[UNITED STATES] The U.S. House of Representatives has passed the "One Big Beautiful Bill Act," a sweeping legislative package introduced by President Donald Trump that includes significant changes to federal student loan programs. The bill proposes consolidating existing income-driven repayment plans into a single "Repayment Assistance Plan" (RAP), which could disqualify some borrowers and increase monthly payments for others. Additionally, the legislation introduces stricter eligibility requirements for Pell Grants and caps on federal student loans.
Major Changes to Student Loan Repayment Plans
Under the proposed legislation, all new federal student loan borrowers would be required to enroll in the RAP, which replaces current income-driven repayment (IDR) plans such as the Saving on a Valuable Education (SAVE) plan. The RAP calculates monthly payments based on a percentage of a borrower's income, but unlike previous plans, it does not adjust for inflation. As a result, borrowers whose income merely keeps pace with inflation may find themselves pushed into higher repayment tiers over time, leading to increased monthly payments without an actual increase in real income.
For existing borrowers, the bill proposes moving them into a modified version of the Income-Based Repayment (IBR) plan, which would require borrowers to pay 15% of their income above 150% of the federal poverty line. This change could significantly increase the monthly bills of most borrowers currently enrolled in IDR plans and extend repayment periods to 20 years for undergraduate loans and 25 years for graduate loans.
Stricter Eligibility for Pell Grants
The legislation also introduces stricter eligibility requirements for Pell Grants, which provide financial aid to low-income undergraduate students. To qualify for the maximum Pell Grant, students would need to enroll in at least 30 credit hours per academic year, up from the current 24 credit hours. This change could affect about a quarter of Pell Grant recipients, particularly those who work part-time or have other responsibilities that limit their ability to take a full course load.
Additionally, the bill proposes eliminating Grad PLUS loans and restricting eligibility for Parent PLUS loans, which could reduce access to higher education for graduate students and families. The legislation also caps federal student loans at $50,000 for undergraduates, $100,000 for graduate students, and $150,000 for professional students.
Potential Impact on Borrowers
Critics of the bill argue that the proposed changes could disproportionately affect low-income students and borrowers. The National Consumer Law Center warns that the elimination of the SAVE plan and the introduction of the RAP could result in higher monthly payments and longer repayment periods for many borrowers, potentially leading to increased student debt.
Furthermore, the elimination of the student loan interest deduction, which allows taxpayers to deduct up to $2,500 of student loan interest paid each year, could increase the financial burden on borrowers. The House Budget Committee's proposal includes a plan to eliminate this deduction, estimated to save about $30 billion over a decade
Next Steps
The "One Big Beautiful Bill Act" now heads to the Senate, where it will undergo further revisions and negotiations. If passed, the changes to student loan programs would take effect starting July 1, 2026. Borrowers are advised to stay informed about ongoing developments in student lending policy and to consider how the proposed changes may impact their financial plans.
WhatsApp
Instagram
Threads
