Student Loan Bill Mandates Quarterly Updates and Post-Tax Income Repayment Estimates

The “Know Before You Owe Federal Student Loan Act of 2025” is exactly what it sounds like: a major attempt to make the student loan process less of a confusing black box and more of a transparent transaction. For anyone considering or currently managing federal student debt, this bill aims to give you the cold, hard numbers upfront and keep them coming, especially when you’re not making payments.

The New Pre-Loan Reality Check

Right now, when you take out your first federal loan, you get “Entrance Counseling.” This bill renames it “Pre-Loan Counseling” and dramatically ramps up the requirements (SEC. 2). Instead of just a general chat about debt, colleges now have to give you a personalized, real-world repayment estimate. This estimate must compare your expected monthly loan payment to your estimated monthly income after they account for taxes, living expenses, and health insurance. They’ll use data on starting wages for your specific field of study to calculate this. Think of it as a mandatory reality check on your future budget.

Crucially, this counseling must also factor in your total expected debt, including any private loans the school knows about and the estimated future debt needed to finish your degree. This shifts the focus from just the current loan to the full financial picture. The school also has to warn you that the higher your debt-to-income ratio, the harder repayment will be, and they must explain why graduating on time is critical to avoiding extra borrowing. For students on the fence about borrowing the maximum, the counseling must explicitly advise borrowing only the minimum necessary.

The Manual Confirmation Loophole Closer

Perhaps the biggest administrative change for students is the requirement that, after finishing the counseling, you must manually enter the exact dollar amount of the loan you want to borrow (SEC. 2). No more automatically accepting the maximum amount offered by simply clicking “yes.” This forces a moment of intentionality. If you’re approved for $10,000 but only need $7,000, you have to type in that lower number. The school can’t certify the loan until this manual confirmation is complete. This provision directly tackles the problem of students passively over-borrowing because it was the easiest option.

No Payments? Quarterly Updates Are Coming

If you’re currently in school, in forbearance, or in any period where you aren’t required to make payments, your loan servicer is now required to send you a quarterly statement (SEC. 3). This is a huge change. Right now, it’s easy to ignore your loans when you’re not paying them, only to be hit with a massive principal balance when repayment starts.

These new quarterly statements must be simple and clearly lay out the numbers. They’ll show your original debt, your current balance, and a breakdown of how much you’ve paid toward interest versus principal so far. Most importantly, the statement must clearly explain the risk of interest capitalization. This is the process where unpaid interest gets added to your principal balance, meaning you start paying interest on your interest. The bill requires the servicer to warn you about this and show you exactly how much interest has accrued since the last statement, along with instructions on how to voluntarily pay that interest to keep your debt from ballooning while you’re in school.