Unprecedented Student Loan Overhaul In ‘Big Beautiful Bill' Passes House, Heads To Trump

Forbes

a day ago

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The House of Representatives on Thursday approved President Donald Trump's 'Big, Beautiful Bill' that would make unprecedented changes to federal student loan programs. Republican lawmakers approved the bill on a narrow party-line vote, with all Democrats opposing the measure. The bill now heads to President Trump, who is expected to sign it on Friday afternoon.
Never before has Congress passed legislation that would take away benefits and relief from current student loan borrowers and college-bound families on such a massive scale. Borrowers currently in repayment on their student loans or pursuing student loan forgiveness, as well as prospective students hoping to attend college or enroll in a graduate program, will now have fewer options to pay for school or manage their existing student debt.
The bill would also impose new restrictions and paperwork requirements for Medicaid and nutritional benefits, which are expected to result in millions of Americans losing access to healthcare and food stamps. GOP lawmakers argued the cuts were necessary to address alleged waste and fraud, and to help offset the costs associated with massive tax cuts. Democrats countered that the bill would disproportionately benefit the wealthiest people, raise the cost of living for everyone else, and endanger the nation's fiscal health by ballooning the deficit.
'Republicans broke their promise to voters to lower costs, instead radically reshaping the way American families pay for the basics while sidelining the federal enforcement officials who hold big corporations accountable for treating families fairly,' said Mike Pierce, Executive Director of the Student Borrower Protection Center, in a statement earlier this week. 'This bill will drive patients deeper into medical debt, borrowers deeper into student debt, and working families deeper into debt to pay for higher energy costs, higher grocery bills, and more expensive cars and trucks.'
Republicans, however, praised the legislation. 'The One Big, Beautiful Bill is one big, beautiful win for the American people,' said Education and Workforce Committee Chairman Tim Walberg (R-MI) in remarks on the House floor early Thursday. 'Americans struggled under crushing inflation driven by the Biden-Harris administration's outrageous spending. Even worse, the Biden-Harris administration spent billions on reckless student loan repayment pauses, forcing Americans who never set foot on a college campus to cover the costs of elite Ivy League degrees.'
Here's what student loan borrowers need to know about the 'Big, Beautiful Bill,' and what comes next.
Major Changes To Student Loan Repayment And Forgiveness
When the Senate narrowly passed its own version of the bill earlier this week, there were some doubts as to whether the House would approve it, given some very significant differences between the Senate bill and the legislation approved by the House in May. But the Senate version of the bill ultimately won the day.
The legislation will phase out most current income-driven repayment plans by July 2026. The SAVE plan, as well as ICR and PAYE, would no longer be an option for any borrower, including those who are now in repayment under those plans. Those who are enrolled in SAVE, ICR, or PAYE would, at some point between July 2026 and 2028, have to either enroll in IBR or a new income-driven plan created by the bill called the Repayment Assistance Plan. Switching to IBR could result in significantly higher monthly payments for many borrowers, particularly those who had been repaying their student loans under PAYE or SAVE. While RAP could be more affordable for some compared to IBR, the tradeoff would be an additional five to 10 years in repayment before the borrower could qualify for student loan forgiveness. Borrowers who lose access to their current repayment plan and fail to make a selection would be forced into a Standard plan, which could be unaffordable for many.
Parent PLUS borrowers who have already consolidated their loans and are currently enrolled in any income-driven repayment plan would be able to maintain access to the IBR plan. But all other Parent PLUS borrowers would have a fairly limited window to act. They would have one year to consolidate their loans, or they could wind up being completely cut off from income-driven repayment and any possibility of eventual student loan forgiveness.
The GOP bill would also suspend new regulations enacted under the Biden-Harris administration that expanded access to student loan discharge programs associated with school misconduct. And it would slash most of the funding allocated to the Consumer Financial Protection Bureau, a federal watchdog agency created to oversee and regulate the financial services sector, including the student loan servicing industry.
More Limited Student Loan Options Starting Next Year
For prospective students and college-bound families, the 'Big, Beautiful Bill' would fundamentally change the landscape for higher education financing. For college students, Stafford loans would remain capped. Parent PLUS loans would still be available, but with severely reduced limits (a $65,000 lifetime cap). And any parent who already has a Parent PLUS loan, and then takes out a new Parent PLUS loan in 2026 or later, could become completely ineligible for any income-driven repayment program or student loan forgiveness, including through the Public Service Loan Forgiveness program.
For graduate and professional students, financing options would also become more narrow. The bill eliminates the Graduate PLUS program, a federal student loan option that helps fund attendance at graduate and professional schools. Increased Stafford loan borrowing limits would partially offset the elimination of this option, but with lifetime caps of $100,000 for graduate students and $200,000 for professional students, it may simply not be enough to cover the full cost of expensive advanced degrees. Critics have argued that some prospective students may turn to riskier private student loans, or decide against going to medical or law school altogether, which would make existing shortages in high-need areas (like rural hospitals) even worse.
And new borrowers who take out any federal student loans starting in July 2026 – regardless of whether they are graduate or undergraduate students – would have only two repayment plan options: a Standard plan on a 10 to 25 year term depending on the loan amount, or the RAP plan, which requires 30 years in repayment before the borrower could qualify for student loan forgiveness.
Student Loan Forgiveness Under PSLF Is Intact But Still In Danger
If there's any good news for borrowers, it's that Congress left the Public Service Loan Forgiveness program, or PSLF, untouched. PSLF offers student loan forgiveness to nonprofit and government workers in as little as 10 years. An earlier provision of the 'Big, Beautiful Bill' would have locked new doctors and dentists out of PSLF, but this provision was dropped by the Senate before passage, and the House approved this modified version of the bill.
But the Trump administration is separately working on a major PSLF overhaul through a rulemaking process that allows the Department of Education to change existing regulations governing federal student loans. The department completed a three-day negotiated rulemaking session this week as it works to implement President Trump's executive order issued in March that would restrict student loan forgiveness under PSLF for organizations that engage in activities with a 'substantial illegal purpose.' Critics have argued that the proposed rules are illegal without approval from Congress, and would allow the Trump administration to weaponize the Public Service Loan Forgiveness program against nonprofit organizations and state and local governments whose policies and missions don't align with the administration's.