans and conditions.
<bullet> Amend Sec. 685.210 to provide information to borrowers
about choosing a repayment plan.
<bullet> Amend Sec. 685.211 to establish miscellaneous repayment
provisions including the minimum payment increase for the Income-Based
Repayment (IBR) plan.
<bullet> Amend Sec. 685.219 to clarify that repaying under the
Repayment Assistance Plan will qualify for PSLF if all other
eligibility criteria are met.
<bullet> Amend Sec. 685.220 to provide terms and repayment plan
eligibility for consolidation loans.

[[Page 4255]]

<bullet> Amend Sec. 685.221 to clarify when a borrower may be
eligible for an alternative repayment plan.
<bullet> Amend Sec. 685.303 to waive the substantially equal
disbursement requirement for an institution when a borrower has less
than full-time enrollment for the academic year and is subject to the
schedule of reductions.
While the Department is proposing the regulations in a consolidated
NPRM, it considers each to be a discrete change independent of other
proposed changes. Consistent with 34 CFR 685.109, ``[i]f any provision
of this subpart or its application to any person, act, or practice is
held invalid, the remainder of the subpart or the application of its
provisions to any person, act, or practice will not be affected
thereby.''
Cost and Benefits:
As further detailed in the Regulatory Impact Analysis (RIA), the
proposed regulations would have significant impacts on students,
borrowers, educational institutions, and taxpayers.
Under the proposed revisions, borrowers would benefit from new loan
repayment terms, such as monthly interest cancellation and principal
payment subsidies under the Repayment Assistance Plan. New caps on
Federal loans for graduate and professional education, as well as caps
on Parent PLUS Loans, will rein in increases in graduate student and
parent borrowing and put downward pressure on tuition prices at
institutions. These new loan limits will encourage institutions to
evaluate the true cost of their programs and create efficiencies where
necessary to allow students to enroll and fund their education within
the boundaries of the new, responsible, loan limits determined by
Congress and/or the institution. Changes to student loans enacted in
the OBBB will result in significant savings to the taxpayer by reducing
the excessive subsidy costs of loan forgiveness and other high-cost
terms and conditions. Specifically, the new annual and lifetime caps on
borrowing will reduce taxpayer exposure for loans that could
potentially be forgiven under the Department's Public Service Loan
Forgiveness Program, Closed School Loan Discharges, Borrower Defense to
Repayment discharges, death of the borrower discharges, total and
permanent disability discharges, time-based forgiveness discharges
under income-based repayment, and discharges that may occur in
bankruptcy. The Department estimates that from 2021 to 2025, it forgave
$199 billion in student debt as a result of these provisions.
These proposed regulations would reduce outlays received from
Direct Loans for institutions of higher education and certain groups of
students. There are four main cost areas. First, the OBBB requires
institutions to reduce annual loan limits in direct proportion to the
percentage of full-time status that the student is enrolled. Prior to
the OBBB, part-time students who were enrolled at least half-time could
receive the same annual loan amount as students attending full-time.
That provision will save taxpayers money by reducing the amounts
borrowed by part-time students. Students will also receive less funds
as credit balances as a result of the reduced borrowing. Institutions
will, as a result, receive less revenue from loans made by the
Department on behalf of students. Second, the OBBB limits excessive
borrowing by graduate and professional students due to the elimination
of unlimited borrowing under the Graduate PLUS Program, maintaining
current borrowing limits of $20,500 for graduate students (but limiting
borrowing to $100,000 in aggregate), and targeting higher loan limits
of $50,000 annually ($200,000 in aggregate) to students enrolled in
professional degree programs. Third, the OBBB streamlines the existing
myriad of forbearance and deferment options while also limiting the
time that borrowers can spend in certain forbearances. These changes
should result in more time in active repayment by borrowers, as well as
streamlining deferment and forbearance options to the benefit of
borrowers, Federal student loan servicers, and taxpayers. Fourth,
parents of undergraduate students will also no longer have unlimited
borrowing under the Parent PLUS Loan program, which will now be capped
at $20,000 per student each year ($65,000 aggregate limit per student).
Now parent borrowers, in addition to student borrowers, will have
common sense limits on the amount they can borrow to finance their
children's postsecondary education.

III. Invitation to Comment

We invite you to submit comments regarding these proposed
regulations. Please clearly identify the specific section or sections
of the proposed regulations that each of your comments address and
arrange your comments in the same order as the proposed regulations.
The Department will not accept comments submitted after the comment
period closes.
The following tips are meant to help you prepare your comments:
<bullet> Please be concise but include objective sources of support
for your claims.
<bullet> Explain your views as clearly as possible and refrain from
using any profanity.
<bullet> Refer to specific sections and subsections of the proposed
regulations throughout your comments, particularly in any headings that
are used to organize your submission.
<bullet> Explain why you agree or disagree with the proposed
regulatory text and support these reasons with data-driven evidence,
including the depth and breadth of your personal or professional
experiences. We encourage commenters to include supporting facts,
research, and evidence in their comments. When doing so, commenters are
encouraged to provide citations to the published materials referenced,
including active hyperlinks. Likewise, commenters who reference
materials which have not been published are encouraged to upload
relevant data collection instruments, data sets, and detailed findings
as a part of their comment. Providing such citations and documentation
will assist us in analyzing the comments.
<bullet> Where you disagree with the proposed regulatory text,
suggest alternatives, including regulatory language, and your rationale
for the alternative suggestion.
<bullet> Do not include PII such as Social Security numbers or loan
account numbers for yourself or for others in your submission.
Mass Writing Campaigns: In instances where individual submissions
appear to be duplicates or near duplicates of comments prepared as part
of a writing campaign, the Department will post one representative
sample comment along with the total comment count for that campaign to
<a href="http://Regulations.gov">Regulations.gov</a>. The Department will consider these comments along with
all other comments received.
In instances where individual submissions are bundled together
(submitted as a single document or packaged together), the Department
will post all the substantive comments included in the submissions
along with the total comment count for that document or package to
<a href="http://Regulations.gov">Regulations.gov</a>. A well-supported comment is often more informative to
the agency than multiple form letters.
Public Comments: The Department invites you to submit comments on
all aspects of the proposed regulatory language specified in this
Notice of Proposed Rulemaking (NPRM), and in the Regulatory Impact
Analysis and Paperwork Reduction Act sections.

[[Page 4256]]

The Department may, at its discretion, decide not to post or to
withdraw certain comments and other materials that contain promotion of
commercial services or products, or are spam.
We may not address comments outside of the scope of these proposed
regulations in the final regulations. Comments that are outside of the
scope of these proposed regulations are comments that do not discuss
the content or impact of the proposed regulations or the Department's
evidence or reasons for the proposed regulations.
Comments that are submitted after the comment period closes will
not be posted to <a href="http://Regulations.gov">Regulations.gov</a> or addressed in the final regulations.
We invite you to assist us in complying with the requirements of
(E.O.)s 12866 and 13563 and their overall requirement of reducing
regulatory burden that might result from these proposed regulations.
Please let us know of ways we could reduce potential costs or increase
potential benefits while preserving the effective and efficient
administration of the Department's programs and activities.
During and after the comment period, you may inspect public
comments about these proposed regulations by accessing <a href="http://Regulations.gov">Regulations.gov</a>.
Assistance to Individuals with Disabilities in Reviewing the
Rulemaking Record: On request, we will provide an appropriate
accommodation or auxiliary aid to an individual with a disability who
needs assistance to review the comments or other documents in the
public rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of accommodation or auxiliary
aid, please contact the Information Technology Accessibility Program
Help Desk at <a href="/cdn-cgi/l/email-protection#fbb2afbaaba88e8b8b94898fbb9e9fd59c948d">[email&#160;protected]</a> to help facilitate.

Clarity of the Regulations

Executive Order (E.O.) 12866 and the Presidential memorandum
``Plain Language in Government Writing'' require each agency to write
regulations that are easy to understand. The Secretary invites comments
on how to make the regulation easier to understand, including answers
to questions such as the following:
<bullet> Are the requirements in the proposed regulations clearly
stated?
<bullet> Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
<bullet> Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphs) aid or reduce its
clarity?
<bullet> Would the proposed regulations be easier to understand if
we divided them into additional (but shorter) sections? (A ``section''
is preceded by the symbol ``Sec. '' and a numbered heading; for
example, Sec. 668.2 General definitions.)
<bullet> Could the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in
making the proposed regulations easier to understand? If so, how?
<bullet> What else could we do to make the proposed regulations
easier to understand?
<bullet> To send any comments that concern how the Department could
make these proposed regulations easier to understand, see the
instructions in the ADDRESSES section.

IV. Background

The OBBB, which President Trump signed into law on July 4, 2025,
makes extensive statutory changes to fix broken and unnecessarily
complex aspects of the Federal student loan programs in the areas of
loan limits, repayment plans, and related provisions in title IV. Among
other changes, the OBBB sets a new lifetime borrowing cap
(approximately $257,500 for most borrowers), eliminates new Graduate
PLUS Loans, eliminates unlimited borrowing under the PLUS program for
parents, maintains current annual limits under the Direct Loan Program
for undergraduate and graduate students, increases annual loan limits
for professional degree students, establishes aggregate limits for
graduate students, professional degree students, and parents of
undergraduates, and reduces annual loan amounts for students enrolled
less than full-time. For repayment, the OBBB simplifies and streamlines
the current confusing patchwork of repayment plan options for future
borrowers to two flexible options: a new Tiered Standard plan for fixed
monthly payments over a 10 to 25-year term, and a new income-driven
plan called the Repayment Assistance Plan that does not put borrowers
deeper in debt by preventing negative amortization over the life of the
loan. Confusing, outdated (and in some cases unlawful) repayment plans
are phased out, including several existing income-contingent plans,
ICR, PAYE, and SAVE (which has been held unlawful in federal court. See
Missouri v. Biden, 112 F.4th 531, 538 (8th Cir. 2024)).
This notice of proposed rulemaking complies with Section 492 of the
HEA, which requires the Secretary to obtain public input and conduct
negotiated rulemaking before issuing proposed regulations for the title
IV, HEA programs. To meet those requirements and implement the new
statutory directives provided for in the OBBB, the Department convened
the Reimagining and Improving Student Education (RISE) negotiated
rulemaking Committee. The Committee was composed of representatives of
institutions, students and borrowers, State officials, financial aid
administrators, loan servicers, and consumer and civil rights
organizations. The Committee met over multiple sessions in the fall of
2025 and reached consensus on the entirety of the regulatory text
described in this NPRM. In accordance with the protocols established by
the Committee, the Department has incorporated the regulatory
amendatory text that was mutually agreed upon into this NPRM. Building
on the statutory and regulatory history, and the RISE Committee's
consensus language, this NPRM conforms Direct Loan rules to the changes
enacted in the OBBB by revising loan limit provisions, restructuring
repayment options (including IBR and adding the new Repayment
Assistance Plan), updating PSLF eligibility and qualifying payment
rules, and aligning consolidation, deferment, forbearance, and borrower
relief provisions with the new framework.

V. Authority for This Regulatory Action

When Congress passes legislation amending statutory provisions
regarding programs administered by an agency, that agency is tasked
with implementing those changes in its regulations. The OBBB amended
portions of the HEA related to the Federal student loan programs
administered by the Department. The Secretary has been granted the
broad authority by Congress to implement federal student aid programs
under title IV of the HEA, including amendments made by the OBBB. See
20 U.S.C. 1221e-3, see also 20 U.S.C. 1082, 3441, 3474, 3471. In order
to carry out functions otherwise vested in the Secretary by law or by
delegation of authority pursuant to law, and subject to limitations as
may be otherwise imposed by law, the Secretary is authorized to make,
promulgate, issue, rescind, and amend rules and regulations governing
the manner of operations of, and governing the applicable programs
administered by, the Department. See 20 U.S.C. 1221e-3. These programs
include the Federal student loan programs authorized by the HEA.

[[Page 4257]]

Waiver of HEA Master Calendar Requirements

Congress may waive, modify, or rescind requirements in the HEA that
require the Department to follow certain processes and procedures when
engaging in informal notice-and-comment rulemaking. Specifically, when
Congress imposes a statutory deadline that is irreconcilable with other
procedural requirements, like in the APA or HEA, then those other
procedures have been implicitly waived by Congress. See, e.g., Asiana
Airlines v. F.A.A., 134 F.3d 393, 398 (D.C. Cir. 1998); Methodist
Hospital of Sacramento v. Shalala, 38 F.3d 1225, 1237 (D.C. Cir. 1998)
(finding that certain parts of the APA procedural framework had been
waived when Congress gave an agency direction that conflicts with and
is irreconcilable with the APA). Indeed, the Harmonious-Reading Canon
provides that statutes should be interpretated in a way that renders
them compatible, not contradictory. See Scalia & Garner, Reading Law,
180 (2012). As such, the Department does not read statutes to create
instructions that directly conflict. Where Congress has given an agency
specific direction in a statute that could not be followed if the
agency also followed another part of the APA (or HEA, as is relevant
here), then the provision is waived.
Here, the OBBB was enacted on July 4, 2025. The OBBB directs the
Department to implement roughly a dozen provisions by July 1, 2026.
Many of these provisions are not self-executing and could not be
implemented absent the Department promulgating regulations to provide
details for institutions on how to comply with the OBBB. Congress gave
the Secretary discretion within the OBBB to implement the provisions
impacting the Federal student loan programs and knew that its commands
were not self-executing when directing the Secretary to take action.
Congress expected the Secretary to act via rulemaking before July 1,
2026, to enable these provisions to actually go into effect.
The master calendar in the HEA provides that regulatory changes
initiated by the Secretary affecting the programs under title IV of the
HEA must be published in final form by November 1st in order for them
to go into effect by July 1st of the following year. 20 U.S.C.
1089(c)(1). Section 492 of the HEA requires the Department to undertake
negotiated rulemaking as part of any regulation under title IV of the
HEA. In order to conduct negotiated rulemaking, the Department must
have a public hearing (providing notice to the public), solicit
nominations from the public to serve on a negotiated rulemaking
Committee, select non-Federal negotiators, hold negotiations, develop
an NPRM and submit it for review by the Office of Information and
Regulatory Affairs (OIRA), publish an NPRM (with at least a 30 day
comment period), and then publish a final rule that responds to any
substantive comments received. As detailed below, the fastest possible
timeframe in which the negotiated rulemaking process for the RISE
rulemaking packages could have occurred is 149 days, which is
irreconcilable with the timeline allowed by the enactment of the OBBB,
due to the fact that there were 120 days between July 4, 2025, (the day
the OBBB was enacted), and November 1, 2025, (the publication date of
the final rule required by the master calendar).
It would not have been possible for the Department to undertake
every step of the negotiated rulemaking process by November 1, 2025, in
order to implement the provisions that become effective in the OBBB by
July 1, 2026, which is the statutory effective date. Congress was aware
of this temporal impossibility when they passed the OBBB, yet Congress
decided that these provisions would still go into effect on July 1,
2026. Because these provisions are not self-implementing and cannot go
into effect unless the Department promulgates a final rule, the OBBB
implicitly waives the master calendar.
For example, Congress directed the Department to publish a schedule
of reductions for part-time students to reduce their annual loan
eligibility. (Sec. 81001 of the OBBB, P.L. 119-21). The Department
announced in DCL: GEN-25-04, published on July 18, 2025, that the
schedule of reductions will be issued by the Secretary and used to
determine the reduction in the annual loan limits for students who are
enrolled less than full-time for subsequent academic years (2026-2027
and beyond). The Department will publish the schedule of reductions in
the final rule. This provision was effective upon enactment; however,
the 2025-2026 award year had already begun prior to President Trump
signing the bill and Federal student loans for that year had already
been calculated and initially disbursed. In addition, Congress left
open to regulation important details in the Repayment Assistance
Program relating to how the Department should treat married borrowers'
income, and whether the Department should essentially double count
their income when calculating repayment rates. Moreover, in codifying a
regulatory definition for professional student that is open-ended,
Congress did not fully address what types of programs should be
considered professional programs or graduate programs. Indeed, the
statute's operative definition of professional degree broadly describes
what a professional student is and includes an illustrative list of
degrees that meet that operative definition. 34 CFR 668.2 (Noting that
the professional degrees ``include but are not limited to'' the degrees
listed). The definition of graduate degree is interrelated to the
definition of professional degree, in that a degree is a graduate
degree if it awards a graduate credential but is not a professional
degree.
With these important details unanswered by the plain text of the
OBBB, it is clear that the policy scheme set forth in the HEA made by
the OBBB cannot be implemented absent regulatory action by the
Department.
At the same time, even though the requirements of negotiated
rulemaking are onerous, it is possible to undergo negotiated rulemaking
and publish a final rule at least 30 days prior to the effective date
of these OBBB provisions on July 1, 2026. Therefore, the OBBB does not
waive negotiated rulemaking nor any provision in the APA. For
provisions in the OBBB that become effective July 1, 2027, and beyond,
Congress did not implicitly repeal the master calendar because it is
possible for the Department to publish a final rule that complies with
the master calendar to implement those provisions. Nonetheless, the
Department is conducting rulemaking relating to those provisions that
go into effect in 2027 and beyond due to the interconnected nature of
these provisions as they relate to Federal student aid programs.

VI. Public Participation

Section 492 of the HEA, 20 U.S.C. 1098a, requires the Secretary to
obtain public involvement in the development of proposed regulations
affecting the title IV, HEA programs. Prior to developing this NPRM,
the Department obtained advice and recommendations from individuals and
representatives of groups involved in the title IV, HEA programs. This
outreach included a 30-day public comment period, one day of public
hearings, and culminated in nine days of in-person negotiated
rulemaking at the Department's headquarters in Washington, DC. Further
details regarding these efforts are provided below.
On July 25, 2025, the Department published in the Federal Register
(90

[[Page 4258]]

FR 35261) a notice of our intent to hold a public hearing and to
establish two negotiated rulemaking Committees to consider regulatory
changes to the title IV, HEA programs included in the OBBB with one
Committee focusing on topics regarding annual and aggregate loan
limits, loan deferment, forbearance, and repayment, among others,
related to Federal student loans.

Public Comments and Hearings

We received 1,864 written comments in response to the Federal
Register notice. Additionally, we held a virtual public hearing on
August 7, 2025. A total of 57 individuals testified virtually at the
hearing.
You may view the written comments submitted in response to the July
29, 2025 ``Intent to Establish Negotiated Rulemaking Committees;
Correction'' correction notice (90 FR 35652), by visiting the Federal
eRulemaking Portal at <a href="http://Regulations.gov">Regulations.gov</a>, within docket ID ED-2025-OPE-
0151. Instructions for finding comments are also available on the site
under ``FAQ.''
Transcripts of the public hearings can be accessed at <a href="https://www.ed.gov/laws-and-policy/higher-education-laws-and-policy/higher-education-policy/negotiated-rulemaking-for-higher-education-2025-2026">https://www.ed.gov/laws-and-policy/higher-education-laws-and-policy/higher-education-policy/negotiated-rulemaking-for-higher-education-2025-2026</a>.

Negotiated Rulemaking

On July 25, 2025, we published a notice in the Federal Register
announcing our intent to establish one Committee to prepare these
proposed regulations (90 FR 35261). The notice set forth a schedule for
Committee meetings and requested nominations for individual, non-
Federal negotiators to serve on the negotiated rulemaking Committee. In
the notice, we also announced the topics that the Committee would
address.
We chose members of the negotiated rulemaking Committee from
individuals nominated by groups involved in the title IV, HEA programs.
We selected individuals with demonstrated expertise or experience with
the student loan program. The negotiated rulemaking Committee included
the following members, representing their respective constituencies:
<bullet> Legal assistance organizations that represent students and
borrowers, consumer advocates, and civil rights groups that represent
students: Ashley Naporlee, Lead Attorney, Consumer Protection Team,
Legal Aid Society of San Diego, and Tamar Hoffman (alternate), Staff
Attorney, Homeownership and Consumer Rights Unit, Community Legal
Services of Philadelphia.
<bullet> Student loan servicers, collection agencies, lenders, and
guaranty agencies: Alexander Ricci, President, National Council of
Higher Education Resources, and Lori Hartung (alternate), Regional
Sales Executive, Education Computer Systems, Inc.
<bullet> Organizations representing taxpayers and the public
interest: Alexander Holt, Senior Advisor on Higher Education, Committee
for a Responsible Federal Budget, and Dr. Andrew Gillen (alternate),
Research Fellow, Cato Institute.
<bullet> Private nonprofit institutions of higher education
including institutions eligible to receive Federal assistance under
Title III and Title V of the HEA tribal colleges and universities, and
historically black colleges and universities: Jenna Colvin, President,
Georgia Independent College Association, and Patti Kohler (alternate),
Vice President of Financial Aid, Western Governors University.
<bullet> Proprietary institutions of higher education, as defined
in 34 CFR 600.5: Dr. Andy Vaughn, President and Chief Executive
Officer, Alliant International University, and Jeffrey Bodimer
(alternate), Vice President of Regulatory Compliance and Financial Aid,
Post University.
<bullet> Public institutions of higher education including
institutions eligible to receive Federal assistance under Title III and
Title V of the HEA, tribal colleges and universities, and historically
black colleges and universities: Dr. Timothy B. King, Vice Provost for
Student Success, Jacksonville State University, and Matthew Ellsworth
(alternate), Director of Financial Aid, Western Carolina University.
<bullet> State officials, including State student grant agencies,
State higher education executive officers, and representatives of
authorizing agencies: Scott Kemp, Student Loan Advocate, State Council
of Higher Education for Virginia, and Dr. Bennett Boggs (alternate),
Commissioner, Missouri Department of Higher Education & Workforce
Development.
<bullet> Student loan borrowers, including borrowers in school,
deferment, forbearance, delinquent, default, and currently in
repayment: Deborah Lilly, Senior Project Manager, UnitedHealthcare, and
Emeka Oguh (alternate), Chief Executive Officer, PeopleJoy.
<bullet> Student loan borrowers who are veterans, U.S. military
service members, or groups representing them: Faisal Sulman, Legal
Fellow, Student Veterans of America, and Robert H. Carey, Jr.
(alternate), Executive Director, National Defense Committee.
The Committee discussion was led by Tamy Abernathy, Director of the
Policy Coordination Group of the Department and supported by the
Department's Office of General Counsel and Office of Postsecondary
Education, with Annmarie Weisman of Federal Student Aid serving as
facilitator for the Committee.
The negotiated rulemaking Committee for these proposed regulations
met from September 29 to October 3, 2025, and November 3 to November 6,
2025, which concluded the negotiations on November 7, 2025, a day
earlier than originally scheduled. The Committee reviewed and discussed
draft regulations prepared by the Department, as well as alternative
regulatory language and suggestions proposed by Committee members.
Additionally, during each negotiated rulemaking meeting, some non-
Federal negotiators shared feedback that they had received from
stakeholders in their respective constituencies. This approach
facilitated the inclusion of a wide array of ideas and perspectives,
which contributed to the development of the consensus language.
Under the organizational protocols for negotiated rulemaking agreed
to by all members of the Committee, if the Committee reaches consensus
on the proposed regulations, the Department agrees to publish, without
substantive alteration, a defined group of regulations on which the
Committee reached consensus--unless the Secretary reopens the process
or provides a written explanation to the participants stating why she
has decided to depart from the agreement reached during negotiations.
In this instance, consensus is considered to be the absence of dissent
by any member of the negotiated rulemaking Committee (abstaining
members are not considered to be dissenting from the proposal). The
Committee reached consensus on the entirety of the draft regulations on
November 6, 2025. As a result, this NPRM reflects the consensus
language without any substantive changes.
Further information on the negotiated rulemaking process can be
found at: <a href="https://www.ed.gov/laws-and-policy/higher-education-laws-and-policy/higher-education-policy/negotiated-rulemaking-for-higher-education-2025-2026">https://www.ed.gov/laws-and-policy/higher-education-laws-and-policy/higher-education-policy/negotiated-rulemaking-for-higher-education-2025-2026</a>.

VI. Significant Proposed Regulations

We discuss substantive issues under the sections of the proposed
regulations to which they pertain. While we generally do not address
technical,

[[Page 4259]]

minor, or legal changes to the proposed amendatory text, there are a
few areas where we determined technical corrections were necessary and
we fully explain those later in the sections where the corrections have
been made in this NPRM.

Federal Perkins Loan Program

Loan Rehabilitation (Sec. 674.39)
Statute: Section 82003(a)(2) of the OBBB amends
Section 464(h)(1)(D) of the HEA to provide that loan rehabilitation
for defaulted Federal Perkins loans is limited to a maximum of two
times per loan. Section 82003(a)(3) of the OBBB provides that the
effective date of this statutory change is July 1, 2027.
Current Regulations: Section 674.39 contains the general terms and
conditions pertaining to loan rehabilitation in the Federal Perkins
Loan Program. Specifically, Sec. 674.39(e) provides that a borrower
may rehabilitate a defaulted Federal Perkins Loan only one time.
Proposed Regulations: The Department proposes to amend the
regulations in Sec. 674.39(e) to provide that on or after July 1,
2027, a borrower may rehabilitate a defaulted loan a maximum of two
times. This means that a borrower who has previously rehabilitated a
defaulted loan but who has subsequently defaulted may begin the process
of rehabilitating a loan on or after July 1, 2027, to bring their loan
back into good standing and resume repayment.
Reasons: The proposed regulations reflect the changes made by
Section 82003(a)(2) of the OBBB, which amended Section 464(h)(1)(D) of
the HEA to update the loan rehabilitation limits for the Federal
Perkins Loan Program. Additionally, Section 82003(a)(3) of the OBBB
provides that the effective date of this statutory change takes effect
beginning on July 1, 2027. Because borrowers with outstanding Federal
Perkins Loans would now have the ability to rehabilitate a defaulted
loan a maximum of two times beginning July 1, 2027, we believe that the
regulations should reflect the number of times a borrower may
rehabilitate this type of loan before and after July 1, 2027.
Accordingly, the Department proposes to bifurcate the limitations
on loan rehabilitations for the Federal Perkins Loan Program: proposed
Sec. 674.39(e)(1) would retain the limitation in the current
regulations that would be in effect prior to July 1, 2027, whereby a
borrower can only obtain the benefit of loan rehabilitation once for a
defaulted Federal Perkins Loan. Proposed Sec. 674.39(e)(2) would
provide that on or after July 1, 2027, a borrower may rehabilitate a
defaulted Federal Perkins Loan a maximum of two times. This bifurcation
would make clear the number of times a borrower may rehabilitate based
on the date of rehabilitation.
During the negotiated rulemaking sessions, non-Federal negotiators
focused on how the Department should treat traditional loan
rehabilitations completed during the COVID-19 payment pause,
particularly for purposes of the statutory limit on the number of
rehabilitations available to a borrower. Negotiators emphasized that
some borrowers completed ``real'' rehabilitations during the pause--
often in circumstances where Fresh Start later became available--and
urged the Department to make certain that those COVID-period
rehabilitations would not count against the borrower's total number of
rehabilitation attempts, given the unusual operational environment and
the availability of alternative default-resolution pathways during the
pandemic. We explained that, while Fresh Start \1\ is a distinct
initiative and does not constitute rehabilitation, a borrower who
completed a rehabilitation during the payment pause, is considered to
have completed the rehabilitation process once. During this time,
borrowers were only permitted to rehabilitate their loans one time
under the statute. Therefore, because those borrowers completed
rehabilitation in accordance with statutory requirements, the
Department does not have the authority to disregard the rehabilitation
when applying the statutory maximum. However, under the OBBB, effective
July 1, 2027, the statute has increased the limit of rehabilitations to
twice.
---------------------------------------------------------------------------

\1\ Federal Student Aid, U.S. Dept of Educ., A Fresh Start for
Borrowers with Federal Student Loans in Default (Fact Sheet) (last
updated July 11, 2024), <a href="https://fsapartners.ed.gov/sites/default/files/2022-08/FreshStartFactSheet.pdf">https://fsapartners.ed.gov/sites/default/files/2022-08/FreshStartFactSheet.pdf</a>
---------------------------------------------------------------------------

Federal Family Education Loan (FFEL) Program

Loan Rehabilitation Agreement (Sec. 682.405)
Statute: Section 82003(a)(1) of the OBBB amends section 428F(a)(5)
of the HEA to change the loan rehabilitation limit in that section to
reflect that a defaulted loan may be rehabilitated twice. Prior to the
OBBB, such loans could only be rehabilitated once. Section 82003(a)(3)
of the OBBB provides that the effective date of this statutory change
is July 1, 2027.
Current Regulations: Section 682.405 contains the general terms and
conditions of rehabilitation of defaulted loans made through the
Federal Family Education Loan (FFEL) program, which are administered by
a guaranty agency. Section 682.405(a)(3) provides that if a borrower's
FFEL program loan is being collected through administrative wage
garnishment (AWG) while the borrower is also rehabilitating that loan
under a rehabilitation agreement, the guaranty agency must continue AWG
until the borrower makes five qualifying monthly payments under such
rehabilitation agreement. After receiving the fifth monthly payment,
the guaranty agency suspends the AWG order. Such a borrower may only
obtain the benefit of a suspension of AWG while also attempting to
rehabilitate a defaulted FFEL program loan once. Section 682.405(a)(4)
provides that after the FFEL program loan has been rehabilitated, the
borrower regains eligibility and the benefits afforded to non-defaulted
borrowers, including access to certain deferments, from the date of the
rehabilitation. Section 682.405(a)(4) further provides that for any
loan that is rehabilitated on or after August 14, 2008, the borrower
cannot rehabilitate the loan again if the loan returns to default
status following the rehabilitation.
Proposed Regulations: The Department proposes to amend the
regulations at Sec. 682.405(a)(3)(iii)(B) to provide that on or after
July 1, 2027, a borrower may only obtain the suspension of AWG benefit
one time per each attempt to rehabilitate a defaulted loan.
Furthermore, the Department also proposes that a loan may only be
rehabilitated once between August 14, 2008, through June 30, 2027. On
or after July 1, 2027, a loan may be rehabilitated a maximum of two
times over the loan's lifetime, regardless of when the loan was made.
Reasons: The regulations are amended to reflect the changes made by
the OBBB. The Department also amends proposed Sec. 682.405(a)(3)(iii)
to correct an administrative error that includes adding paragraph (A)
and (B). This proposed additional language is needed to distinguish the
number of times a FFEL borrower may rehabilitate their defaulted loans
before and after June 30, 2027, and its impact on the suspension of
AWG. Accordingly, we revised current Sec. 682.405(a)(3)(iii) to
proposed Sec. 682.405(a)(3)(iii)(A), which would only apply for loans
on or before June 30, 2027, and state that a borrower may only obtain
the benefit of a suspension of AWG while also attempting to
rehabilitate a defaulted loan once.

[[Page 4260]]

Proposed Sec. 682.405(a)(3)(iii)(B) would apply to loans obtained on
or after July 1, 2027, and states that a borrower may only obtain the
suspension of AWG benefit one time per each attempt to rehabilitate a
defaulted loan. We believe separating these provisions at the
subparagraph level would make clear that suspension of AWG remains
available for one eligible rehabilitation through June 30, 2027, and
provides that the suspension would be available for up to a maximum two
rehabilitations per loan on or after July 1, 2027.
Income-Based Repayment Plan (Sec. 682.215)
Statute: Section 82001(f)(1)(B) of the OBBB amends Section
493C(a)(3) of the HEA to eliminate the requirement that FFEL borrowers
must have a partial financial hardship to be eligible for IBR. Section
82001(g) of the OBBB amends Section 428(b)(9)(A)(v) of the HEA to
remove the partial financial hardship requirement from IBR for FFEL
Loans. The OBBB also creates the definition of applicable amount in
Section 493C(a)(3) of the HEA. These provisions were effective upon
enactment, and the Department has already taken steps to eliminate the
requirement that borrowers show a partial financial hardship to
participate in existing IDR plans.
Current Regulations: Section 682.215 contains the regulations on
the IBR plan for FFEL program loans. Section 682.215(a) provides the
definitional terms that are applicable to the IBR plan, including a
definition of partial financial hardship. Section 682.215(b) provides
the terms and conditions of the IBR plan, including a borrower's
eligibility for the IBR plan and the calculation of a borrower's
monthly payment under the plan. In current regulations, to enroll in
the IBR plan, the borrower must have a partial financial hardship and
the borrower's monthly loan payments are limited to no more than 15
percent of the amount by which the borrower's adjusted gross income
exceeds 150 percent of the poverty line income applicable to the
borrower's family size, divided by 12.
Section 682.215(d) provides for changes in a borrower's payment
amount if a borrower no longer has a partial financial hardship or if a
borrower elects to repay their loans under a different repayment plan.
Section 682.215(e) provides the eligibility documentation,
verification, and notification requirements to determine a borrower's
initial or continued eligibility for the IBR plan or to calculate a
monthly payment under such plan. Finally, Section 682.215(f) provides
the loan forgiveness provisions under the IBR plan: in general, a
borrower receives forgiveness of the remaining balance of their loans
after the borrower has made 300 qualifying monthly payments (or 25
years) under IBR.
Proposed Regulations: To conform the regulations to changes of the
HEA that were enacted by the OBBB, we are proposing to amend the
regulations at Sec. 682.215(a)(4) to remove the definition of partial
financial hardship and include a new definition of applicable amount.
Applicable amount would mean for the purposes of the IBR plan, 15
percent of the result obtained by calculating, on at least an annual
basis, the amount by which the adjusted gross income of the borrower
and the borrower's spouse (if applicable) exceeds 150 percent of the
poverty guideline. We also propose to amend the terms and conditions of
the IBR plan in Sec. 682.215(b), including a borrower's eligibility
for the IBR plan and the calculation of a borrower's monthly payment
under the IBR plan by removing references to partial financial
hardship, and where appropriate, replacing references to partial
financial hardship with a provision of the applicable amount calculated
under IBR. Finally, we propose to amend the forgiveness provisions in
IBR plan in Sec. 682.215(f) by removing references to partial
financial hardship.
Reasons: The regulations are amended to reflect the changes made by
the OBBB, including the definition of applicable amount. The term
applicable amount by and large supplants partial financial hardship,
and we propose making conforming changes throughout Sec. 682.215 by
removing partial financial hardship or removing the concepts of partial
financial hardship by using applicable amount instead. Additionally,
the Department removed the definition of partial financial hardship in
Sec. 682.215(a)(4) and removed the term throughout the section.

William D. Ford Federal Direct Student Loan (Direct Loan) Program

Definitions (Sec. 685.102)
Statute: Section 81001(2) of the OBBB amends Section 455(a) of the
HEA and defines the following terms: expected time to credential,
graduate student, professional student, and program length.
Current Regulations: Section 685.102 contains the definitions that
apply to 34 CFR part 685. Specifically, Sec. 685.102(a)(1) provides a
list of common definitions for all the title IV, HEA programs in 34 CFR
part 668 (Student Assistance General Provisions) that also apply to 34
CFR part 685.
Proposed Regulations: To implement the new provisions enacted in
the OBBB, we propose to add several new definitions for the purposes of
the Direct Loan Program. We propose to add in Sec. 685.102(b) the
following new definitions: expected time to credential; graduate
student; professional student; and program length.
We propose to define expected time to credential to mean the
expected time for a student to complete a program that is the lesser of
(1) three academic years or (2) the period determined by calculating
the difference between the length of the academic program and the
period the student already completed in that academic program.
We propose to define graduate student to mean a student who is
enrolled in a program of study that is above the baccalaureate level
and awards a graduate credential (other than a professional degree)
upon completion of the program. Above the baccalaureate level means
that the program ordinarily requires, as a prerequisite for enrollment,
that a student first obtain a baccalaureate degree. For the purposes of
dual degree programs that allow individuals to complete a bachelor's
degree and either a graduate or professional degree within the same
program, a student is considered an undergraduate student for at least
the first three years of that program. 34 CFR 668.2(b).
We propose to define professional student to mean a student
enrolled in a program of study that awards a professional degree upon
completion of the program. In defining professional student, we apply
the definition of a professional degree in 34 CFR 668.2 that was in
effect on July 4, 2025, and clarify that such degrees meet the
following elements: signifies both completion of the academic
requirements for beginning practice in a given profession and a level
of professional skill beyond that which is normally required for a
bachelor's degree; is generally at the doctoral level; requires at
least six academic years of postsecondary education coursework for
completion, including at least two years of post-baccalaureate level
coursework; generally requires professional licensure to begin
practice; and, includes a four-digit program Classification of
Instructional Program (CIP) code, as assigned by the institution or
determined by the Secretary, in the same intermediate group in certain
fields. We also propose that a professional degree only includes

[[Page 4261]]

degrees in the following fields: \2\ Pharmacy (Pharm.D.), Dentistry
(D.D.S. or D.M.D.), Veterinary Medicine (D.V.M.), Chiropractic (D.C. or
D.C.M.), Law (L.L.B. or J.D.), Medicine (M.D.), Optometry (O.D.),
Osteopathic Medicine (D.O.), Podiatry (D.P.M., D.P., or Pod.D.),
Theology (M.Div., or M.H.L.), and Clinical Psychology (Psy.D. or
Ph.D.). Finally, we propose that a professional student may not receive
title IV aid as an undergraduate student for the same period of
enrollment and must be enrolled in a program leading to a professional
degree. The Department seeks comment on its analysis relating to the
professional degrees it included in or excluded from the professional
student definition. Specifically, it would be useful to have feedback
on how the Department applied the operative definition of professional
student and utilized the context of the illustrative list of degrees
when interpreting the definition.
---------------------------------------------------------------------------

\2\ Pharm.D.--Doctor of Pharmacy; D.D.S.--Doctor of Dental
Surgery; D.M.D.--Doctor of Dental Medicine; D.V.M.--Doctor of
Veterinary Medicine; D.C.--Doctor of Chiropractic; DCM. (or D.C.M)--
Doctor of Chiropractic Medicine; L.L.B. (LLB)--Bachelor of Laws
(Latin: Legum Baccalaureus); J.D. (JD)--Juris Doctor; M.D. (MD)--
Doctor of Medicine; O.D. (OD)--Doctor of Optometry; D.O. (DO)--
Doctor of Osteopathic Medicine; D.P.M. (DPM)--Doctor of Podiatric
Medicine; D.P.--Doctor of Podiatry; Pod.D.--Doctor of Podiatry;
M.Div.--Master of Divinity; M.H.L.--commonly rendered as Master of
Hebrew Letters or Master's in Hebrew Literature; and Psy.D. or Ph.D.
(Ph.D.)-- Clinical Psychology Doctor of Psychology or Doctor of
Philosophy). Usage reflects common degree-name conventions;
terminology and degree-name expansions may vary by institution,
accrediting agency, or program.
---------------------------------------------------------------------------

We propose to define program length to mean the minimum amount of
time in weeks, months, or years that is specified in the catalog,
marketing materials, or other official publications of an institution
for a full-time student to complete the requirements for a specific
program of study.
Reasons: In the definition of expected time to credential
(implementing Section 455(a)(8)(B) of the HEA, added Section 81001 of
the OBBB), we begin the definition with ``From July 1, 2026.'' Section
455(a)(3)(C), (4), (5), and (6) of the HEA, added by Section 81001 of
the OBBB, terminates the Department's authority to make Federal Direct
PLUS Loans to graduate and professional students, imposes new annual
and aggregate limits for Federal Direct Unsubsidized Loans made to
graduate and professional students, and imposes new annual and
aggregate limits for Federal Direct PLUS Loans. Each of these statutory
provisions takes effect on July 1, 2026. Therefore, the definition of
expected time to credential, begins with ``July 1, 2026'' because the
term is used in regard to the limited exception to Sections
455(a)(3)(C), (4), (5), and (6) of the HEA, added by Section 81001 of
the OBBB, for currently enrolled students.
Additionally, in paragraph (1) of the definition of expected time
to credential, we propose adding a cross reference to the definition of
the term academic year in 34 CFR 668.3. Because this definition applies
to loan limits, we believe using this cross reference to academic year,
as defined in Sec. 668.3, would be consistent with existing policy
such as that reflected in Sec. 685.203(h), where the loan limit period
applies to an academic year as defined in 34 CFR 668.3.
Changes enacted in the OBBB, effective for loans made on or after
July 1, 2026, limit borrowing amounts for graduate students to an
annual limit of $20,500, with an aggregate lifetime limit of $100,000.
For those students enrolled in professional degree programs, the annual
limit is $50,000, with an aggregate lifetime limit of $200,000.
Due to the significant difference between the loan limits for
graduate students compared to the limits for students enrolled in
professional degree programs, institutions, relevant trade
associations, and other stakeholders have been seeking to have graduate
degree programs that have historically not been identified as first
professional or professional degree programs to be classified as such,
since the OBBB was signed into law.\3\ Labeling such programs as
professional degrees would significantly increase the amount of Federal
student loans that a borrower may have access to more than doubling the
annual loan limit and doubling the lifetime access for graduate
students.
---------------------------------------------------------------------------

\3\ Blake, Jessica. (2025, November 26). What to Know About
Trump's Definition of Professional Degrees. Inside Higher ED.
<a href="https://www.insidehighered.com/news/government/student-aid-policy/2025/11/26/what-know-about-definition-professional-degree">https://www.insidehighered.com/news/government/student-aid-policy/2025/11/26/what-know-about-definition-professional-degree</a>.
---------------------------------------------------------------------------

In the definition of graduate student (see Section 455(a)(4)(C)(i)
of the HEA), we include the clause that a graduate student is a
``student enrolled in a program of study that is above the
baccalaureate level'' to make clear that the academic program needs to
be above the baccalaureate level to be considered eligible for the
higher graduate student loan limits. This proposed change incorporates
the current definition of graduate or professional student in Sec.
668.2 and a long-standing policy for the Federal Pell Grant, Federal
Supplemental Opportunity Grant (FSEOG), and student loan programs that
a graduate student is a student who is enrolled in a program or course
above the baccalaureate level. Words and phrases typically carry their
ordinary and everyday meaning. Scalia & Garner, Reading Law: The
Interpretation of Legal Texts, 69 (2012). The term ``graduate'' in this
context ordinarily means an advanced college degree program that
requires, as a condition of enrollment, that a student must have
graduated from a lower-level postsecondary program (otherwise known as
an ``undergraduate degree''). The common understanding of the
nomenclature ``graduate'' in this context has always implicitly
referred to individuals who have graduated from a baccalaureate degree
program, as opposed to graduates of certificate degree or associate's
degree programs.\4\ Both baccalaureate degrees and associate's degrees
are undergraduate degrees, but an associate's degree is not sufficient
for a student to enroll in a graduate degree program. Here, we provide
that a graduate student must be a student enrolled in a program above
the baccalaureate level.
---------------------------------------------------------------------------

\4\ See ``Graduate'', ``of, relating to, or engaged in studies
beyond the first or bachelor's degree,'' <a href="http://Merriam-Webster.com">Merriam-Webster.com</a>
Dictionary, Merriam-Webster, <a href="https://www.merriam-webster.com/dictionary/graduate">https://www.merriam-webster.com/dictionary/graduate</a>. Accessed 11. Dec. 2025; see also ``Graduate
Student'', ``a student who is studying for a degree that is higher
than the one received after four years of study at a college or
university,'' Cambridge <a href="http://Dictionary.com">Dictionary.com</a> Dictionary, Cambridge
University Press & Assessment, <a href="https://dictionary.cambridge.org/dictionary/english/graduate-student">https://dictionary.cambridge.org/dictionary/english/graduate-student</a>. Accessed 11. Dec. 2025.
Further, the U.S. Department of State (State) defines `graduate
student' as ``someone who has earned a bachelor's degree and is
pursuing additional education in a specific field''. U.S. Department
of State, Education USA, <a href="https://educationusa.stat.gov/your-5-steps-us-study/research-your-options/graduate/what-graduate-student">https://educationusa.stat.gov/your-5-steps-us-study/research-your-options/graduate/what-graduate-student</a>.
Accessed 11. Dec. 2025.
---------------------------------------------------------------------------

For the purpose of the Direct Loan limits established in section
81001 of the OBBB, Congress made it clear that ``a graduate student,
who is not a professional student,'' will continue to receive the
current loan limit of $20,500 for unsubsidized loans after July 1,
2026. 20 U.S.C. 1087e(a)(4)(A)(i). The OBBB made no change in the
annual loan limit for Direct Unsubsidized Loans for which graduate
students can qualify.
To distinguish between graduate students and professional students,
Section 81001 of the OBBB amends Section 455(a) of the HEA by defining
a professional student to mean ``a student who is enrolled in a program
of study that awards a professional degree (as that term is defined
under section 668.2 of title 34, Code of Federal Regulations, and in
effect on the date of enactment of July 4, 2025), upon completion of
the program.'' The OBBB defines graduate student as ``a student

[[Page 4262]]

enrolled in a program of study that awards a graduate credential (other
than a professional degree) upon completion of the program.''
The definition of professional degree in 34 CFR 668.2 that is
referenced in 20 U.S.C. 1087e(a)(4)(C)(ii) and was in effect on the
OBBB date of enactment of July 4, 2025, reads as follows:

Professional degree: A degree that signifies both completion of the
academic requirements for beginning practice in a given profession and
a level of professional skill beyond that normally required for a
bachelor's degree. Professional licensure is also generally required.
Examples of a professional degree include but are not limited to
Pharmacy (Pharm.D.), Dentistry (D.D.S. or D.M.D.), Veterinary Medicine
(D.V.M.), Chiropractic (D.C. or D.C.M.), Law (L.L.B. or J.D.), Medicine
(M.D.), Optometry (O.D.), Osteopathic Medicine (D.O.), Podiatry
(D.P.M., D.P., or Pod.D.), and Theology (M.Div., or M.H.L.).

In applying this long-standing definition to the new loan limits for
graduate and professional students, the inclusion of the phrase in the
definition that ``[e]xamples of a professional degree include but are
not limited to . . .'' suggests that the list of examples provided in
the definition need not be exhaustive. Conversely, the list is not
completely open-ended, as it provides an illustrative list and a three-
part test to draw upon.
Rather than constructing a definition for professional student,
Congress borrowed and codified the Department's regulatory definition
of the term ``professional degree'' in 34 CFR 668.2. This definition
served a very limited purpose in the Department's regulations, and the
Department has not identified any interest in the prior use of the term
``professional degree'' that will be impaired by its adoption below.
However, the Department seeks public feedback on whether any pre-
existing interest in the regulation will be affected.
In adopting this definition of ``professional degree,'' Congress
incorporated a variety of words and phrases that may, without context,
appear ambiguous or vague on their face or as applied to specific
degree programs. The Department must identify the best reading of the
statute using the tools of statutory construction.
The operative definition provided in the OBBB establishes a three-
part test: First, the degree must signify completion of the academic
requirements for beginning practice in a given profession. The word
``signify'' means to be a sign of something (<a href="https://www.merriam-webster.com/dictionary/signify">https://www.merriam-webster.com/dictionary/signify</a>). Here, it means when the degree is
completed, the recipient has completed all academic requirements to
begin practicing in a profession, even if some additional training is
required.
Second, the profession the graduate enters must require a level of
professional skill beyond what is normally required for a bachelor's
degree. This means that the profession must require skill(s) that
students who only have a bachelor's degree (or training below a
bachelor's degree level) would not normally have. The term ``normally''
connotes that this rule will be followed in almost every circumstance,
but it does not rule out the possibility per se of some exception to
the rule.
Third, the profession that a degree holder would enter after
graduating generally requires professional licensure. This means that
before beginning practice, the degree recipient must obtain additional
authorization to begin practicing, which would typically flow from a
government or standard setting organization. Like the second part, the
third part requires licensure ``generally,'' which connotes that this
rule will be followed in almost every circumstance, but it does not
rule out the possibility per se of some exception to the rule.
In addition to the operative test, the definition also provides for
an illustrative list of advanced degrees that are professional degrees
and meet the definition. These degrees were codified by Congress into
the definition as examples, meaning the Department does not need to do
additional interpretive work to know that these specific degree
programs qualify as professional degrees. Accordingly, the proposed
rule designates each of the degrees on this list as a professional
degree for purposes of eligibility for the higher Direct Loan Program
limits.
The illustrative list of degrees also provides additional
contextual clues that the Department may rely upon when discerning the
facial or as applied meaning of the operative test to any specific
degree program. For example, while the operative definition does not
explicitly state that a degree must generally be at the doctoral-level
to be considered a professional degree, the illustrative list of
degrees suggests that this must be the case, as it contains only three
non-doctoral degrees L.L.B. (a law degree no longer conferred by
American institutions of higher education), as well as the two listed
theology degrees (the M.Div. and the M.H.L.).\5\
---------------------------------------------------------------------------

\5\ This conclusion is further borne out by the fact that the
LLB, M.Div., and M.H.L. also fit within exceptions explicitly
included within the operative definition. All of the degrees within
the illustrative list signifies a level of professional skill beyond
that normally required for a bachelor's degree except for the L.L.B.
Likewise, professional licensure is required for employment in all
of the degree fields included in the illustrative list with the
exception of theology.
---------------------------------------------------------------------------

In the same way, we assume that Congress does not write statutes in
a vacuum, but rather ``legislates against the backdrop of existing
law.'' McQuiggin v. Perkins, 569 U.S. 383, 398, n. 3 (2013). Here,
rather than charting a new course and writing a statute anew, without
mooring to previously established statutes, Congress inserted a cross-
reference to a long-established Department regulation that defines
professional degree. In doing so, under the prior construction canon,
we assume that the words and phrases in the definition that the
Department has already given authoritative construction to, are to be
understood as being adopted by Congress. See, e.g., Bragdon v. Abbott,
524 U.S. 624, 645 (1998) (``When administrative and judicial
interpretations have settled the meaning of an existing statutory
provision, repetition of the same language in a new statute indicates,
as a general matter, the intent to incorporate its administrative and
judicial interpretations as well.''); Sekhar v. United States, 570 U.S.
729, 733, 133 S. Ct. 2720, 2724, 186 L. Ed. 2d 794 (2013) (``[I]f a
word is obviously transplanted from another legal source, whether the
common law or other legislation, it brings the old soil with it.''
(quoting Felix Frankfurter, Some Reflections on the Reading of
Statutes, 47 Colum. L.Rev. 527, 537 (1947)).
Against that backdrop, we explore the history of the adoption of
the regulation in 34 CFR 668 to provide context as to what Congress
implicitly incorporated into the OBBB. When the regulation was
promulgated in 2007, the definition of professional degree in 34 CFR
668.2 was based on the long-standing definition of a first-professional
degree used by the Department's National Center for Education
Statistics (NCES). The 2007 Integrated Postsecondary Education Data
System (IPEDS) Glossary defined first-professional degrees as meeting
all of the following criteria: (1) completion of the academic
requirements to begin practice in the profession; (2) at least 2 years
of college work prior to entering the program; and (3) a total of at
least 6 academic years of college work to complete the degree program,
including

[[Page 4263]]

prior required college work plus the length of the professional program
itself.
Additionally, at the time, NCES considered the first- professional
degree as one which ``encompasses certain occupationally specific and
closely regulated degree programs including the following: medicine
(M.D.), chiropractic (DC or DCM.), dentistry (D.D.S. or D.M.D.),
optometry (O.D.), osteopathic medicine (D.O.), pharmacy (Pharm.D.),
podiatry (Pod.D. or D.P.M.), veterinary medicine (D.V.M.), law (LL.B.
or J.D.), and theology (M.Div., M.H.L., or B.D.)'' (Graduate and First-
Professional Students: 2007-08, Susan Choy, et al, <a href="https://nces.ed.gov/pubs2011/2011174.pdf">https://nces.ed.gov/pubs2011/2011174.pdf</a>).
Prior to that, there had been little change in the criteria for
first-professional degrees and in the 10 fields and accompanying
degrees that NCES identified as specific examples of such degrees. Such
criteria were used for reporting on such programs in IPEDS, and its
predecessor survey, the Higher Education General Information Survey
(HEGIS).
Against this backdrop, in defining professional degree in 34 CFR
668.2, in 2007, the Department proposed in the NPRM to add a definition
of first-professional degree ``based on the definition currently used
by the National Center for Education (sic) Statistics'' (72 FR 44621).
In response to a public comment requesting that the Department consider
altering several definitions proposed in the NPRM, including first-
professional degree, so that the terms used reflected the layman's
language and terminology used in the Department's Federal Student Aid
Handbook for student financial aid administrators, the Department
agreed with the comment that it was not necessary to specify whether a
professional degree is a first-professional degree for the title IV,
HEA purposes, and the Department dropped the word ``first,'' but
retained the term ``professional degree'' and made no changes to the
definition proposed in the NPRM. (72 FR 62016). The definition of
professional degree has not been further amended since November 1,
2007.
In overturning Chevron deference in Loper Bright Enters. v.
Raimondo, 603 U.S. 369 (2024), the Supreme Court emphasized that
Chevron had fostered ``unwarranted instability in the law, leaving
those attempting to plan around agency action in an eternal fog of
uncertainty.'' Id. at 411. The Court explained that Chevron had enabled
administrative agencies to change course even when Congress had not
authorized them to do so. Id. However, the Court did not abandon all
reliance on agency interpretations of statute, explaining that
interpretations issued by agencies ``which have remained consistent
over time, may be especially useful in determining the statute's
meaning.'' Id. at 370 (citing American Trucking Assns., 310 U.S. at
549).
Here, Congress adopted and codified an agency regulation that had
been remarkably consistent over time, as it remained unaltered for
nearly 20 years, and changes to it before then had been minimal. With
that said, the regulation existed in a different context and served a
different role in that it had no bearing on Federal student loan
eligibility. In that sense, the rule existed in a paradigm where there
were no significant legal consequences for a degree being counted, or
not, as a professional degree. In addition to its longstanding nature,
the comparative lack of legal consequences when the regulation was
promulgated serves as some indicia of evidence that the interpretation
represents a balanced and fair reading of what a professional degree
is. The agency was, in promulgating the rule, free from outside
pressure from students and institutions that have a financial incentive
to insist upon a broader interpretation that includes more degree
programs. While certainly not dispositive, these facts along with the
Department's longstanding interpretation, provide ``useful evidence in
determining the statute's meaning.'' Loper Bright, 603 U.S. at 370.
At the same time, by its own terms, the list of degrees in the
definition need not be exhaustive and merely includes an illustrative
list of degrees. The Department does not necessarily claim that the
included list of professional degrees represents all professional
degrees being offered by institutions, just those that the Department
has identified as meeting the statutory definition. Indeed, the
definition states that ``Examples of a professional degree include but
are not limited to'' the degrees listed. This provides clear clues that
the Department may, so long as the operative definition and context
allow, add additional degrees to the list of professional degrees
through regulation.
At the same time, context is key. And we are bound to adhere
closely to the text of the statute. The interpretive canon noscitur a
sociis is instructive in this context. It provides that words and
phrases are ``known by its associates,'' or, when a word or phrase is
``susceptible of multiple and wide-ranging meanings,'' it is ``given
more precise content by the neighboring words with which it is
associated.'' United States v. Williams, 553 U.S. 285, 294 (2008).
Here, the illustrative list of degrees Congress provided do just that;
they provide context for the types of degrees that Congress considered
to have met its definition of professional degree for the purposes of
higher loan limits. So, the Department must consider what these degrees
have in common and the context those commonalities provide. Id.
Degrees on the example list in 34 CFR 668.2 may be fairly compared
to any degrees not on the list. If any given degree is similar to
degrees on the list, that provides additional evidence that the degree
at hand may be a professional degree. If any given degree is dissimilar
to degrees on the list, that provides evidence that the degree at hand
may not be a professional degree. Of course, this comparative exercise
is not dispositive; the degree must also meet the bounds of the
operative test of professional degree to be categorized as such. This
exercise of running the degree through the operative definition, then
comparing and contrasting it to the list of degrees cited in 34 CFR
668.2, appropriately takes into account the broader statutory scheme
and ensures that the Department interprets the statute in accordance
with the intent.
During the negotiated rulemaking process, members of the RISE
Committee provided several examples of degree programs and certain
fields for consideration as to whether those would qualify in the same
general class as those programs stated as examples of professional
degrees.
Several members of the Committee suggested the Doctorate in
Clinical Psychology as another specific example of a professional
degree program, noting that such programs meet all of the criteria in
the definition of professional degree in 34 CFR 668.2. Additionally,
they noted that, in the definition of qualifying graduate program in 34
CFR 668.2, Clinical Psychology programs are specifically included with
other professional degree programs requiring postgraduate training to
obtain licensure, including medicine (M.D.), dentistry (D.D.S. or
D.M.D.), and osteopathic medicine (D.O.), and therefore are in the same
class as these programs which are also specifically identified as
professional degree programs.
Committee members also noted that a doctorate in Clinical
Psychology is explicitly required for licensure to practice as a
clinical psychologist in every state.
Further, several members of the Committee suggested using the
Classification of Instructional Programs

[[Page 4264]]

(CIP) (a system originally developed by the Department's NCES for
tracking and reporting fields of study and program completion activity)
to identify additional degree programs that meet the definition of
professional degree in 34 CFR 668.2. The CIP is an integral part of
institutions' annual IPEDS data reporting of professional degree and
other programs, as every postsecondary school that receives Federal
student aid funds must use CIP codes to report their program data to
the government. The CIP is the accepted Federal government standard on
instructional program classifications and is used in a variety of
education information surveys and databases, as well as by State
agencies, national associations, academic institutions, and employment
counseling services for collecting, reporting, and analyzing
instructional program data.\6\
---------------------------------------------------------------------------

\6\ See Introduction to the Classification of Instructional
Programs: 2020 Edition (CIP-2020), Nat'l Cent. For Educ. Statistics,
at 1 <a href="https://nces.ed.gov/ipeds/cipcode/Files/2020_CIP_Introduction.pdf">https://nces.ed.gov/ipeds/cipcode/Files/2020_CIP_Introduction.pdf</a>.
---------------------------------------------------------------------------

The CIP coding taxonomy, for instructional programs is organized on
three levels: (1) A two-digit series of 48 general fields that groups a
large number of related programs; (2) A four-digit series nested within
each two-digit series which represent groupings of programs that have
comparable content and objectives, within those two-digit fields; (3) A
six-digit series which assigns unique six-digit codes to specific
instructional programs. Six-digit CIP codes are the most specific
program classifications under the taxonomy and institutions
participating in the title IV, HEA programs are required to report
completion data in IPEDS for each of their programs using the six-digit
CIP code. Id, at 2. In some cases, instructional programs may be found
in one or more series. For instance, a person can receive a degree in
Statistics from a program that focuses on mathematical models; this
program would be coded under code 27.0501 (Statistics, General). On the
other hand, a person can receive a degree in Statistics from a program
which focuses on the applications of statistical methods to the
description, analysis, and forecasting of business data; this degree
would be coded under code 52.1302 (Business Statistics).\7\
---------------------------------------------------------------------------

\7\ See Frequently Asked Questions for CIP website and CIP
Wizard 2020, Nat'l Cent. For Educ. Statistics, Aug, 2020 at 2.
<a href="https://nces.ed.gov/ipeds/cipcode/files/CIP_FAQ_Document_2020.pdf#page=2">https://nces.ed.gov/ipeds/cipcode/files/CIP_FAQ_Document_2020.pdf#page=2</a>.
---------------------------------------------------------------------------

CIP codes generally apply to all levels of certificates and
degrees. In some cases, however, degrees were specified in the examples
for certain CIP codes in which Federal agencies needed to be able to
obtain data on the number of degrees awarded in a particular field of
study. For example, CIP code 51.1201 (Medicine) lists Medicine (MD) as
an example.
The Doctorate in Clinical Psychology and each of the 10 fields and
associated degrees identified in the definition of professional degree
in 34 CFR 668.2 has a unique six-digit CIP code in the current CIP
taxonomy. Members of the Committee suggested that the scope of the
professional degree program defined in the proposed regulation include
programs that meet the requirements for professional degree that are
within the intermediate four-digit grouping of programs for each of
these six-digit CIP codes, as assigned by the institution or determined
by the Secretary. We agreed with the Committee members that such an
approach would accurately include other advanced degree programs in
these 4-digit intermediate CIP groupings that met all requirements for
a professional degree as defined in 34 CFR 668.2. Under the proposed
regulations, such advanced programs would be considered in the general
class with the professional degree programs in Clinical Psychology and
the fields and degrees identified in the professional degree
definition.
The Department believes 4-digit CIP groupings are the most
appropriate level for classifying programs for two reasons.
Specifically, NCES defines 2-digit CIP codes as ``the most general
groupings of related programs.'' Comparatively, the 4-digit CIP series
is defined as ``groupings of programs that have comparable content and
objectives.'' \8\ After examining the groupings, the Department
believes that using 4-digit CIP groupings are closely related to the
examples of professional programs listed in CFR 668.2 to qualify for
the higher loan limits.
---------------------------------------------------------------------------

\8\ National Center for Education Statistics (2020).
``Introduction to the Classification of Instructional Programs: 2020
Edition.'' <a href="https://nces.ed.gov/ipeds/cipcode/Files/2020_CIP_Introduction.pdf">https://nces.ed.gov/ipeds/cipcode/Files/2020_CIP_Introduction.pdf</a>.
---------------------------------------------------------------------------

To provide an illustrative example, the proposed rule allows all
programs with the 4-digit CIP code ``01.80'' to qualify for the higher
loan limits. In this case, there is just one such program in the 4-
digit CIP grouping 01.80: Veterinary Medicine. However, if all programs
in the same 2-digit CIP family were used, programs that are not
connected to a professional practice would be included, such as
``Horticulture Science'' (01.01.03), ``Plant Sciences'' (01.11.01),
``Soil Chemistry'' (01.12.02), ``Brewing Science'' (01.10.03), and
``Dairy Science'' (01.09.05), to name a few.
Veterinary medicine is categorically different from these other
types of agricultural programs. The National Center for Education
Statistics describes a veterinary medicine program as ``a program that
prepares individuals for the independent professional practice of
veterinary medicine, involving the diagnosis, treatment, and health
care management of animals,'' while describing, for example, a
horticultural science program as ``a program that focuses on the
scientific principles related to the cultivation of garden and
ornamental plants, including fruits, vegetables, flowers, and
landscape.'' \9\ Given the substantial difference in a program that
prepares individuals to medically treat animals and a program that
trains students on scientific principles related to gardening, the
Department believed it would be illogical to include all programs
sharing the same 2-digit CIP family.
---------------------------------------------------------------------------

\9\ National Center for Education Statistics (2020).
``Classification of Instructional Programs--Browse CIP Codes.''
<a href="https://nces.ed.gov/ipeds/cipcode/browse.aspx?y=55">https://nces.ed.gov/ipeds/cipcode/browse.aspx?y=55</a>.
---------------------------------------------------------------------------

In the Department's view, the explicit incorporation of a four-
digit program CIP code into the regulatory definition of ``professional
degree'' is not inconsistent with the statutory definition. Indeed, it
would make explicit what is already implicitly a common element among
the statute's illustrative examples of professional degrees.
Furthermore, the CIP code taxonomy has administrative benefits for the
Department and institutions given its wide use that make its use
practically convenient. In sum, adopting this element would ease
administrative burden and is consistent with the statutory framework.
During negotiated rulemaking, the Department also considered
whether other degree programs met, or did not meet, the definition of
professional degree used in 34 CFR 668.2 for the purposes of defining
the term professional student. During negotiations with non-Federal
negotiators, we considered and discussed whether a wide range of degree
programs met the operative test, taking into consideration the context
of the broader statute. A substantial discussion centered around the
need for workers in specific fields, however, the definition of
professional degree used in 34 CFR 668.2 considered only the
characteristics of the program and the requirements of the profession;
it did not consider the need for workers in a given field. Congress did
not instruct

[[Page 4265]]

the Department to take need into account when determining which
programs are eligible for the higher loan limits. Therefore, the
Department only considers its own historical practice, the
characteristics of the existing programs, and the requirements of the
profession when determining which degree programs did not meet the
professional degree definition. Finally, the Department is hesitant to
classify degrees that lead to employment that must be supervised by a
licensed professional, and cannot be performed independently, as
professional degrees within this definition. Although this decision may
be subject to public critique and unpopular, it is once again informed
by the characteristics of programs in 34 CFR 668.2.
During negotiations and as part of public comment, the Department
heard from many who claimed that certain degree programs should be
considered professional degree programs for the purposes of the higher
Direct Loan limits under the OBBB. The Department considered these
programs and found that the following degree programs did not meet the
professional degree definition for one or more reasons:
Business (MBA): The Department determined that an MBA would not
satisfy the professional degree definition because it is not required
for entrance into a specific profession, nor is there an accompanying
licensure for MBA graduates. While the coursework a student completes
while obtaining an MBA may satisfy certain prerequisite licensure
requirements (such as the completion of 150 credit hours of coursework,
which is required to obtain licensure as a certified public accountant)
\10\ an MBA is not explicitly required for licensure in any field.
---------------------------------------------------------------------------

\10\ See CPA Review: CPA Exam Requirements, <a href="https://www.becker.com/blog/cpa/150-credit-hours-cpa-a-tale-of-courses-and-creative-counting">https://www.becker.com/blog/cpa/150-credit-hours-cpa-a-tale-of-courses-and-creative-counting</a> (last visited Dec. 19, 2025)).
---------------------------------------------------------------------------

Education (M.Ed./Ed.D./Ed.S.): The Department determined that the
M.Ed. and Ed.D. would not satisfy the professional degree definition
because they are not required for entrance into a specific profession
and are not required for licensure. While several states require
teachers to ultimately obtain a master's degree to maintain their
license, no state requires an M.Ed. (or similar master's degree) to
begin work as a teacher. Likewise, while an Ed.D. may offer the
possibility of career advancement to the degree holder, the degree is
not in any way required for entrance into a specific profession or a
prerequisite for licensure in a field.
Occupational therapy (MSOT/OTD): The Department determined that an
MSOT or OTD would not satisfy the professional degree definition
because, for example, the degree is not specifically required to enter
the field. Boards, though not states, may include an MSOT or OTD as one
possible condition for eligibility for licensure, but an individual may
also be eligible to sit for the boards necessary to obtain licensure if
they have a bachelor's or a master's in a related field.\11\ Therefore,
an MSOT or OTD is not required to enter the profession in the same
manner as the enumerated professional degrees.
---------------------------------------------------------------------------

\11\ Am I eligible to take the NBCOT exam?, Nat'l Bd. For
Certification in Occupational Therapy, <a href="https://www.nbcot.org/get-certified/eligibility#usa">https://www.nbcot.org/get-certified/eligibility#usa</a> (last visited Dec. 23, 2025).
---------------------------------------------------------------------------

Naturopathic medicine (N.D.): The Department determined that an
N.D. did not satisfy the professional degree definition because the
regulatory landscape surrounding naturopathic medicine is unsettled.
Currently, only 23 states, the District of Columbia, Puerto Rico, and
the U.S. Virgin Islands license naturopathic physicians.\12\
Furthermore, the practice of naturopathy is explicitly banned in three
states. Fla. Stat. Sec. 458.305; S.C. Code Ann. Sec. 40-31-10; and
Tenn. Code Ann. Sec. 63-6-205. While universal licensure of
practitioners in a given field by every state is not required for a
degree to be a professional degree, because of the fact that less than
half of states license naturopathic physicians and some states ban the
practice of naturopathy entirely, the Department determined that an
N.D. cannot clearly be said to be required for entrance into a specific
profession or lead to licensure at this moment in time.
---------------------------------------------------------------------------

\12\ Naturopathic Doctor Licensure, Ass'n of Accredited
Naturopathic Med. Colleges, <a href="https://aanmc.org/licensure/">https://aanmc.org/licensure/</a> (last
visited Dec.23, 2025).
---------------------------------------------------------------------------

Nursing (MSN/DNP): The Department determined that neither the MSN
nor the DNP would satisfy the professional degree definition because,
for example, the degrees are not necessary for entrance into the
nursing profession. While holders of an MSN or a DNP may obtain
licensure as a nurse practitioner, students entering degree programs
which lead to an MSN, or a DNP, are already licensed nurses when they
begin the degree program.\13\ Therefore, Department does not believe
that the MSN or the DNP satisfy a core aspect of the definition of
professional degree.
---------------------------------------------------------------------------

\13\ The Path to Becoming a Nurse Practitioner (NP), Am. Ass'n
of Nurse Practitioners (Nov. 10, 2020) <a href="https://www.aanp.org/news-feed/explore-the-variety-of-career-paths-for-nurse-practitioners">https://www.aanp.org/news-feed/explore-the-variety-of-career-paths-for-nurse-practitioners</a>.
---------------------------------------------------------------------------

Additionally, while the Department acknowledges that nurse
practitioners engage in different forms of work than other nurses, the
Department is hesitant to treat them as being distinct for the purpose
of this regulation, primarily due to the fact that their practice
authority (and therefore, their scope of work) differs substantially
from state to state. For example, full practice authority states permit
all nurse practitioners to evaluate patients; diagnose, order, and
interpret diagnostic tests; and initiate and manage treatments,
including prescribing medications and controlled substances, under the
exclusive licensure authority of the state board of nursing, while
restricted practice authority states require career-long supervision,
delegation, or team management by another health provider in order for
the nurse practitioners to provide patient care.\14\ Because a
substantial portion of states substantially restrict the types of work
that can be performed by nurse practitioners and require them to be
supervised by physicians, just as other nurses are, the Department
believes that nurse practitioners cannot be said to be part of a
distinct profession, meaning that the MSN and DNP are not requirements
for entrance into a profession.
---------------------------------------------------------------------------

\14\ State Practice Environment, Am. Ass'n of Nurse
Practitioners, <a href="https://www.aanp.org/advocacy/state/state-practice-environment">https://www.aanp.org/advocacy/state/state-practice-environment</a> (last visited Dec. 19, 2025).
---------------------------------------------------------------------------

Finally, the Department does not believe that the statute permits
the classification of degrees as ``professional'' when the degree leads
to employment where the employee must be supervised by another
professional who has, as required by their license and degree, more
education, training, and qualifications than the person being
supervised.
None of the state-required degrees in the illustrative list in the
regulation that was codified by the OBBB require another profession to
supervise their practice.\15\ In that, the list provides support for
the idea that professional degrees enable those who obtain them, after
licensure, to practice in an unsupervised manner. As noted above, a
substantial portion of states significantly restrict the types of work
that can be performed by nurse practitioners and generally require them

[[Page 4266]]

to be supervised by or enter into formal collaboration agreements with
physicians,\16\ even in states where nurse practitioners have full
practice authority (i.e., where nurse practitioners are authorized to
``evaluate patients, diagnose, order and interpret diagnostic tests and
initiate and manage treatments--including prescribing medications--
under the exclusive licensure authority of the state board of
nursing'').\17\ Such practice authority is often more limited in scope
than that of medical doctors, i.e., several states where nurse
practitioners possess full practice authority preclude them from
prescribing medications unless they have a formal relationship with a
physician.\18\ Likewise, a substantial portion of the states where
nurse practitioners possess full practice authority condition a nurse
practitioner's ability to exercise that authority on the nurse
practitioner having completed a requisite number of ``transition to
practice hours'' where the nurse practitioner must be supervised by a
physician. This is very different from residency requirements in fields
such as medicine, dentistry, and clinical psychology, where a resident
is supervised by another member of their own profession.\19\ For these
reasons, the Department believes it would be inaccurate to classify an
MSN or a DNP as meeting the definition of professional degree.
---------------------------------------------------------------------------

\15\ The following degrees are all, with appropriate licensure,
sufficient for independent and unsupervised practice in all states
in the relevant profession: Pharmacy (Pharm.D.), Dentistry (D.D.S.
or D.M.D.), Veterinary Medicine (D.V.M.), Chiropractic (D.C. or
D.C.M.), Law (L.L.B. or J.D.), Medicine (M.D.), Optometry (O.D.),
Osteopathic Medicine (D.O.), Podiatry (D.P.M., D.P., or Pod.D.), and
Clinical Psychology (Psy.D. or Ph.D.). The Department notes that
states do not license, supervise, or regulate the practice of
religion, including the licensure of clergy who may earn degrees in
theology (M.Div., or M.H.L.).
\16\ Nurse Practitioner Practice and Prescriptive Authority,
Nat'l Conference of State Legislatures (last visited Dec. 29, 2025),
<a href="https://www.ncsl.org/scope-of-practice-policy/practitioners/advanced-practice-registered-nurses/nurse-practitioner-practice-and-prescriptive-authority">https://www.ncsl.org/scope-of-practice-policy/practitioners/advanced-practice-registered-nurses/nurse-practitioner-practice-and-prescriptive-authority</a>.
\17\ Issues at a Glance: Full Practice Authority, Am. Ass'n of
Nurse Practitioners (last visited: Dec. 29, 2025), https://
www.aanp.org/advocacy/advocacy-resource/policy-briefs/issues-full-
practice-
brief#:~:text=States%20that%20restrict%20or%20reduce,standard%20of%20
care%20set%20nationally.
\18\ See supra n. 15.
\19\ Id. See Deborah Dillon, Do transition to practice hour
requirements make a difference in adverse action and medical
malpractice payment reports: An analysis from the National
Practitioner Data Bank, 37 J. Am. Ass'n Nurse Practitioners 327
(June, 2025).
---------------------------------------------------------------------------

Physical therapy (DPT): The Department determined the DPT would not
satisfy the professional degree definition. The Department notes that
historically, licensed therapists did not require doctoral degrees, and
that the progression from a master's level degree to the DPT degree is
a relatively modern development.\20\ As a result, the Department has
never included these degrees in the definition of professional degree.
The adoption of the DPT in the physical therapy profession pre-dates
the changes made to the definition in 34 CFR 668.2, yet the Department
did not make updates to that definition as discussed above. This
context is important, and the Department finds it to be dispositive
regarding the interpretation. To that end, for the reasons cited above
and because the Department's interpretation here has ``remained
consistent over time'' and represents the ``the longstanding practice
of the government,'' the Department does not think it is appropriate to
expand the interpretation of professional degree here to include DPT.
See Loper Bright Enters., 603 U.S. at 386; NLRB v. Noel Canning, 573
U.S. 513, 525 (2014).
---------------------------------------------------------------------------

\20\ Plack, Margaret M PT, MA; Wong, Christopher K PT, MS, OCS.
The Evolution of the Doctorate of Physical Therapy: Moving Beyond
the Controversy. Journal of Physical Therapy Education 16(1):p 48-
59, Spring 2002.
---------------------------------------------------------------------------

Physician assistant (MSPAS): The Department determined that the
MSPAS would not satisfy the professional degree definition because, for
example, of the unsettled regulatory landscape regarding licensure and
scope of practice of physician assistants. A physician assistant's
scope of practice varies from state to state. While a handful of states
allow physician assistants to practice and prescribe medication
independent of physician supervision, the majority require a physician
assistant to collaborate with (or be directly supervised by) a
physician or other health care provider in order to practice and
prescribe medication.\21\ Additionally, of the five states that allow a
physician assistant to practice independent of supervision by or
collaboration with a physician, several only allow independent practice
after the physician assistant has completed a requisite number of hours
of postgraduate clinical experience in collaboration with a physician,
which differs from residency requirements in fields such as medicine,
dentistry, and clinical psychology, where the resident is supervised by
another member of their own profession.\22\
---------------------------------------------------------------------------

\21\ See Physician Assistant Practice and Prescriptive
Authority, Nat'l Conference of State Legislatures, <a href="https://www.ncsl.org/scope-of-practice-policy/practitioners/physician-assistants/physician-assistant-practice-and-prescriptive-authority">https://www.ncsl.org/scope-of-practice-policy/practitioners/physician-assistants/physician-assistant-practice-and-prescriptive-authority</a>
(last visited Dec. 19, 2025).
\22\ Id.
---------------------------------------------------------------------------

As discussed above, the Department does not believe the statute
permits the classification of degrees as professional where the degree
leads to employment where the employee must be supervised by another
licensed professional who is, by virtue of their licensure, more
qualified or skilled than the person being supervised. This is because
none of the degrees on the illustrative list in the codified definition
of professional degree require another professional to supervise their
practice. Therefore, because the overwhelming majority of states
substantially restrict the practice of physician assistants and require
them to collaborate with, or be supervised by, physicians, the
Department believes it would be inaccurate to treat an MSPAS as a
professional degree.
Public health (MPH): The Department determined that the MPH would
not satisfy the professional degree definition because, for example, it
is not required for entrance into a specific profession and does not
lead to licensure.
Social work (MSW/DSW): The Department has determined that MSW and
DSW would not meet the professional degree definition because neither
degree is generally required to obtain an entry-level licensure in the
social work field or to begin work in a profession. A person may obtain
work as a social worker after earning a bachelor's degree.\23\ Most
states license BSW holders as certified social workers, making the
baccalaureate level degree the one necessary to begin practice in the
social work profession.\24\ In addition, individuals who are licensed
with a BSW may later obtain an MSW with only one year of additional
coursework, for a total of five years of education compared to six
years as provided for in the professional degree definition.\25\
---------------------------------------------------------------------------

\23\ Social Work at a Glance, Council on Social Work, <a href="https://www.cswe.org/students/prepare-for-your-education/social-work-at-a-glance/">https://www.cswe.org/students/prepare-for-your-education/social-work-at-a-glance/</a> (last visited Dec. 19, 2025).
\24\ Id.
\25\ Id.
---------------------------------------------------------------------------

The Department is aware that individuals who have earned an MSW or
DSW may obtain work as a clinical social worker, which allows an
individual to perform similar work in a supervisory role or to take on
heavier caseloads.\26\ In some cases, a clinical social worker may
perform work that is different than other social workers, but the
Department does not believe the statute permits the classification of
clinical social work as a separate and distinct profession, as opposed
to a specialization or concentration.\27\
---------------------------------------------------------------------------

\26\ Id.
\27\ Id.
---------------------------------------------------------------------------

Pilot Training and Licensure: The Department considered whether
students training to be pilots are professional students but found that
these programs fail the operative test and are foreclosed upon due to
compelling legislative history. Part 141 of title 14 is a statute
administered by the Federal Aviation Agency concerning

[[Page 4267]]

the training and certification of airplane pilots.
There are ``few principles of statutory construction are more
compelling than the proposition that Congress does not intend sub
silentio to enact statutory language that it has earlier discarded in
favor of other language.'' I.N.S. v. Cardoza-Fonseca, 480 U.S. 421,
442-43, 107 S. Ct. 1207, 1219, 94 L. Ed. 2d 434 (1987) (quoting Nachman
Corp. v. Pension Benefit Guaranty Corporation, 446 U.S. 359, 392-393
(1980) (Stewart, J., dissenting)).
When the OBBB passed the House of Representatives (House), the bill
contained borrowing limits on Direct Loans for both graduate and
professional students. In defining professional students, the House
provided that a professional student is a student: enrolled in a
program of study that awards a professional degree upon completion of
the program, or [. . .] provides the training described in part 141 of
title 14, Code of Federal Regulations (or any successor regulation).
The Senate subsequently removed the reference to Part 141 of Title
14, replacing it with its own definition, which was subsequently agreed
to by the House and enacted into law. In other words, Congress
considered the notion that students enrolled in pilot training or
degree programs could be professional students, but it discarded that
concept in favor of other language.
This is the kind of legislative history that the court in Cardoza-
Fonseca described as being among the most compelling principles to
discern otherwise vague text. The exceptions in the operative test are
narrow. Because pilot training programs generally do not require the
completion of or training beyond what is normally provided for in a
baccalaureate degree, these programs fail the operative test. To the
degree there was any uncertainty, this legislative history sures up any
lingering doubt. Congress considered adding pilot training in the
House-passed version of the OBBB, but the Senate removed this language
from the final version of the OBBB. Therefore, the Department cannot go
against demonstrable evidence of Congressional intent by determining
that students enrolled in pilot training programs are professional
students for the purposes of higher loan limits when it is clear that
Congress intentionally excluded them from the definition of
professional student.
In the definition of program length (Section 455(a)(8)(C) of the
HEA), we included the term ``full-time'' as found in the statutory
definition because we believe that Congress intended program length to
be based on whatever is published in the institution's official
publication and consistent to how program length is used in other title
IV contexts (such as Student Right to Know disclosures in 34 CFR 668,
subpart D). Therefore, the Department is including ``full-time'' in the
definition of program length.
Borrower Eligibility (Sec. 685.200)
Statute: Section 81001(1)(C) of the OBBB amends Section
455(a)(3)(C) of the HEA by terminating graduate and professional
students' eligibility for the Direct PLUS Loan program for any period
of instruction beginning on or after July 1, 2026.
Current Regulations: Section 685.200 contains the regulations on
borrower eligibility for the Direct Loan Program, which are comprised
of the following components: the Direct Subsidized Loan Program; Direct
Unsubsidized Loan Program; Direct PLUS Loan Program; and the Direct
Consolidation Loan Program. Section 685.200(b) provides the eligibility
criteria for student PLUS borrowers (i.e., graduate or professional
students) including whether the student is enrolled, or accepted for
enrollment, on at least a half-time basis at an eligible institution;
the student is an eligible student under the requirements in 34 CFR
part 668; if applicable, the student meets the requirements of
receiving a loan despite obtaining a total and permanent disability
discharge and is qualified to obtain a college or career education by
completing a high school education in a homeschool setting or meets an
ability-to-benefit alternative; the student has received a
determination of their annual loan maximum eligibility under the Direct
Unsubsidized Loan Program and, for periods of enrollment beginning
before July 1, 2012, the Direct Subsidized Loan Program; and, the
student does not have adverse credit.
Proposed Regulations: The Department proposes to restructure the
regulations at Sec. 685.200(b) to provide the eligibility criteria for
a Direct PLUS Loan to student PLUS borrowers. First, the Department
proposes to revise Sec. 685.200(b)(1) to provide that a graduate
student or professional student is eligible to receive a Direct PLUS
Loan only if the student meets the enumerated criteria in Sec.
685.200(b)(1)(i) through (v). The Department further proposes to
redesignate current Sec. 685.200(b)(1) through (5) as Sec.
685.200(b)(1)(i) through (v), respectively.
Second, the Department proposes adding a new Sec. 685.200(b)(2)(i)
to provide that beginning on July 1, 2026, a graduate student or
professional student may not borrow a Direct PLUS Loan. The Department
proposes adding Sec. 685.200(b)(2)(ii) as an exception to the rule
that prevents graduate or professional students from borrowing a Direct
PLUS Loan under Sec. 685.200(b)(2)(i). A graduate student or
professional student may borrow a Direct PLUS Loan during the period of
the student's expected time to credential, if the student is enrolled
in a program of study at an institution as of June 30, 2026; and, a
Direct Loan was made to the student for such program of study prior to
July 1, 2026.
Finally, the Department proposes to add Sec. 685.200(b)(3) that
provides that if the student withdraws or otherwise ceases to be
enrolled in the program of study at any point after receiving the
exception under Sec. 685.200(b)(2)(ii), that student cannot borrow a
Direct PLUS Loan. In other words, the regulation allows a borrower who
is enrolled in a program of study and who has participated in the
Direct Loan Program to continue to participate in the program on the
same terms until they complete their degree or withdraw. This is often
referred to as ``grandfathering'' current participants under those same
terms and conditions. The grandfathering provisions do not apply to any
student who withdraws, even if they subsequently reenroll in the same
program.
Reasons: These regulations are amended to reflect the changes made
by the OBBB to phase out the Graduate PLUS Program. Accordingly, our
proposed regulatory restructuring in Sec. 685.200(b)(1) would allow
graduate and professional students to continue to borrow under the
Direct PLUS Loan program before July 1, 2026, or if they meet the
limited exception for current borrowers further discussed below. The
regulatory restructuring in Sec. 685.200(b)(2)(i) would make clear
that beginning on or after July 1, 2026, a graduate student or
professional student may not borrow a Direct PLUS Loan to conform with
the changes the OBBB made to the HEA.
Because Section 455(a)(3)(C) of the HEA contains an interim
exception whereby a graduate student or professional student could
obtain a Direct PLUS Loan on or after July 1, 2026, we included
regulations at Sec. 685.200(b)(2)(ii) explaining the terms and
conditions for borrowing loans under this exception. A borrower who
withdraws or otherwise ceases to be enrolled would lose continued
eligibility for the Direct PLUS Loan program under this interim
exception. As such, to distinguish between

[[Page 4268]]

withdrawals and leaves of absence, we included a cross-reference to a
withdrawal or ceasing to be enrolled in accordance with Sec. 668.22.
This cross-reference preserves certain borrowers' eligibility under the
interim exception, such as a borrower who is a servicemember called to
active-duty and receives a leave of absence from their institutions
because of military orders. In this case, the servicemember would not
be subject to the new loan limits and would continue to have access to
Direct PLUS Loans.
Additionally, under the OBBB, if a graduate student received a
Direct Unsubsidized Loan for enrollment in a graduate program before
July 1, 2026, they would be eligible for the interim exception for
continued enrollment in that same program after July 1, 2026.
Obtaining a Loan (Sec. 685.201)
Statute: Section 81001(1)(C) of the OBBB amends Section
455(a)(3)(C) of the HEA by phasing out graduate and professional
students' eligibility for the Direct PLUS Loan program for any period
of instruction beginning on or after July 1, 2026. Section 455(a)(8) of
the HEA lists the conditions under which graduate and professional
students may continue to access Direct PLUS Loans during the interim
exception period.
Current Regulations: Section 685.201 includes regulations on how a
borrower obtains a Direct Loan. Section 685.201(b) provides the
application criteria for a Direct PLUS Loan and Sec. 685.201(b)(2)
specifies that for a graduate or professional student to apply for a
Direct PLUS Loan, the student must complete a Free Application for
Federal Student Aid (FAFSA[supreg]) and complete a Direct PLUS Loan
master promissory note (MPN).
Proposed Regulations: To implement the changes to Section
455(a)(3)(C) of the HEA, we propose to redesignate current Sec.
685.201(b)(2) as Sec. 685.201(b)(2)(i) with a clause that paragraph
(b)(2)(i) applies to graduate or professional students applying for a
Direct PLUS Loan before July 1, 2026. We further propose to add Sec.
685.201(b)(2)(ii) to provide that on or after July 1, 2026, a graduate
student or professional student may only apply for a Direct PLUS Loan
if the student meets the exception in Sec. 685.200(b)(2)(ii). That
exception allows Direct PLUS Loan eligibility for a graduate student or
professional student during the period of the student's expected time
to credential, if the student is enrolled in a program of study at an
institution as of June 30, 2026, and, a Direct Loan was made for such
program of study prior to July 1, 2026.
Reasons: The proposed regulations reflect the changes enacted in
the OBBB. To conform with Section 455(a)(3)(C) of the HEA regarding the
termination of the authority to make Direct PLUS Loans to graduate
students and professional students, the Department has proposed
regulations at Sec. 685.201 to outline when a graduate student or
professional student may apply for a Direct PLUS Loan for a period of
enrollment that begins on or after July 1, 2026.
The Department proposes to make a technical correction under Sec.
685.201(b)(2). During negotiated rulemaking, the RISE Committee reached
consensus on the draft regulations in Sec. 685.201. Due to an
administrative error, the Department believes that Sec. 685.201(b)(2)
requires subparagraphs (i) and (ii) to distinguish borrowers' access to
Direct PLUS Loans before and after July 1, 2026. The consensus language
in Sec. 685.201 did not distinguish borrowers' access to Direct PLUS
Loans before and after July 1, 2026. In subparagraph (b)(2)(i), we
propose to add ``Before July 1, 2026,'' to make clear that subparagraph
applies before that date. In subparagraph (b)(2)(ii), we are not adding
any additional text but instead redesignate to that appropriate
subparagraph level. Accordingly, we revised current Sec. 685.201(b)(2)
to proposed Sec. 685.201(b)(2)(i) which would read as follows:
``Before July 1, 2026, for a graduate or professional student to apply
for a Direct PLUS Loan, the student must complete a Free Application
for Federal Student Aid and submit it in accordance with instructions
in the application. The graduate or professional student must also
complete the Direct PLUS Loan MPN.'' Proposed Sec. 685.201(b)(2)(ii)
would read as follows: ``On or after July 1, 2026, a graduate student
or professional student may only apply for a Direct PLUS Loan if the
student satisfies the conditions set forth in Sec.
685.200(b)(2)(ii).'' We believe separating these provisions at the
subparagraph level would make clear that, beginning on July 1, 2026,
graduate and professional students may only obtain a Direct PLUS Loan
if they meet the interim exception requirements.
Loan Limits (Sec. 685.203)
Statute: Section 81001(1)(A) and (B) of the OBBB amends Section
455(a)(3) and (4) of the HEA to include new annual limits of Direct
Unsubsidized Loans for graduate and professional students for periods
of enrollment beginning on or after July 1, 2026. Section 81001(2) of
the OBBB adds Section 455(a)(4)(B) to the HEA to provide the aggregate
limits of the amount of Direct Unsubsidized Loans graduate students and
professional students may receive for periods of enrollment beginning
on or after July 1, 2026. Section 81001(2) of the OBBB adds Section
455(a)(5) to the HEA to establish new annual and aggregate limits of
Direct PLUS Loans parent borrowers may receive beginning on or after
July 1, 2026. Section 81001(2) of the OBBB adds Section 455(a)(6) to
the HEA and establishes a new lifetime maximum aggregate limit for the
total amount of title IV loans. The lifetime cap is based upon the
aggregate principal balance of all loans taken and would include
origination fees but would not include any interest accrued. Section
81001(2) of the OBBB amends HEA Section 455(a) to add Section
455(a)(7)(A), which establishes an annual loan limit when a student is
enrolled less than full-time in an academic year. Section 81001(2) of
the OBBB added Section 455(a)(7)(B) to the HEA and provides additional
rules regarding institutionally determined loan limits. Section
81001(2) of the OBBB added HEA Section 455(a)(8), which provides an
interim exception under which loan limits that are effective July 1,
2026, do not apply.
Current Regulations: Section 685.203 contains the regulations on
loan limits in the Direct Loan Program. Section 685.203(b) and (c)
provides the loan limits and additional eligibility for Direct
Unsubsidized Loans; in the case of graduate or professional students
for a loan period beginning on or after July 1, 2012, the annual loan
limit may not exceed $8,500; however, Sec. 685.203(c)(2)(v) provides
additional eligibility for graduate and professional students in
amounts up to $12,000 making a total annual limit of $20,500. Section
685.203(e) provides the aggregate limits for unsubsidized loans; in the
case of graduate or professional students, the aggregate loan limit is
$138,500.
Section 685.203(f) provides the Direct PLUS Loans annual limit; in
the case of graduate or professional students, the annual limit that a
graduate or professional student may borrow for a Direct PLUS Loan for
an academic year may not exceed the student's cost of attendance less
other financial assistance. Section 685.203(g) provides the Direct PLUS
Loans aggregate limit; in the case of graduate or professional
students, the aggregate limit that a graduate or professional student
may borrow for a Direct PLUS Loan may not

[[Page 4269]]

exceed the student's cost of attendance less other financial assistance
for the entire period of enrollment.
Finally, Section 685.203(j) provides the maximum loan amounts in
the Direct Loan Program. The amount of Direct Loans that a borrower may
receive cannot exceed the student's estimated cost of attendance minus
other financial assistance.
Proposed Regulations: The Department proposes to implement the
changes enacted in Section 81001 of the OBBB by amending Sec. 685.203.
With respect to Direct Unsubsidized Loan limits, we propose to clarify
in Sec. 685.203(b)(2)(iii) that in the case of a graduate or
professional student for a period of enrollment beginning on or after
July 1, 2012, and ending on or before June 30, 2026, the total amount
the student may borrow for any academic year of study under the Direct
Unsubsidized Loan Program must not exceed $8,500. As explained above,
Sec. 685.203(c)(2)(v) provides additional Direct Unsubsidized Loan
eligibility for graduate and professional students to $12,000, making a
total annual limit of $20,500. Similarly, we propose to clarify in
Sec. 685.203(c)(2)(v) that in the case of a graduate or professional
student for a period of enrollment through June 30, 2026, the
additional Direct Unsubsidized Loan eligibility would be $12,000. We
propose to add Sec. 685.203(b)(2)(iv), which would provide the loan
limits for graduate students and professional students for periods of
enrollment beginning on or after July 1, 2026.
Specifically, a graduate student, who is not a professional
student, for a period of enrollment beginning on or after July 1, 2026,
may borrow up to $20,500 for any academic year under the Direct
Unsubsidized Loan Program. A professional student, for a period of
enrollment beginning on or after July 1, 2026, may borrow up to $50,000
for any academic year under the Direct Unsubsidized Loan Program. These
loan limits, however, would not apply for certain borrowers who are
grandfathered into the prior loan limits. Specifically, we propose to
add Sec. 685.203(b)(2)(iv)(B) that the loan limits in effect on July
1, 2026, would not apply to student borrowers during the period of the
student's expected time to credential if the student is enrolled in a
program of study at an institution as of June 30, 2026, and a Direct
Loan was made prior to July 1, 2026, for such program of study. Under
proposed Sec. 685.203(b)(2)(iv)(C), this exception to the loan limit
would not apply if the student withdraws in accordance with the
regulations in Sec. 668.22 for returning title IV funds or otherwise
ceases to be enrolled in the program of study at any point after
receiving the exception.
With respect to the aggregate loan limits for Direct Unsubsidized
Loans, we propose to amend Sec. 685.203(e)(3) to provide that for a
graduate or professional student for periods of enrollment beginning
before July 1, 2026, their aggregate loan limit is $138,500. This
amount includes any loans for undergraduate study, minus any Direct
Subsidized Loan, Subsidized Federal Stafford Loan, and Federal
Supplemental Loan for Undergraduate Students (SLS) Program loan
amounts, if applicable. We propose to add Sec. 685.203(e)(4) to
include the aggregate loan limits for a graduate student for a period
of enrollment beginning on or after July 1, 2026. Specifically, a
graduate borrower who is not and has never been a professional student
at an institution would have an aggregate loan limit of $100,000. A
graduate student who is or has been a professional student at an
institution would have an aggregate loan limit of $200,000, minus any
amount borrowed as a professional student. We also propose to add Sec.
685.203(e)(5) that would provide, for a professional student, for a
period of enrollment beginning on or after July 1, 2026, their
aggregate loan limit would be $200,000, minus any Direct Subsidized
Loan, Subsidized Federal Stafford Loan, and Federal SLS Program loan
amounts and any amounts such student borrowed as a graduate student, if
applicable. Similar to the earlier example, these aggregate loan limits
would not apply in certain circumstances. We propose to add Sec.
685.203(e)(6) that the loan limits in effect on July 1, 2026, would not
apply to graduate student or professional student borrowers during the
period of the student's expected time to credential if the student is
enrolled in a program of study at an institution as of June 30, 2026,
and a Direct Loan was made prior to July 1, 2026, for such a program of
study. Under proposed Sec. 685.203(e)(7) this exception to the
aggregate loan limit would not apply if the graduate student or
professional student withdraws in accordance with the regulations about
the return of title IV funds in Sec. 668.22 or otherwise ceases to be
enrolled in the program of study at any point after receiving the
exception.
With respect to the annual loan limits for Direct PLUS Loans, we
propose to clarify the annual limits before July 1, 2026. We propose to
amend Sec. 685.203(f)(1) to provide that the total amount of all
Direct PLUS Loans that a parent, or parents, may borrow on behalf of
each dependent undergraduate student, or that a graduate or
professional student may borrow, for any academic year of study for a
period of enrollment beginning before July 1, 2026, must not exceed the
cost of attendance minus other estimated financial assistance for the
student. This provision maintains the current lifetime loan limits
under current regulations at Sec. 685.203(f) for these existing
borrowers, while providing a date after which these limits will be
phased out for new loans. We also propose to add to Sec.
685.203(f)(2), the annual limits for parents of dependent
undergraduates on or after July 1, 2026. Specifically, we propose to
add new language to Sec. 685.203(f)(2)(i) stating that for periods of
enrollment beginning on or after July 1, 2026, the total amount of all
Direct PLUS Loans that all parents may borrow on behalf of each
dependent student for an academic year of study may not exceed $20,000,
minus other financial assistance for the student. Similar to the
earlier examples, these Direct PLUS annual loan limits would not apply
in certain circumstances. We propose to add a new paragraph, Sec.
685.203(f)(2)(ii), that provides that the loan limits in effect on July
1, 2026, would not apply to parent borrowers who borrowed a loan on
behalf of a dependent student during the period of the student's
expected time to credential if the following conditions are met: (1)
the student is enrolled in a program of study at an institution as of
June 30, 2026, and, (2) a Direct Loan was made to the parent borrower
on behalf of the dependent student or to a dependent student prior to
July 1, 2026, for such a program of study. Under proposed Sec.
685.203(f)(2)(iii), this exception to the Direct PLUS annual loan limit
would not apply to the parent borrower if the student withdraws in
accordance with the regulations in Sec. 668.22 about returning title
IV funds or otherwise ceases to be enrolled in the program of study at
any point after receiving the exception. Under proposed Sec.
685.203(f)(3), the Direct PLUS annual limits for graduate students and
professional students on or after July 1, 2026, would be found in Sec.
685.200.
With respect to the aggregate limits for Direct PLUS Loans, we
propose to provide for aggregate limits before July 1, 2026. We propose
to amend Sec. 685.203(g)(1) to provide that the total amount of all
Direct PLUS Loans that a parent or parents may borrow on behalf of each
dependent student, or that a graduate or professional student may
borrow for a period of enrollment beginning before July 1, 2026, for
enrollment in an eligible program of

[[Page 4270]]

study must not exceed the student's cost of attendance minus other
estimated financial assistance for that student for the entire period
of enrollment. We also propose to add aggregate limits for parents of
dependent undergraduates on or after July 1, 2026. Specifically, we
propose to add Sec. 685.203(g)(2), which provides that for periods of
enrollment beginning on or after July 1, 2026, the total amount of all
Direct PLUS Loans that all parents may borrow on behalf of each
dependent student must not exceed $65,000, without regard to any
amounts repaid, forgiven, canceled, or otherwise discharged on any such
loan. We would also provide that any amount of loan funds that have
been returned by the institution, or the borrower, will not count
against the aggregate loan limit. Similar to earlier examples, these
Direct PLUS aggregate loan limits for parent borrowers would not apply
in certain circumstances. We propose to add Sec. 685.203(g)(3) that
the loan limits in effect on July 1, 2026, would not apply to parent
borrowers during the period of the student's expected time to
credential if the student is enrolled in a program of study at an
institution as of June 30, 2026, and a Direct Loan was made to the
parent borrower on behalf of the dependent student, or to the dependent
student prior to July 1, 2026, for such a program of study. Under
proposed Sec. 685.203(g)(4) this exception to the Direct PLUS
aggregate loan limit would not apply to the parent borrower if the
student withdraws in accordance with the return of title IV funds in
Sec. 668.22 or otherwise ceases to be enrolled in the program of study
at any point after receiving the exception. We also propose to clarify
that, for the purposes of the Direct PLUS aggregate loan limits, a
student who changes majors within the same degree or certificate
program remains enrolled in the same program of study. This includes a
student enrolled in a bachelor's degree program who changes majors but
remains enrolled in a bachelor's degree program at the same
institution. Students are generally not admitted to undergraduate
institutions in a manner that binds them to a specific major; they can
switch majors without generally seeking new admittance to the
institution. As such, they are in the same program of study for the
purposes of this grandfathering provision. On the contrary, it would
not include a student who is enrolled in an associate's degree program,
but who transfers into a bachelor's degree program even if the student
remains at the same institution or even in the same program. In
comparison to undergraduate school, graduate and professional school
admittance is significantly different. Students in a graduate program
cannot generally switch to a different degree program without
submitting a new application for admittance. As such, when they switch
graduate programs, they are switching programs of study, even if they
are attending the same institution. Accordingly, graduate or
professional students who change programs would not be grandfathered
into the aggregate loan limits. Under proposed Sec. 685.203(g)(6), the
Direct PLUS aggregate limits for graduate students and professional
students for periods of enrollment beginning on or after July 1, 2026,
would be found in Sec. 685.200.
With respect to the maximum loan amounts, we propose to add the
lifetime maximum aggregate limits that would be effective July 1, 2026.
We propose to add Sec. 685.203(j)(2), which would provide that
effective July 1, 2026, the lifetime maximum aggregate amount of all
title IV loans that a student may borrow, excluding Federal PLUS loans
or Federal Direct PLUS Loans, would be $257,500 without regard to any
amounts repaid, forgiven, canceled, or otherwise discharged on such
loans. We propose that any amount of loan funds that have been returned
by the institution, or the borrower, would not count against this
lifetime maximum aggregate loan limit. Similar to the earlier examples,
this lifetime maximum aggregate loan limit would not apply to certain
students who are grandfathered into the old system. As such, we propose
to add Sec. 685.203(j)(3), which would provide that the loan limits
effective on July 1, 2026, would not apply to student borrowers during
the period of the student's expected time to credential if the student
is enrolled in a program of study at an institution as of June 30,
2026, and a Direct Loan was made for such program of study prior to
July 1, 2026. Under proposed Sec. 685.203(j)(4) this exception to the
lifetime maximum aggregate loan limit would not apply to the borrower
if the student withdraws in accordance with the return of title IV
funds regulations in Sec. 668.22 or otherwise ceases to be enrolled in
the program of study at any point after receiving the exception.
We also propose to add a new provision to determine the appropriate
loan limit if a certain academic program awards both a graduate degree
and professional degree. Under proposed Sec. 685.203(l), if a student
is enrolled in a program that awards both a graduate degree and
professional degree, the student would be considered a professional
student for the purposes of loan eligibility if more than 50 percent of
the credit hours in that academic program count toward the professional
degree. Specifically, this calculation is based upon the entire course
of study and does not need to be calculated during each academic term.
A student may be a professional student notwithstanding whether the
student's courseload for a given semester is comprised of more than 50
percent of the credits that count toward a professional degree.
Finally, we propose to add two new loan limit provisions in
proposed Sec. 685.203(m) including an annual award year loan limit
provision for less than full-time enrollment and a provision for
institutionally determined loan limits. Under proposed Sec.
685.203(m)(1), if a student is enrolled in an eligible program (except
for a non-term program) at an institution on a less than a full-time
basis during an academic year, the amount of any Direct Loan that
student may borrow for an academic year or its equivalent would be
reduced in direct proportion to the degree to which that student is not
so enrolled on a full-time basis, as of the date the institution
determined the student's eligibility for the disbursement, rounded to
the nearest whole percentage point. The formula to determine the
reduced annual loan limit percentage is equal to the number of credit
hours enrolled for an academic year divided by the number of credit
hours considered full-time (by that institution) for that academic year
for the program of study and then multiplied by 100.
Under proposed Sec. 685.203(m)(1)(i), for a period of enrollment
of less than an academic year (i.e., fall semester only), the
institution would be required to calculate the Direct Loan eligibility
that student may borrow for the term in which the borrower is enrolled,
or its equivalent, in direct proportion to the degree to which that
student is not so enrolled on a full-time basis for that term as
determined by the institution.
The steps an institution would be required to take include:
<bullet> Determine the borrower's eligibility for a disbursement of
a Direct Loan for the term;
<bullet> Calculate the amount of the academic year loan limit under
this section that the term represents; and
<bullet> Reduce the borrower's Direct Loan amount based on less
than full-time enrollment for that term at that institution.
The formula to determine the term's loan limit equals the number of
credit hours enrolled for the term divided by the number of credit
hours that is considered full-time at that institution (as determined
by the institution) for

[[Page 4271]]

that term for the program of study; multiply that value by 100, which
equals the percentage of the reduction that should be applied to the
single term loan amount the borrower is eligible to receive (e.g.,
student is enrolled 6 hours and 12 hours is considered full-time. Take
6 hours and divide that by 12 hours which equals .5. Then, take .5 and
multiply it by 100 and that equals 50 percent. Fifty percent, rounded
to nearest whole percentage point, if needed, equals the percentage of
the scheduled reduction required). You would then take that percentage
and multiply it by the amount of eligibility the borrower has for one
term to determine amount of the loan the borrower may receive. If the
annual amount was $3,000; one term of loan eligibility prior to the
reduction would be $1,500. Multiply $1,500 by .5, which equals $750.
Therefore, the amount the borrower is eligible to receive based on the
schedule of reductions for less than full-time enrollment = $750.
Finally, we propose to add Sec. 685.203(m)(2), which would provide
that beginning on July 1, 2026, an institution may limit the total
amount of Direct Loans that a student, or a parent on behalf of such
student, may borrow for a specific program of study for an academic
year, as long as any such limit is applied consistently to all students
enrolled in that program of study. An institution that chooses to limit
borrowing under this provision would be required to document their
decision and follow standard requirements for record retention. The
institution would also be required to provide clear and conspicuous
information describing any program of study that is subject to the loan
limitation and explain the need for such limitation to current and
prospective students, including, but not limited to, sharing
information via publication in the institution's course catalog,
publication on institution's website(s), and award notifications. We
propose that prior to limiting borrowing under this provision, the
institution would be required to notify any student who plans to enroll
or is enrolled in the program that is subject to this limitation.
Additionally, the Department would propose that, for the purposes of
the institutionally determined loan limits, program of study means
eligible program.
Reasons: In general, Section 81001 of the OBBB amended Section
455(a) of the HEA and established the new loan limits for borrowers.
Due to these statutory changes to the loan limits, the Department
proposes to make conforming changes to the regulations as further
discussed below.
To help guide readers, we are providing a high-level summary of the
statutory changes to the loan limits in a chart shown below. These new
loan limits take effect on July 1, 2026.
BILLING CODE 4000-01-P

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BILLING CODE 4000-01-C
With respect to annual and aggregate limits for Direct Unsubsidized
Loans for graduate and professional students, because of the statutory
changes to the HEA, the Department's proposed regulations codify the
new Direct Unsubsidized Loan annual and aggregate limits based on
whether the borrower is a graduate student or professional student. We
discuss the definitions of graduate student and professional student
elsewhere in this document.
The Department wishes to make a technical correction under Sec.
685.203(e)(4)(ii). During negotiated rulemaking, the RISE Committee
reached consensus on the draft regulations in Sec. 685.203. However,
after reviewing the statute, the Department determined that Sec.
685.203(e)(4)(ii) needed to be amended. Section 81001(2) of the OBBB
added Section 455(a)(4)(B)(i)(II)(bb) to the HEA to state that for a
period of enrollment beginning on or after July 1, 2026, the aggregate
limit for a graduate student who is (or has been) a professional
student at an institution, is $200,000, minus any amounts such student
borrowed as a professional student. The consensus language in Sec.
685.203(e)(4)(ii) erroneously stated that the aggregate limit for a
graduate student who is or has been a professional student at an
institution, is $200,000, minus any amounts such student borrowed as a
graduate student. In subparagraph (e)(4)(ii), we propose to replace
``graduate'' with ``professional'' to make clear that it is minus any
amounts such student borrowed as a professional student to accurately
reflect the statute. Accordingly, we revised proposed Sec.
685.203(e)(4)(ii) to read as follows: ``(ii) who is or has been a
professional student at an institution, $200,000, minus any amounts
such student borrowed as a professional student.'' We believe making
this technical correction would make clear that, for a period of
enrollment beginning on or after July 1, 2026, the aggregate limit for
a graduate student who is or has been a professional student at an
institution, is $200,000, minus any amounts such student borrowed as a
professional student.
While this is a minor, technical change, the Department complied
with the requirements in 20 U.S.C. 1098a(b)(2), which requires the
Department whenever making a change from the consensus regulatory text
to ``provide a written explanation to the participants in that
[negotiated rulemaking] process why the Secretary has decided to depart
from such agreements.''
During negotiated rulemaking, the Committee discussed joint degree
programs, in which a student earns both a graduate and a professional
degree upon completion, such as a joint MBA and JD program. In
response, the Department set the baseline that if more than 50 percent
of the credit hours count toward the professional degree, the student
would be considered a professional student for purposes of higher loan
limits. As the Department explained during the first week of
negotiations, the Department was concerned about the potential for
abuse where graduate degree programs could be disguised as professional
degree programs in order to gain access to the higher loan limits.
Section 81001(c)(ii) of the OBBB provides that a ``professional
student'' means a student enrolled in a program of study that awards a
professional degree. The Department believes looking holistically at
the academic program to determine whether the majority of the program
counts toward the professional degree would allow us to assess the
appropriate loan limit. In this case, we propose that if more than 50
percent of the credit hours count toward the professional degree, it
would render such program a professional degree program. This is
because if over 50 percent of the credits from a program are being
earned toward a professional degree, the preponderance of a student's
academic work is on earning a professional degree. The Department
believes when most of a student's time is focused on professional
credits, that it is sufficient to classify the student as a
professional student for the purposes of the Direct Loan Program. The
Department construes the phrase ``enrolled in a program of study that
awards a professional degree'' in this context to mean a student who is
spending more than half of their coursework working toward a
professional degree. If a student is spending less than half of their
coursework working toward a professional degree, most of their time is
spent on a non-professional program. To allow any student enrolled in
professional degree coursework, without considering what percentage of
a student's total enrollment the professional coursework represents, to
be considered a professional degree contravenes the intent of the
statute by enabling students to enroll in such programs but not make
serious attempts at taking the necessary coursework required to
complete the program, while working primarily on a graduate degree
program. The Department seeks comments on alternative approaches on how
to classify joint degree programs for the purposes of Direct Loan
eligibility.
Regarding the interim exceptions, we note that Section 455(a)(8) of
the HEA contains obligatory terms and says the loan limits ``shall not
apply'' if certain criteria are met, and accordingly, a borrower does
not have the option to choose whether the new loan limits would apply
to them. Students who meet the interim exception in proposed Sec.
685.203(b)(2)(iv)(B) would be subject to the legacy loan limit
provisions in Section 455(a)(3)(A)(ii) of the HEA. As an illustrative
example, a professional student who enrolled in a program of study on
or after July 1, 2026, is eligible for a Direct Unsubsidized Loan limit
of $50,000 per year, but a professional student who was enrolled in the
same program of study before that time (and

[[Page 4275]]

remains enrolled in that program of study at the same institution),
would be subject to the legacy loan limit of $20,500 per year.
We also note that if a borrower withdraws or ceases to be enrolled
in the eligible program at the same institution, the interim exception
would no longer apply as the exception is only available to borrowers
who remain enrolled in a program of study as required by Section 81001
of the OBBB. If a borrower withdraws, the borrower is no longer
enrolled. And the borrower would then be subject to the loan limits in
Sec. 685.203(b)(2)(iv)(A), if the borrower were to re-enroll or
matriculate at another institution. As such, we believe including a
cross reference to a withdrawal as described in Sec. 668.22 is
instructive to borrowers. This policy would preserve certain borrowers'
access to the interim exception, such as a borrower who is a
servicemember called to active-duty and takes a leave of absence due to
her military orders. In this case, she would not be subject to the loan
limits in Sec. 685.203(b)(2)(iv)(A).
The Department's proposed regulations codify new Direct PLUS Loan
annual and aggregate limits for parent borrowers found in the OBBB. We
also preserve the annual and aggregate limits for Direct PLUS Loans for
periods of enrollment beginning before July 1, 2026. Separately in this
NPRM, we discuss how the OBBB terminates graduate and professional
students' access to the Direct PLUS Loan program for any period of
instruction beginning on or after July 1, 2026.
Section 455(a)(5)(B) of the HEA provides that the aggregate limit
for parent borrowers is $65,000 per dependent student, without regard
to any amounts repaid, forgiven, canceled, or otherwise discharged on
any such loan. The Department believes Congress' intent in using the
words ``without regard to any amounts repaid, forgiven, canceled, or
otherwise discharged on any such loan'' was to make certain that only
the loan funds the borrower actually received are included in the
aggregate limit. For example, students who received a false
certification discharge for identity theft did not actually receive
loan funds. The Department would not include loan amounts discharged
under false certification in the parent borrower's aggregate limit and,
similarly, we would not include loan amounts discharged under false
certification in the lifetime maximum aggregate limit in Sec.
685.203(j).
The OBBB also established a new lifetime aggregate limit;
following, the Department has proposed regulations here to codify the
new lifetime maximum aggregate limit. As part of the regulations on
lifetime limits, the Department will make certain that only funds
actually received by the borrower will count toward this lifetime
aggregate limit. To enforce this principle, as a high-level overview,
the Department would review all amounts disbursed minus any amounts
that were returned by the institution or the borrower. We included a
provision in Sec. 685.203(j)(2) proposing that any amount of loan
funds that have been returned by the institution, or the borrower, will
not count against that borrower's lifetime maximum aggregate loan
limit. Because the borrower did not receive the benefit of those funds
that were returned to the Secretary, we believe those amounts should
not be counted toward this lifetime maximum aggregate limit so that we
remain consistent with historical precedent.
The OBBB also introduces a loan limit for borrowers who are
enrolled on a less than full-time basis. The Department proposes to
codify the Direct Loan eligibility on a less than full-time enrollment
basis and a corresponding schedule of reductions. Section 455(a)(7) of
the HEA requires the Secretary to publish a schedule of reductions for
institutions to calculate the student's Direct Loan eligibility for the
purposes of determining the amount of loan funds the borrower is
eligible to receive for the `less than full-time enrollment status'
provision. Therefore, the Department's regulations at Sec.
685.203(m)(1) would provide additional information about these
provisions and serve as the example of the schedule of reductions for
students enrolling less than full-time.
Consistent with the OBBB, the proposed regulations include a
formula that uses the number of credit hours in which the student is
enrolled for the academic year divided by the number of credit hours
that constitute full-time enrollment, as determined by the institution,
for that academic year in the student's program of study, expressed as
a percentage. The resulting percentage is then applied to the student's
annual loan limit for that academic year. This proposal would implement
Congress's direction that the annual loan limit be reduced in direct
proportion to the student's enrollment status, rather than allowing a
student who attends only part of the year or at reduced enrollment to
receive the same annual loan amount as a full-time student.
The RISE Committee discussed the formula for less than full-time
enrollment in detail and walked through several examples of how to
properly apply this formula. The Department explained during
negotiations that the language contained within this NPRM explicitly
sets the required annual loan-limit for when a borrower enrolls less
than full-time in the academic year. The Department explained that, in
addition to this loan limit, a borrower must also meet all other
eligibility criteria to receive a Federal student loan. The OBBB
intentionally created an academic year requirement and not a per-term
or per-disbursement schedule. We made the formula easily translatable
to what the institution defines as full-time for the academic (award)
year and easily divisible by the relevant number of terms. For an
undergraduate student, current section 668.2 defines full-time as at
least 24 credit hours. Using 24 credit hours as the baseline for full-
time and factoring in enrollment for the complete academic year, an
undergraduate borrower who enrolls nine hours in the fall and fifteen
hours in the spring would be considered as full-time for the academic
year and would be eligible for the full amount of eligibility and not
subject to a reduction for less than half-time, which would equal 50
percent of the annual loan limit. A student's maximum disbursement
eligibility for each term will be equal to the proportion of the full
academic year and reduced by the percentage the student is enrolled
less than full-time.
Section 455(a)(7)(A) of the HEA applies to the loan amount ``for an
academic year, or its equivalent.'' The proposed text in Sec.
685.203(m)(1) includes a corresponding formula for determining the
proportion of the annual loan limit that applies to a single term at
the receiving institution and then applying the less than full-time
reduction to that amount in order to address situations in which a loan
period is shorter than a full academic year such as when a student
transfers mid-year.
The Department, in negotiations, also clarified situations relevant
to a borrower who transfers enrollment to a different institution and
how the new annual loan limit should be applied to the subsequent term
of enrollment. The Department also walked through example schedules of
reductions. For these transfer students, the new institution would
determine what share of the academic year loan limit that term
represents; and then reduce the Direct Loan based on the student's
enrollment status in that term. The institution would use the schedule
of reductions formula for the term of enrollment, which takes the
number of credits

[[Page 4276]]

enrolled in that term for that program of study divided by the total
number of credits that the institution considers full-time enrollment
for that term in the program. This structure provides institutions with
a clear, formula-based method for applying the statutory requirement to
the portion of the annual loan limit for which it is disbursing.
Institutions are familiar with the common practice of adjusting a
student's aid package to reflect one term of enrollment or awarding aid
to a student who has transferred from one institution to another. The
concept of determining aid for one semester is not new. As such,
creating the schedule of reductions for one term of enrollment was the
appropriate action to address the new annual loan limit for less than
full-time enrollment for students who fluctuate their attendance
between institutions or only enroll in one term.
During negotiations, the Department answered several questions
about the application of the schedule of reductions across differing
academic calendars and payment period structures. These questions were
relevant to the scope of regulations at Sec. 685.203(m)(1), and the
Department discusses the applicability of the schedule of reductions to
programs contained in these regulations below. For non-term clock hour
and credit-hour programs, the Department believes existing title IV
disbursement rules are already tightly linked to academic progress.
Students in these programs generally may not receive subsequent
disbursements until they complete the required number of clock or
credit hours, and institutions calculate payment periods and
disbursements based on hours completed rather than fixed terms of time.
During the second week of the RISE Committee, the Department
discussed the application of the schedule of reductions for students
who are enrolled in subscription-based programs. Under a subscription-
based program, the first two subscription periods of the programs are
treated as terms for purposes of the title IV, HEA fund disbursements
and there is no requirement for a student to complete a specified
amount of coursework before receiving the disbursement for the second
subscription period. However, in the third and subsequent subscription
periods, disbursements are treated similarly to clock-hour and other
non-term programs. Students in such programs cannot receive subsequent
disbursements until they have earned the credits associated with the
period, so the amount of loans a student can receive is already
constrained by their actual pace and enrollment. Given that none of the
non-Federal negotiators had specific experience with subscription-based
programs, we removed reference to such programs in the regulations for
schedule of reductions and are seeking specific feedback from
institutions that use this type of academic calendar during the public
comment period. The Department welcomes all relevant feedback on such
programs and the relevancy of the schedule of reductions, or whether
additional provisions are necessary to specifically address unique
aspects of subscription-based programs. Specifically, we invite
comments that ponder how the schedule of reductions would work at a
subscription-based institution.
Section 455(a)(7)(A) of the HEA also ties the reduction to the
student's enrollment status as of the date the institution determines
the student's eligibility for a disbursement. A cross-reference to the
general disbursement rules in Sec. 668.164(b)(3) is also included.
Under Sec. 668.164, before each disbursement of title IV funds, an
institution (or its third-party servicer) must confirm that the student
is eligible, including confirming the student's enrollment status for
that payment period.
The Department's proposed regulations therefore require
institutions to apply the schedule of reductions formula using the
student's actual enrollment at the time of disbursement, not just the
enrollment that was anticipated when the institution originally
packaged the annual loan. In the RISE Committee discussions, the
Department explained that institutions typically build an award package
based on the student's intended full-time enrollment for the academic
year, but before a second or subsequent disbursement, as is already
required, the school must re-check enrollment status to determine
eligibility for the second or subsequent disbursement. If the student
is enrolled for fewer credits than full-time at that point, the
institution must reduce that disbursement so that the total loan for
the academic year reflects the student's actual enrollment status.
Likewise, if the student withdrew or dropped credits after the first
disbursement that caused the student to be enrolled less than full-time
for that term, the institution must reduce the subsequent disbursement
in accordance with the schedule of reductions formula to make certain
the student's annual amount disbursed is equal to the student's
enrollment status.
By anchoring the reduction to the disbursement eligibility date in
Sec. 668.164(b)(3), the regulations ensure that:
<bullet> students who remain full-time across the academic year may
still receive the full annual loan limit;
<bullet> students whose enrollment falls below full-time before a
disbursement will have their annual loan amount reduced in proportion
to their updated enrollment; and
<bullet> institutions are not required to predict future enrollment
beyond what they already do under the existing aid packaging process.
This approach reflects the RISE Committee's concern that part-time
and less than full-time students should receive the amount of loan
eligibility they ``earn'' based on their enrollment over the academic
year, while avoiding retroactive recalculations that would be difficult
to administer and confusing for borrowers.
The Department's proposed regulations would codify the
institutionally determined loan limits established in the OBBB.
Financial aid administrators have long supported this approach as a
means of helping to prevent borrowers from incurring unreasonable
levels of debt.\28\ Institutions already have the authority under Sec.
685.301(a)(8), on a case-by-case (or student-by-student) basis, to
reduce a Direct Loan or choose not to originate a loan. However, the
new institutionally determined loan limit regulations provide further
flexibility as to when, and how, an institution may limit borrowing
under the new OBBB statutory authority. Additionally, the Department's
proposed regulations in Sec. 685.203(m)(2)(ii) through (iv) provide
requirements to ensure the Department complies with the statutory
requirements and that institutions provide borrowers with adequate
information about the programs that may be subject to institutionally
determined loan limits, thereby

[[Page 4277]]

providing borrowers with information to make informed choices.
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\28\ National Association of Student Financial Aid
Administrators, NASFAA Issue Brief: Loan Limits (Feb. 2018)
(recommending institutional authority to limit loans); Keeping
College Within Reach: Examining Opportunities to Strengthen Federal
Student Loan Programs, Hearing Before the Subcomm. on Higher Educ.
and Workforce Training, H. Comm. on Educ. and the Workforce, 113th
Cong. (2013) (questions submitted for the record noting NASFAA's
Debt Task Force recommendation to allow colleges to limit students'
loan eligibility); Ben Barrett & Amy Laitinen, Off Limits: More to
Learn Before Congress Allows Colleges to Restrict Student Borrowing
(New America, May 2017) (describing institutional and trade
association support for expanded loan-limiting flexibility);
National Association of Student Financial Aid Administrators,
Ability to Limit Loans: NASFAA Membership Survey (May 2019)
(reporting survey results on institutional interest in borrowing-
limit authority).
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By requiring institutions to document their decision and follow
customary record retention requirements, the Department would be able
to examine if the institution is applying their policy consistently to
all students enrolled in that academic program. Furthermore, an
institution would be required to notify students prior to limiting a
current or prospective student's eligibility for a Direct Loan. We
believe that these additional measures help ensure transparency in the
process and would allow students to make an informed decision on
whether to continue in their academic program or seek other means to
finance their education.
The Department believes that the institution's decision to reduce
the loan limit for a specific program of study would occur before the
start of the new academic year so that there is adequate time to notify
current and prospective students who enroll in that program prior to
those students being subjected to the reduced loan limit.
Section 428H of the HEA and Loan Limits for Certain Health
Professionals
Section 428H(d)(2)(A) of the HEA established loan limits for
Federal Unsubsidized Stafford Loans made to graduate, professional, and
independent postbaccalaureate students prior to July 1, 2010, and the
HEA authorized the Secretary to increase loan limits for students
``engaged in specialized training requiring exceptionally high costs of
education.'' Under this authority, the Secretary previously increased
the aggregate loan limits for graduate and professional students
enrolled in certain approved health profession programs (as defined by
Section 703(a) of the Public Health Act). The Department first
published these increased limits in DCL 98-L-209 (August 1, 1998). The
Department last updated the increased limits in 2008 (DCL GEN-08-04
(April 18, 2008)).
Section 455(a)(1) of the HEA provides that ``loans made to
borrowers under Part D of the HEA shall have the same terms,
conditions, and benefits, and be available in the same amounts, as
loans made to borrowers, and first disbursed on June 30, 2010 under
sections 428, 428B, 428C, and 428H'' of the HEA, ``unless otherwise
specified in this part.'' Section 455(a)(4) of the HEA, added by the
OBBB, established new annual and aggregate limits for Federal Direct
Unsubsidized Stafford Loans made to graduate and professional students
``beginning on July 1, 2026.'' Because the limits set forth in Section
455(a)(4) explicitly apply to all Federal Direct Unsubsidized Stafford
Loans made to graduate and professional students on or after July 1,
2026, including those enrolled in health profession programs, the
increased annual and aggregate loan limits established by the Secretary
for graduate and professional students enrolled in certain approved
health profession programs will not apply to loans made on or after
July 1, 2026.
Notwithstanding the aforementioned, graduate and professional
students enrolled in certain approved health profession programs and
who meet the criteria for the interim exception under proposed Sec.
685.203(b)(2)(iv)(B) regarding unsubsidized annual loan limits or Sec.
685.203(e)(6) regarding unsubsidized aggregate loan limits will still
be eligible for the increased loan limits during their expected time to
credential. This is because the new loan limits effective on or after
July 1, 2026, will not apply to these borrowers so long as they remain
enrolled in their program of study. Consequently, they will retain
access to the loan limits for loans made before July 1, 2026, including
the increased unsubsidized loan amounts due to the high-cost nature of
their program of study through the interim exception period. While a
longstanding and widely used definition, the Department is aware that
the definition of ``professional student'' has caused some confusion.
The Department particularly invites commenters to suggest alternative
terminology for this and related terms to ensure it is clear that this
provision was designed by Congress to reduce borrowing for certain
types of students and is not a value judgement about the professional
nature of programs or occupations themselves.
Deferment (Sec. 685.204)
Statute: Section 82002 of the OBBB amends Section 455(f) of the
HEA, titled ``Deferment; Forbearance,'' to sunset the authority for
unemployment and economic hardship deferments for new Direct Loans
while preserving these deferments for existing borrowers.
Current Regulations: Section 685.204 contains the regulations on
deferments for Direct Loan borrowers. Section 685.204(f) provides the
eligibility criteria, including the timeframes in which the borrower
may receive an unemployment deferment. Section 685.204(f) further
provides the borrower qualifications, including the manner on how to
apply for an unemployment deferment and other rules that pertain to
borrowers receiving an unemployment deferment.
Section 685.204(g) provides the eligibility criteria for the
economic hardship deferment, including the cumulative maximum periods a
borrower may receive an economic hardship deferment and the periods of
time in which the Secretary grants an economic hardship deferment.
Proposed Regulations: The Department proposes to restructure the
regulations at Sec. 685.204(f)(1) to provide the eligibility criteria
for an unemployment deferment based on loan disbursement date. We
propose to redesignate current Sec. 685.204(f)(1) as Sec.
685.204(f)(1)(i) and provide that for loans disbursed before July 1,
2027, a borrower is eligible for an unemployment deferment during
periods that, collectively, do not exceed the three years in which the
borrower is seeking and unable to find full-time employment. We further
propose to add new Sec. 685.204(f)(1)(ii) to provide that for loans
disbursed on or after July 1, 2027, a borrower may not receive an
unemployment deferment. We also propose to add ``the'' after ``For'' in
Sec. 685.204(f)(3).
The Department proposes to restructure the regulations at Sec.
685.204(g)(1)(i) and (ii) to provide the eligibility criteria for an
economic hardship deferment based on the loan disbursement date.
Specifically, we propose to revise the current Sec. 685.204(g)(1)(i)
to provide that for Direct Loans disbursed before July 1, 2027, a
borrower is eligible for economic hardship deferments that,
collectively, do not exceed three years. We further propose to
redesignate current Sec. 685.204(g)(1)(ii) as Sec.
685.204(g)(1)(iii). Finally, we propose to add a new Sec.
685.204(g)(1)(ii) to provide that for Direct Loans disbursed on or
after July 1, 2027, a borrower may not receive an economic hardship
deferment.
Reasons: The regulations are amended to reflect the changes made by
the OBBB. Specifically, the OBBB provides that, for those borrowers
with loans first disbursed before July 1, 2027, they may continue to
receive unemployment and economic hardship deferments, subject to
existing duration limits, but borrowers with loans first disbursed on
or after that date are not eligible for those deferments. We note that
an individual borrower could have split eligibility (i.e., they could
have a loan before July 1, 2027, which is eligible for unemployment
deferment, and a loan on or after July 1, 2027, which would not be
eligible for that same deferment). These statutory changes require
conforming amendments to Sec. 685.204 so that the Department's
regulations on

[[Page 4278]]

deferment reflect the revised HEA framework and operate consistently
with the OBBB repayment and hardship-relief system.
Current Section 685.204(f) and (g) provide unemployment and
economic hardship deferments for eligible Direct Loan borrowers,
generally for up to three years. These provisions describe the
circumstances in which a borrower may receive an unemployment
deferment, including when the borrower is seeking and unable to find
full-time employment, and the criteria for receiving an economic
hardship deferment. The deferments have functioned as short-term
protections for borrowers who experience job loss, very low income, or
other qualifying hardships.
To conform our regulations to the OBBB, the Department proposes to
revise Sec. 685.204(f) and (g) so that eligibility for unemployment
and economic hardship deferments depends on the loan's first
disbursement date. Proposed Sec. 685.204(f)(1)(i) and (g)(1)(i) would
provide that a borrower with Direct Loans first disbursed before July
1, 2027, remains eligible for unemployment and economic hardship
deferments during periods that collectively do not exceed three years,
consistent with current rules. New Sec. 685.204(f)(1)(ii) and
(g)(1)(ii) would provide that a borrower with Direct Loans first
disbursed on or after July 1, 2027, may not receive unemployment or
economic hardship deferments. The Department also proposes minor
conforming edits, including revisions to cross-references and
clarifying words, to improve internal consistency and readability
without altering the substance of borrower protections for loans that
remain eligible for deferment.
During the RISE Committee, the Department explained that the OBBB
preserves unemployment and economic hardship deferments only for
borrowers whose loans are first disbursed on or before July 1, 2027,
and that the regulations would need to reflect that distinction by loan
disbursement date. Committee materials and discussion summarized the
Department's intent to maintain access to these deferments for legacy
borrowers while ending their availability for new loans, and to
coordinate this change with related proposals on forbearance limits,
rehabilitation, and the new repayment framework. After reviewing the
draft amendments to Sec. 685.204(f) and (g), the Committee did not
raise objections when presented with the amendatory text in week two of
the negotiations.
By limiting unemployment and economic hardship deferments to Direct
Loans first disbursed before July 1, 2027, the proposed amendments to
Sec. 685.204 implement the OBBB's statutory changes, preserve existing
expectations for borrowers with legacy loans, and clarify that future
borrowers must rely primarily on simplified repayment options and
targeted hardship-relief authorities rather than on status-based
deferments. This structure is intended to reduce regulatory complexity,
improve alignment between deferment provisions and the new repayment
system, and provide a clearer set of protections for both current and
future borrowers.
These revisions would give borrowers, institutions, and servicers a
more transparent and administrable deferment framework that aligns with
the new repayment structure under the OBBB, clarifies when deferment is
available, and supports smoother transitions between deferment, active
repayment, and periods that may count toward forgiveness.
Forbearance (Sec. 685.205)
Statute: Section 82002 of the OBBB amends Section 455(f) of the
HEA, ``Deferment; Forbearance,'' to limit the use of forbearance for
future borrowers, effective for loans made on or after July 1, 2027.
Current Regulations: Section 685.205 contains the regulations on
forbearances for Direct Loan borrowers; Sec. 685.205(c) provides the
periods of forbearance. Under Sec. 685.205(c)(1), the Secretary grants
forbearance for a period of up to one year and under Sec.
685.205(c)(2), a borrower may request to renew the forbearance, and it
will remain valid for the duration of the period in which the borrower
meets the criteria for the forbearance.
Proposed Regulations: The Department proposes to restructure the
regulations at Sec. 685.205(c)(1) to provide the period of forbearance
and a limited period of forbearance for loans disbursed on or after
July 1, 2027. Specifically, we propose to redesignate current Sec.
685.205(c)(1) as Sec. 685.205(c)(1)(i). We also propose to add Sec.
685.205(c)(1)(ii) that provides for loans disbursed on or after July 1,
2027, and notwithstanding the granting of forbearance for a period of
up to one year, the Secretary grants forbearance for a period that does
not exceed nine months within a 24-month period for a general
forbearance. Such forbearance would begin the first month for which the
forbearance is granted.
Reasons: The Department proposes to amend Section 685.205 to
reflect the changes made by the OBBB. Under these amendments, loans
made on or after July 1, 2027, are eligible for general forbearance for
no more than nine months within any 24-month period, while earlier
cohorts with legacy loans retain access to the longer forbearance
periods authorized under current law. The Department must therefore
revise Sec. 685.205 to reflect these new statutory limits and to
distinguish between legacy borrowers and borrowers whose loans are made
under the OBBB framework.
Currently, Sec. 685.205 allows the Secretary to grant forbearance
when a borrower is unable to make required monthly payments. Under
Sec. 685.205(c)(1), the Secretary may grant a forbearance for a period
of up to one year. Under Sec. 685.205(c)(2), the borrower may request
a renewal of a forbearance period so long as the borrower continues to
meet the criteria for forbearance.
Consistent with the OBBB, the Department proposes to restructure
Sec. 685.205(c)(1) to set different limits on general forbearance
based on loan disbursement date, while preserving existing rights for
legacy borrowers. As described to the RISE Committee, the Department
would redesignate current Sec. 685.205(c)(1) as Sec.
685.205(c)(1)(i), under which borrowers with loans disbursed before
July 1, 2027, may continue to receive general forbearance for periods
of up to one year at a time, subject to existing renewal rules. The
Department would then add Sec. 685.205(c)(1)(ii), providing that for
loans disbursed on or after July 1, 2027, the Secretary may grant
general forbearance for no more than nine months within any 24-month
period.
The Department also proposes conforming edits in Sec. 685.205(a)
and (b) to cross-reference the new paragraph (c)(1) to make this limit
required for borrower-requested general forbearances.
In its presentations to the RISE Committee, the Department
explained that the nine-month limit applies only to general,
discretionary forbearances requested by the borrower under Sec.
685.205(a)(1) and does not apply to processing or other administrative
forbearances initiated by the Department or a servicer. Non-Federal
negotiators raised questions about how distinct types of forbearances
such as processing forbearances while an income-driven repayment
application is pending or administrative forbearances during a total
and permanent disability discharge review would interact with the new
limit. The Department clarified that processing, and administrative,
forbearances would not count against the nine-month general forbearance
cap,

[[Page 4279]]

while borrower-requested discretionary forbearances would count, and
confirmed that cancer deferment and Total and Permanent Disability-
related administrative forbearances are not impacted by the cap.
The RISE Committee also reviewed the proposed text for Sec.
685.205 during its two sessions. Department staff described the
restructuring of Sec. 685.205(c)(1) into separate provisions for loans
disbursed before and on or after July 1, 2027, and emphasized that
borrowers with loans disbursed before July 1, 2027, would retain access
for up to one year of general forbearance per loan, while borrowers
with later loans would be limited to nine months. Like deferments, we
note that an individual borrower could have split eligibility (i.e.,
they could have a loan eligible for forbearance made before July 1,
2027, but a loan made on or after July 1, 2027, would not be eligible
for that same forbearance). The RISE Committee expressed concern about
borrower confusion and servicing errors, particularly the risk that
servicers might misclassify forbearances in ways that could cause
borrowers to exhaust their nine-month limit inadvertently. In response,
the Department reiterated that the cap applies only to borrower-
requested general forbearances and noted that existing oversight and
error-correction processes would continue to apply.
These proposed changes to Sec. 685.205 are intended to work in
concert with the broader OBBB repayment and relief framework, including
the new Repayment Assistance Plan. At the same time, the proposed nine-
month limit for loans disbursed on or after July 1, 2027, retains
general forbearance as a short-term tool for unexpected disruptions,
while reducing the risk that borrowers will spend years in forbearance
accumulating interest instead of enrolling in affordable repayment
plans. For borrowers with loans made before July 1, 2027, the rule
preserves access to longer forbearance periods consistent with current
regulations, providing a gradual transition to the new statutory
framework and honoring existing expectations. Collectively, these
revisions would create a more transparent and disciplined forbearance
framework that aligns with the OBBB's repayment structure, reduces the
risk that borrowers are inappropriately placed or kept in prolonged
forbearance, and clarifies how forbearance periods affect interest,
capitalization, and a borrower's progress toward potential forgiveness.
Fixed Payment Repayment Plans (Sec. 685.208)
Statute: Section 82001(b)(1)(A) of the OBBB amends Section
455(d)(1) of the HEA to limit access to the standard, graduated, and
extended repayment plans to borrowers who only have outstanding Direct
Loans and do not receive another Direct Loan on or after July 1, 2026.
Section 82001(b)(3) of the OBBB further amends Section 455(d)(6) of the
HEA which terminated and limited the Secretary's repayment authority
and sunsets repayment plans that were available before July 1, 2026.
Section 455(d)(7)(A)(i) of the HEA would be the only fixed payment
repayment plan available to borrowers who receive a Direct Loan made on
or after July 1, 2026.
Current Regulations: Section 685.208 contains the regulations on
fixed payment repayment plans for Direct Loan borrowers. Section
685.208(a) provides a general overview of fixed payment repayment plans
under which a borrower's required monthly payment amount is determined
based on the amount of the borrower's Direct Loans, the interest rates
on the loans, and the repayment plan's maximum repayment period.
Section 685.208(b) and (c) provide the terms of the standard repayment
plans based on Direct Loan type and date of entering repayment; Sec.
685.208(d) and (e) provide the extended repayment plans based on Direct
Loan type and date of entering repayment; and Sec. 685.208(f), (g),
and (h) provide the graduated repayment plans based on Direct Loan type
and date of entering repayment. Section 685.208(i) and (j) provide the
repayment periods for the fixed payment repayment plans based on the
outstanding balance of a borrower's Direct Loans. Finally, Sec.
685.208(k) provides that the repayment period for any of the fixed
payment repayment plans excludes periods of authorized deferments or
forbearances.
Proposed Regulations: The Department proposes to restructure the
regulations at Sec. 685.208 to provide the fixed payment repayment
plans based on when the Direct Loan was made. We propose to revise
current Sec. 685.208(b) as the header for fixed repayment plans for
Direct Loans made before July 1, 2026. Proposed Sec. 685.208(b) would
also contain the following fixed repayment plans: standard, graduated,
extended, and tiered standard. We also propose to revise current Sec.
685.208(c) as the header for fixed repayment plans for Direct Loans
made on or after July 1, 2026. Proposed Sec. 685.208(c) will contain
only the tiered standard repayment plan. We also propose to include the
repayment period within each fixed repayment plan.
Reasons: The regulations are amended to reflect changes made to the
HEA by the OBBB. Among the changes in Sec. 685.208, our proposal to
organize the regulatory text by when a Direct Loan was made and the
fixed repayment plans available to the borrower for that loan would
streamline information so that all information about each of the
respective repayment plans (i.e., the standard, graduated, or extended
repayment plans) are in a central location in regulation and are
contained together. Each fixed payment repayment plan would also
contain the appropriate repayment period applicable for that plan and
other terms such as authorized periods of deferment and forbearances
that are included in the repayment period. This provides structure and
consistency to this regulatory subsection.
Congress specified the new standard repayment plan in Section
455(d)(7)(A)(i) of the HEA to be one of the two repayment plans
available to new borrowers on or after July 1, 2026. We propose to name
the new fixed payment repayment plan the Tiered Standard repayment
plan. The Tiered Standard repayment plan would be the only fixed
repayment plan available to borrowers who receive a Direct Loan made on
or after July 1, 2026. The Tiered Standard repayment plan, including
the prescribed repayment periods specified in the law, is added in
proposed Sec. 685.208(b).
Consistent with these two statutory provisions that amended the
HEA, in Sec. 685.208(b)(1) through (b)(7), we limit access to the
standard, graduated, and extended plans on the condition that the
borrower does not receive a new Direct Loan on or after July 1, 2026.
The repayment period for the Tiered Standard repayment plan is
enumerated in statute and ranges from a period of 10 years to 25 years
based on the total outstanding principal balance at the time the
borrower enters repayment under the plan. However, in certain
circumstances, that term is recalculated. If a borrower in the Tiered
Standard repayment plan obtains new loans that would be repaid under
Tiered Standard repayment plan, the repayment period is recalculated
using the outstanding principal balance for all eligible loans as of
the date that the new Direct Loan enters the Tiered Standard repayment
plan. Similarly, a borrower enrolled in Tiered Standard repayment plan,
who changes to a repayment plan that is not the Tiered Standard
repayment plan (or defaults on their loan) and then re-

[[Page 4280]]

enrolls in Tiered Standard repayment plan would also have their
repayment period recalculated based on the total outstanding balance of
eligible loans on the date the borrower re-enrolls in the Tiered
Standard repayment plan. Section 455(d)(7)(A)(i)(II) of the HEA bases
the applicable repayment period on the total outstanding principal of
all the borrower's Direct Loans ``at the time the borrower is entering
repayment'' under the Tiered Standard repayment plan, and inclusion of
that additional loan would require an amortization of all the
outstanding principal for all the borrower's Direct Loans. A borrower
in the Tiered Standard repayment plan who enters a period of authorized
deferment or forbearance would not be considered to have left the
Tiered Standard repayment plan and would not need to have the repayment
period recalculated.
During the first session of the RISE Committee, some Committee
members expressed concerns about borrowers being placed into Tiered
Standard repayment plan, which is not a qualifying repayment plan for
PSLF purposes. Section 455(d)(7)(B) of the HEA requires the Secretary
to place a borrower in the Tiered Standard repayment plan if the
borrower does not select a repayment plan for loans made on or after
July 1, 2026; accordingly, a borrower who is on track to receive PSLF
would need to proactively select a PSLF qualifying repayment plan if
their loan qualifies for such a plan. Section 455(m)(1)(A) of the HEA
and the regulations at 34 CFR 685.219(b) enumerate the PSLF qualifying
repayment plans, and the Tiered Standard repayment plan is not listed
as one of the PSLF qualifying repayment plans. The Department will make
certain that information in communications to borrowers who are seeking
PSLF clearly states that the Tiered Standard repayment plan would not
qualify as an eligible repayment plan for the purposes of the PSLF
program.
Minimum Payments
Section 428(b)(1)(L)(i) of the HEA provides that the total amount
of the annual payments made by a borrower during any year of a
repayment period with respect to the aggregate amount of all loans made
to that borrower must not be less than $600 or the balance of all such
loans, whichever amount is less. This provision creates a mandatory
minimum monthly payment of $50 per month per borrower under the Tiered
Standard repayment plan. Section 455(a)(1) of the HEA, as amended, 20
U.S.C. 1087e(a)(1), otherwise known as,
Parallel Terms and Conditions provision, states that unless
otherwise specified in this part, loans made to borrowers under this
part shall have the same terms, conditions, and benefits . . . as loans
made to borrowers . . . under section 428 . . .
And Section 82001 of the OBBB, Public Law 119-21, which amended Section
455(d)of the HEA to create the Tiered Standard repayment plan, does not
specify a minimum monthly payment amount. Therefore, by operation of
the Parallel Terms and Conditions provision of the HEA, the monthly
payment amount is imputed into the language of the Tiered Standard
repayment plan.
Income-Driven Repayment Plans (Sec. 685.209)
Statute: Section 82001(b) of the OBBB amends Section 455(d)(1) of
the HEA to limit access to certain IDR plans for borrowers who only
have outstanding Direct Loans and do not receive another Direct Loan on
or after July 1, 2026. Section 82001(c)(1) of the OBBB further amends
Section 455(d) and (e) of the HEA, which terminated and limited the
Secretary's repayment authority to make income-contingent repayment
available and sunset those ICR plans before July 1, 2028. Section
82001(a) provides for the transition of borrowers in an ICR plan to
other IBR plans. Section 82001(d) of the OBBB adds Section 455(q) to
the HEA, which provides the authority and overall framework for the
Repayment Assistance Plan. Section 82001(f) of the OBBB amends Section
493C(a)(3) of the HEA to eliminate partial financial hardship as a
condition of entry into IBR. Section 82001(c)(2)(D) of the OBBB amended
Section 494(a)(2) of the HEA regarding the procedure and requirements
for requesting Federal tax information (FTI) from the Internal Revenue
Service (IRS) for purposes of determining eligibility for the IDR
plans, including the Repayment Assistance Plan.
Current Regulations: Section 685.209 contains the regulations on
IDR plans for Direct Loan borrowers. Section 685.209(a) provides a
general overview of the four IDR plans under which a borrower's
required monthly payment amount is determined based on the borrower's
income and family size. Currently, the four IDR plans are: the Saving
on a Valuable Education (SAVE) plan, which replaced the Revised Pay As
You Earn (REPAYE) plan; the Income-Based Repayment (IBR) plan; the Pay
As You Earn (PAYE) Repayment plan; and the Income-Contingent Repayment
(ICR) plan.\29\ Section 685.209(b) enumerates definitional terms
pertaining to IDR plans. Section 685.209(c) provides the borrower
eligibility criteria for each of the IDR plans. Section 685.209(d)
stipulates the loans eligible to be repaid under each of the IDR plans
while Sec. 685.209(e)(1) provides how the Secretary treats a
borrower's income for purposes of calculating a borrower's monthly
payment amount under an IDR plan, and Sec. 685.209(e)(2) provides
whose loan debt is includable for purposes of adjusting a borrower's
monthly payment amount in an IDR plan. Section 685.209(f) provides how
the Secretary calculates the monthly payment amounts for each of the
IDR plans, and Sec. 685.209(g) provides adjustments to those monthly
payment amounts.
---------------------------------------------------------------------------

\29\ The Department is currently enjoined from operating the
Saving on a Valuable Education (SAVE) plan. See Missouri v. Biden,
112 F.4th 531, 538 (8th Cir. 2024).
---------------------------------------------------------------------------

Section 685.209(h) provides how the Secretary treats interest
accrual on a borrower's loans depending on the IDR plan. Section
685.209(j) provides how the Secretary capitalizes unpaid, accrued
interest under the various IDR plans. Section 685.209(k) provides the
forgiveness timelines under which a borrower receives forgiveness of
the remaining balance of the borrower's Direct Loan after satisfying
the requisite number of monthly payments or the equivalent over a
period of years based on the type of IDR plan. Section 685.209(k) also
provides when a borrower receives a month of credit toward forgiveness
for the various IDR plans. Finally, Sec. 685.209(l) provides the
application and annual recertification procedures of a borrower's
income and family information for purposes of calculating a monthly
payment under an IDR plan and includes the consequences of failing to
recertify.
Proposed Regulations: The Department proposes to include repayment
plan provisions in Sec. 685.209, including most of the terms and
conditions of the newly created Repayment Assistance Plan, and other
changes made by the OBBB.
With respect to the IDR plans, we propose to amend Sec. 685.209(a)
to add the newest IDR plan: the Repayment Assistance Plan. We also
propose to restructure the definitions section in Sec. 685.209(b) by
providing definitional terms applicable to the Repayment Assistance
Plan. We propose to add the following new definitions and amend
existing definitions: applicable amount; base payment; dependent;
eligible loan; excepted consolidation loan; excepted

[[Page 4281]]

loan; excepted PLUS loan; family size; monthly payment or the
equivalent; and new borrower. We propose to remove the definition of
partial financial hardship from the list of definitions in Sec.
685.209(b).
With respect to borrower eligibility for IDR plans, we propose to
amend Sec. 685.209(c)(1) to make clear that, except under certain
circumstances for borrowers in IBR or the Repayment Assistance Plan,
defaulted loans may not be repaid under an IDR plan. We propose to
amend Sec. 685.209(c)(2), (4), and (5) to provide that through June
30, 2028, borrowers may repay under the PAYE and ICR plans if they meet
the criteria in each of those ICR plans and have not received a Direct
Loan on or after July 1, 2026. Where appropriate, we propose removing
partial financial hardship, and in its place the borrower must elect to
have their aggregate monthly payment recalculated so as not to exceed
the applicable amount. We also propose in Sec. 685.209(c)(6) that any
Direct Loan borrower may repay under the Repayment Assistance Plan if
the borrower has loans eligible for repayment under the plan. Finally,
we provide a transition period for borrowers in an income-contingent
repayment plan (ICR, PAYE, SAVE) to elect to repay under a different
repayment plan.
With respect to loans eligible to be repaid under IDR plans, we
propose to amend Sec. 685.209(d)(1) and (3) to provide that through
June 30, 2028, borrowers may repay select Direct Loans under certain
ICR plans. We propose to amend Sec. 685.209(d)(1), (2), and (3) to
make clear when a borrower may repay excepted consolidation loans under
IDR plans. We propose to add Sec. 685.209(d)(4) to clarify the loans
eligible to be repaid under the Repayment Assistance Plan. And we make
clear in proposed Sec. 685.209(d)(5) that only Direct Loans made
before July 1, 2026, may be repaid under the PAYE, IBR, and ICR plans.
We also propose to amend Sec. 685.209(e) to specify how the Secretary
would treat income and loan debt for the purposes of calculating a
monthly payment under the IDR plans, including by adding how loan debt
and income are treated for purposes of the Repayment Assistance Plan.
With respect to how monthly payment amounts are calculated for the
various IDR plans, we propose to amend Sec. 685.209(f)(2) and (3) to
clarify that a borrower's repayment period could exceed the 10-year
standard repayment plan timeframe while repaying under the IBR or PAYE
plans when their payment is no longer based on an amount calculated
using their income. We also propose to add Sec. 685.209(f)(5), which
governs the applicable monthly payment amount required under the
Repayment Assistance Plan and clarifies it must be equal to the
borrower's base payment, divided by twelve, less $50 for each dependent
of the borrower. We also propose to add Sec. 685.209(g)(3), where we
would adjust monthly payment amounts calculated under the Repayment
Assistance Plan and propose that if the adjusted monthly payment as
calculated is less than $10, the monthly payment would be $10.
With respect to treatment of interest and interest subsidies under
the various IDR plans, we propose to add in Sec. 685.209(h) a cross-
reference to the Repayment Assistance Plan that if a borrower's
calculated monthly payment under an IDR plan is insufficient to pay the
accrued interest on the borrower's loans, we would charge the remaining
accrued interest to the borrower. We also propose to add Sec.
685.209(h)(4), which would state that under the Repayment Assistance
Plan, during all periods of repayment on all loans being repaid under
the Repayment Assistance Plan, we would not charge the borrower accrued
interest that is not covered by the borrower's on-time payment of the
amount due for that month. However, we would provide under Sec.
685.209(h)(4)(ii), that if a borrower's payment is credited to a future
monthly payment, and the payment equals or exceeds the on-time monthly
payment amount made under the Repayment Assistance Plan, we would
charge the borrower accrued interest that is not covered by the
borrower's on-time payment of the amount due for that month. Under
proposed Sec. 685.209(j)(1), we would add the Repayment Assistance
Plan as one of the IDR plans where the Secretary does not capitalize
unpaid accrued interest in accordance with interest capitalization
regulations at Sec. 685.202.
With respect to loan forgiveness under the IDR plans, we propose to
amend Sec. 685.209(k)(4) to specify under which IDR plans a borrower
may receive a month of credit toward IDR forgiveness. Specifically, we
propose to add Sec. 685.209(k)(4)(i)(B), which would provide that
making a payment on or before June 30, 2028, under the PAYE, or ICR,
plan or having a monthly payment obligation of $0 would give a borrower
a month of credit toward forgiveness for IBR. We also propose to add
Sec. 685.209(k)(7), which would provide that under the Repayment
Assistance Plan, a borrower receives forgiveness of the remaining
balance of the borrower's loans after the borrower has satisfied 360
monthly payments over a period of at least 30 years. We propose to
specify in Sec. 685.209(k)(8) the terms and conditions of receiving
forgiveness under the Repayment Assistance Plan and specify the monthly
payment or their equivalents that would give a borrower a month of
credit toward forgiveness under the Repayment Assistance Plan.
With respect to applying for an annual recertification procedure in
IDR plans, we propose to codify procedures when the Secretary may
implement certification and automatic recertification for enrollment in
the Repayment Assistance Plan. We propose to add Sec. 685.209(l),
which are the conditions under which a borrower must provide
documentation or information to the Secretary related to the borrower's
income and number of dependents of the borrower for purposes of
enrolling in the Repayment Assistance Plan.
Finally, we propose to add new provisions in Sec. 685.209 under
new Sec. 685.209(o). First, we propose in Sec. 685.209(o)(1) for the
PAYE plan and the Repayment Assistance Plan, if the borrower's monthly
payment amount is not sufficient to pay any of the principal due, the
payment of that principal is postponed. We further add in Sec.
685.209(o)(2) the provisions of matching principal payments under the
Repayment Assistance Plan, which would provide that when the borrower
is not in a period of deferment or forbearance, for each month the
borrower makes an on-time monthly payment and the outstanding principal
balance is reduced by less than $50, the Secretary reduces such total
outstanding principal of the borrower by an amount that is equal to the
lesser of $50 or the monthly payment made and then subtracting that
figure from the amount of the monthly payment that is applied to such
total outstanding principal balance. We also propose to specify in
Sec. 685.209(o)(3) that for the purposes of the Repayment Assistance
Plan, we would consider a payment to be ``on-time'' if the payment is
received on or before the due date for the current month and satisfies
the due date for the current month, but after the due date for the
previous month. We would also specify how we would treat loan payments
made in excess of on-time payments under the Repayment Assistance Plan
for purposes of receiving the matching principal payment or interest
subsidy, monthly credit toward PSLF, or forgiveness under the Repayment
Assistance Plan.
Rea

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