6 Takeaways As Huge Student Loan Reform Bill Advances In Congress

Major reforms to federal student loan repayment plans, student loan forgiveness programs, and federal aid are on the cusp of enactment after Senate Republicans on Tuesday approved their sprawling reconciliation bill that would dramatically change how millions of Americans pay for college and repay their student debt. The huge changes to student loan programs are just one element of their broader effort to deliver on President Donald Trump’s priorities of slashing government spending and cutting taxes.

“President Trump and I want to preserve the American Dream for working and middle America,” said Senator Bill Cassidy (R-La.) in a statement on Tuesday. “We keep taxes low, cut taxes on tips, overtime, and Social Security, extend the Child Tax Credit, fix our broken education system, support our military, secure our border, and build a business environment that creates better paying jobs.”

But critics slammed the bill, warning that it could have devastating consequences for borrowers, prospective students, and the broader public.

“Young people are being treated as collateral, and today’s vote makes that painfully clear,” said Krystal D. Milam, national policy & advocacy director at Young Invincibles in a statement on Tuesday. “Medicaid, SNAP, financial aid, and student loan repayment options are all being gutted to pay for tax cuts for the wealthy and well-connected. Young Americans deserve better than lawmakers who treat their future as bargaining chips.”

As the student loan reforms inch closer to becoming a reality, here are the key takeaways for borrowers and their families.

Student Loan Repayment Would Be Costlier For Some Borrowers

The “One Big, Beautiful Bill” would fully repeal the Pay-As-You-Earn and SAVE plans — two of the most affordable income-driven repayment plan options. IDR plans allow borrowers to make payments based on a formula applied to their income, with student loan forgiveness for any remaining balance after 20 or 25 years. New borrowers would be cut off from PAYE and SAVE by July 2026, and the programs would be fully phased out by July 2028.

Under the terms of the Senate bill, pre-2026 borrowers enrolled in PAYE and SAVE would have the choice to switch to the Income-Based Repayment plan (or IBR) or the new Repayment Assistance Plan (or RAP). But under either scenario, many borrowers will pay much more on their student loans. Take the following example of a single borrower with two children who makes around $70,000 per year:

• Under PAYE, her payments would be around $250 per month. Under SAVE, if all of her loans are from an undergraduate program, her payments would be around $85 per month.
• If she switches to IBR, her payments would be around $375 per month. She may also have an additional five years in repayment under IBR as compared to PAYE and SAVE, which would cost her an additional $22,500.
• If she switches to RAP, her payments would be around $310 per month. But she would have an additional 10 years in repayment under RAP, which has a 30-year repayment term instead of 20. As a result, she would pay more than $37,000 in additional payments.

IBR Preserves Student Loan Forgiveness Paths

While the bill would repeal PAYE and SAVE (as well as an older income-driven plan called Income-Contingent Repayment, or ICR), the IBR plan would be preserved for current borrowers. And IBR allows for student loan forgiveness after 2o or 25 years, depending on whether the borrower took out loans prior to July 1, 2014. However, the legislation would remove a feature of IBR that caps how high a borrower’s monthly payment would get – meaning there would be no limit to payment increases under this modified version of the plan.

IBR also is a qualifying repayment plan for Public Service Loan Forgiveness, or PSLF. PSLF offers student loan forgiveness to borrowers after 10 years of qualifying payments while while working for eligible nonprofit or public employers. The Senate bill does not make changes to the PSLF program (Republicans dropped a provision that would have eliminated PSLF eligibility for new doctors and dentists).

RAP Is A Mixed Bag For Student Loan Borrowers

The RAP plan that the bill would create is very much a mixed bag for student loan borrowers.

On the one hand, the RAP formula may result in comparatively lower monthly payments compared to IBR for pre-2026 borrowers who would lose access to the PAYE and SAVE plans. Essentially, RAP wouldn’t be as generous as PAYE or SAVE, but wouldn’t necessarily be as expensive as IBR in many cases. RAP also borrows some features that were part of the SAVE plan, including an interest waiver designed to prevent runaway balance growth for borrowers whose monthly payments don’t cover monthly interest accrual, as well as the ability to pay down some loan principal.

But RAP also has some downsides. The plan has a minimum monthly payment requirement, which will hit the lowest-income borrowers the hardest. It also has a 30-year repayment term, which would push out student loan forgiveness by five to 10 years compared to current IDR plans. RAP also has a complicated tiered repayment formula, where the percentage of income that is counted toward the monthly student loan payment increases by every $10,000 in additional income earned; this means that borrowers on the edge of an income bracket could see their payments jump if they earn just a few extra dollars in income. In addition, RAP only allows borrowers to deduct $50 per dependent child in their household from their student loan payment; the formulas for other income-driven plans are more generous, typically allowing for a reduction in payments of around $100 or more per dependent.

Good News And Bad News For Student Loan Borrowers With Parent PLUS Loans

The Senate bill, which was revised just a few days before it passed, is not as bad for Parent PLUS borrowers as the original version of the bill was. That version would have effectively cut off most current Parent PLUS borrowers from any income-driven repayment plan or student loan forgiveness track by repealing the ICR plan and preventing them from accessing IBR or RAP. The only exception would have been for borrowers who were already enrolled in ICR after consolidating their loans. The House version of the bill that passed last month was even worse in some ways.

The version of the bill that passed the Senate this week has some improvements. Under the revised provisions, Parent PLUS borrowers would essentially have one year to consolidate their loans, and up to three years to enroll in an income-driven plan, before they would be cut off. Still, it’s not a perfect solution, as enrolling in an income-driven plan does not make sense for many Parent PLUS borrowers until they have experienced a reduction in their income, and being forced to enroll prematurely in order to preserve their options may be impractical or impossible financially for some families. Importantly, new Parent PLUS borrowers after July 1, 2026 would lose all access to income-driven repayment and student loan forgiveness, including PSLF.

Major Limits On New Student Loans

For prospective borrowers looking to enroll in college or go back to school in 2026 or later, the student loan and financial aid landscape may be significantly different. The legislation imposes major restrictions on new borrowing. The Graduate PLUS program — which helps fund graduate and professional programs — would be completely eliminated. GOP senators tried to partially make up for this by increasing Stafford loan limits for graduate students, but these lifetime limits ($100,000 for graduate programs and $200,000 for professional programs) may not be enough to cover the cost of many graduate, medical, and law programs.

Parent PLUS borrowing would also be capped at $65,000 after July 1, 2026. And new Parent PLUS loans would effectively be barred from income-driven repayment and PSLF. New student loan borrowers would also be ineligible for IBR, with only two repayment options available for their student loans — either a Standard plan, or RAP.

Student Loan Changes Are Not Yet A Done Deal

The Senate bill differs significantly from the House reconciliation bill that passed that chamber in May. As a result, this legislative process is not over. The Senate bill now heads back down to the House, where a vote could occur as soon as today on whether to approve it. If the House rejects the Senate bill, additional changes may be made to various provisions — including, potentially, the elements impacting student loan repayment and loan forgiveness — before it can be finalized and sent to President Trump for his signature.