4 Ways Trump's 'Big, Beautiful Bill' Would Change Student Loans

While much of the focus on President Donald Trump’s “big, beautiful bill” is on tax breaks, immigration and health insurance, the sprawling budget deal is also expected to overhaul how the government handles student loans.

The U.S. House of Representatives narrowly passed a version of the bill last month, and the Senate subcommittee in charge of education policy recently released its 71-page portion of the legislation that focuses on federal student loans and grants.

“The reform package would substantially change the current federal student loan repayment system, including for current borrowers,” Adam Minsky, an attorney who specializes in student loan law, says in an email to Money.

Minsky adds that the changes could result in “substantially higher monthly payments” for certain borrowers who are currently enrolled in income-related repayment plans with the Department of Education.

The Senate’s version of the bill mirrors much of what was proposed by the House, meaning Republican lawmakers are largely in agreement on the big-picture items. But the budget package is still far from a done deal, and the final text is subject to change.

Here’s what we know so far about the reforms slated for federal student loan repayment.

1. A new loan repayment system

Currently, the Department of Education runs eight different repayment plans for student loans that vary by loan type, income of the borrower and repayment timeline (usually 10 to 30 years).

With the "big, beautiful bill," Republican lawmakers are looking to reduce that number to two plans: a standard repayment plan that ranges from 10 to 25 years, and a new Repayment Assistance Plan, or RAP, to take the place of the handful of income-related plans for struggling borrowers.

The proposed standard repayment plan has several tiers and repayment timelines based on the total amount of money borrowed.

• For loans totaling less than $25,000, borrowers would pay a fixed monthly amount for 10 years.

• For $25,000 to $49,999 worth of loans, borrowers pay a fixed payment for 15 years.

• For $50,000 to $99,999, borrowers pay for 20 years.

• For $100,000 and up, borrowers pay for 25 years.

The new Repayment Assistance Plan is designed for borrowers who can’t afford the standard repayment plan.

• Monthly payments under RAP range from 1% to 10% of the adjusted gross income of the borrower, with a minimum monthly payment of $10 per month. Borrowers with higher earnings would pay a higher portion of their income.

• Adjusted gross income in this context includes spousal earnings regardless of separate filing status.

• After on-time payments for 360 months, or 30 years, remaining balances would be canceled.

• If the monthly payment does not cover the amount of interest that accrues on the loans, that interest is waived. The program would also reduce the loan’s principal by up to $50 per month based on the borrower’s calculated monthly payment amount.

Current borrowers who are already enrolled in a standard or Income-Based Repayment plan could stay in it or choose to switch to the RAP if they wish.

Otherwise, borrowers in other repayment options would need to switch to one of the two new plans. Millions of borrowers who signed up for the Biden administration’s Saving on a Valuable Education (SAVE) plan remain in limbo, as the plan was blocked by the courts. The SAVE plan drastically reduced the monthly payment amounts due for borrowers, and about half of enrollees had their monthly payments set to $0.

Due to ongoing legal challenges, SAVE enrollees have been placed into a general forbearance period, with no payments due for the foreseeable future.

However, if the “big, beautiful bill” becomes law, SAVE would effectively cease to exist, and borrowers who previously had low or $0 monthly payments, as Minsky mentions, would have to pay much more.

2. Limits student loan types and amounts

The Senate version of the “big, beautiful bill” would limit lifetime borrowing for all students to $257,000, minus any Parent PLUS loans. This limit could dip, as the House version of the text proposed a borrowing cap of $200,000, including Parent PLUS loans.

Another point of contention may arise on subsidized loans. House lawmakers want to get rid of them entirely, while senators seem intent on keeping subsidized loans intact.

Here’s a look at some other proposed changes:

• Parent PLUS loan limits: The Senate wants to impose a $20,000 per year cap on parents borrowing on behalf of a dependent student, with a total lifetime limit of $65,000 per student. The limits proposed by the House were lower: a $50,000 lifetime cap with an additional stipulation that parents could borrow only if their student maxed out their unsubsidized loans first.

• Graduate and professional loan caps: In the Senate’s bill, annual loans would be capped at $20,500 for graduate students and $50,000 for professional students. Lifetime borrowing limits would be $100,000 and $200,000, respectively. The House’s version had a more complex calculation that factored in the national median cost of the program. Its lifetime borrowing limits were slightly different, too, capped at $100,000 for grad programs and $150,000 for professional study programs.

• No more Grad PLUS loans: Both chambers agreed that the Grad PLUS loan program should be phased out entirely.

3. Stricter payment requirements for struggling borrowers

Under current law, low-income borrowers can defer their student loan payments for up to three years under certain conditions.

One condition is economic hardship. If a borrower receives welfare benefits, they can defer their payments. Likewise, they can also defer payments if they’re working but don’t earn above minimum wage or 150% of the federal poverty line.

Another condition allows unemployed borrowers to defer payments if they are receiving unemployment benefits, or if they are seeking and unable to find full-time employment.

Both versions of the bill would erase these two forms of deferment.

4. Big changes to Pell Grants

While not directly student loans, need-based Pell Grants are nonetheless an essential part of many students’ financial aid packages.

The “big, beautiful bill” seeks to introduce major changes to the grant program. Chief among these reforms includes restrictions on the award amount for certain students who are currently eligible, as well as the introduction of a new version of the Pell Grant that applies to workforce training programs.

The House version of the bill seeks to change the definition of full-time student to require enrollment for at least 30 hours per academic year (up from 24). It would erase the Pell Grant for part-time students. The House’s bill would also impose stricter need-based requirements, as indicated by the Student Aid Index (SAI).

The Senate bill keeps the current definition of full-time student at 24 credit hours and would allow part-time students to receive the Pell Grant. However, if a student receives grants or scholarships elsewhere that covers the cost of attendance, they would lose their Pell eligibility.

Both chambers would like to introduce a new Workforce Pell program that would award aid to attendees of workforce training programs that provide a credential related to “high-skill, high-pay” jobs in areas such as skilled trades, cosmetology and barbering, and health care. The program must be at least 150 to 599 “clock” (not credit) hours to qualify. The amount of the grant would be prorated based on its length.

What proposals could change before becoming law?

Technically, every proposal could change before the package comes to a vote. But given the self-imposed deadline of July 4 and the large overlap between the House and Senate versions of the bills, experts are expecting many of the proposals to survive late-stage negotiations.

Areas where borrowers are likeliest to see some last-minute changes include the provisions related to Pell Grants and loan limit caps, which are examples of current differences between the House and Senate versions of the bill.

Another wrinkle that could spur eleventh-hour changes is that the Senate intends to pass the legislation using the budget reconciliation process. This method allows for passage of budget-focused legislation with only 51 votes (as opposed to 60 votes needed to overcome a Senate filibuster, which Republicans do not have).

Using this process, however, opens the legislation up to challenges via the so-called Byrd Rule, which allows senators to flag provisions of the bill that aren’t directly related to the budget. It’s not clear how this technicality may be wielded. Minsky says he’s not sure what, if any, provisions could be challenged by the Byrd Rule.

On the other hand, Viviann Anguiano, an education policy expert and senior fellow at the left-leaning think tank The Century Foundation, tells Money that everything is on the table.

“Every proposal by Senate Republicans on student loans in the reconciliation bill is subject to a challenge under the Byrd Rule because of the clear policy implications each one would pose,” says Anguiano, who was the former director of education on the Biden administration’s domestic policy council.

She notes that it’s ultimately up to the Senate parliamentarian, a non-elected advisor who weighs in on procedural issues, to decide which provisions are budgetary and which are policy-driven under a Byrd Rule challenge. Currently, that position is occupied by Elizabeth MacDonough, who’s held the title since her 2012 appointment.

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