Key Points
- House Republicans passed a budget bill that would eliminate subsidized and Grad PLUS loans and extend loan repayment terms to as long as 30 years.
- The proposal would reduce Pell Grant access for hundreds of thousands of students.
- The bill limits borrowing based on new federal formulas.
The new budget bill narrowly passed by House Republicans aims to restructure the federal student loan system and dramatically reshape financial aid. The proposal, dubbed the "Big Beautiful Bill", outlines longer repayment terms, the elimination of long-standing loan options like Grad PLUS loans, and puts restrictions on Pell Grant eligibility that could impact hundreds of thousands of students.
Though the legislation has no clear path in the Senate and faces strong opposition from Democrats and higher education groups, it represents the most ambitious attempt in recent years to overhaul how Americans finance college.
Many of these reforms have been on the Republican radar for a while, with an attempt last year called the College Cost Reduction Act. Where this goes in the Senate, and if it is signed into law, is still to be seen.
Would you like to save this?
We'll email this article to you, so you can come back to it later!
Subsidized And Grad Plus Loans Targeted For Elimination
Among the bill's most controversial provisions is the elimination of subsidized loans for new borrowers starting in the 2026-2027 academic year. These loans, which do not accrue interest while a student is in school, have helped millions of low-income students reduce the long-term cost of borrowing.
The bill also phases out Grad PLUS loans and dramatically restricts Parent PLUS borrowing.
Under the proposal, parents would only be allowed to borrow after their student has taken out the maximum in unsubsidized loans. Total Parent PLUS student loan borrowing would be capped at $50,000.
Graduate students would face a lifetime borrowing limit of $150,000. These change for grad students come with a three-year grace period for current students who have already borrowed under these programs.
30 Year Student Loan Repayment Term And Plan Changes
The bill would end access to current income-driven repayment plans for future borrowers and introduce a new structure with up to 30 years of repayment based on income and loan size.
Borrowers with balances over $100,000 would be placed in a 25-year standard repayment plan by default, unless they qualify for a new assistance option based on income. The new standard repayment plan would be a tiered repayment approach:
- Loans Under $25,000: 10 Years
- Loans $25,000 to $50,000: 15 Years
- Loans $50,000 to $100,000: 20 Years
- Loans Over $100,000: 25 Years
Current IDR plan borrowers (including those in the SAVE forbearance) would move into the amended IBR plan, which is based on the existing old IBR plan.
The proposed Repayment Assistance Plan (RAP) would base monthly payments on a borrower’s adjusted gross income, with a sliding scale ranging from 1% to 10% of income. Payments would be capped for low-income borrowers, and those with children would see reductions in their monthly payment by $50 per month per child.
While the plan promises loan forgiveness after 30 years, it offers less flexibility than current IDR options and phases out SAVE, PAYE, and ICR for new borrowers.
Cuts To Pell Grants
The bill would reduce the number of students eligible for full Pell Grants by increasing the number of credits required to receive full aid.
Currently, students taking 12 or more credits per term qualify for the maximum grant of $7,395. The new plan would raise the threshold to 15 credits, cutting grants by $1,479 for many full-time students who only take 12 units.
This could make it harder for low-income students since many may also be balancing work and school - making it difficult to take more units to qualify for a full Pell Grant.
Don't Miss These Other Stories:
Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.