AID Act

The AID Act creates a new student loan allowance for parents with federal student debt to reduce their income when calculating financial aid for dependent children. Parents with outstanding federal student loans can subtract an allowance equal to the lesser of $4,000 or 15% of their debt (adjusted for inflation), but only if their adjusted gross income is below $200,000 (single) or $400,000 (married). The allowance amount automatically increases yearly based on inflation, as measured by the Consumer Price Index. The Department of Education must report annually by 2026 on how many students benefit, including breakdowns by Pell Grant eligibility and average allowance amounts. This policy directly affects parents with student debt and their dependent children's financial aid calculations under the Higher Education Act.