Key Points
- The Senate bill raises Parent PLUS loan caps and rejects some of the House’s stricter financial aid cuts.
- Pell Grant eligibility changes were removed from the Senate version.
- A new income-based Repayment Assistance Plan remains in both bills.
As the House and Senate work to reconcile sweeping higher education legislation, the Senate’s version of the Big Beautiful Bill (PDF File) signals a departure from some of the more aggressive reforms passed earlier by the House. With final negotiations expected in the coming weeks, families and borrowers are watching closely to see which provisions make it to the final law.
The Senate proposal, released by the Health, Education, Labor, and Pensions (HELP) Committee, outlines a more somewhat softer shift in loan policy, including fewer restrictions on parent borrowing and no Pell Grant eligibility changes. But it does preserve the House’s major student loan repayment overhaul, known as the Repayment Assistance Plan (RAP), but without some of the accompanying cuts.
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Caps On Student Borrowing Slightly Loosened
One of the more controversial elements of the House-passed bill was the hard cap on student loan borrowing, and the potential median cost of attendance proposal.
The Senate version still eliminates Grad PLUS Loans, but preserves subsidized student loans for undergraduate students, and slightly increases the cap on borrowing for Parent PLUS Loans (compared to the House plan).
Under the Senate proposal, the new student loan borrowing limits would be:
- Undergrad Direct Loans: No changes to current limits
- Parent PLUS: Capped at $65,000 per student, and $20,000 annually
- Grad Direct Loans: Continue $20,500 annual limit, and $100,000 total limit
- Professional Students: $50,000 loan limit, and $200,000 total limit
This change is particularly significant for families who have historically relied on Parent PLUS loans to cover tuition gaps at private colleges, where costs often exceed the federal loan limits for students. It could also have an impact to graduate students, as some programs, like medicine, cost significantly more than the $100,000 limit.
Pell Grant Formula Improved
The House bill had proposed a shift in Pell Grant eligibility by incorporating a new Student Aid Index (SAI) cap that would exclude some students with otherwise qualifying incomes. Critics called the move punitive and warned it could cut off aid to students whose families face complex financial circumstances.
They also wanted to change the maximum credits required to get the full Pell Grant.
The Senate version leaves most of the current Pell Grant structure intact, maintaining income-based eligibility and rejecting the proposed SAI limit. It also includes the proposed Workforce Pell Grant, and even helps families qualify for more aid by excluding farm and small business assets from the eligibility formula. This is a big win for farmers and small business owners, who always had a hard time even figuring out what to value their assets at for the FAFSA.
Both Chambers Agree On The RAP Plan
Despite diverging views on loan limits and aid formulas, both the House and Senate versions keep the proposed Repayment Assistance Plan (RAP), a new income-based option for borrowers that replaces current IDR plans like IBR and PAYE for new loans after July 1, 2026.
The new structure sets monthly payments based on a sliding percentage of income, starting at $120 for those earning less than $10,000 and rising to 10 percent of income for borrowers earning more than $100,000. Borrowers with dependents receive $50 reductions per child.
Loan forgiveness would be available after 30 years of qualifying payments. Unlike some past plans, there’s no negative amortization, interest that isn’t covered by a borrower’s monthly payment is forgiven rather than added to the loan balance. The bill also includes a principal reduction subsidy when payments fall below a certain level.
However, unlike the House bill, the Senate bill re-introduces a marriage penalty for borrowers by not allowing them to file taxes separately for RAP.
For borrowers in public service, the new plan qualifies for Public Service Loan Forgiveness, though the Senate bill, like the House version, would eliminate medical residency as qualifying employment starting with new borrowers after June 30, 2025.
Finally, parent PLUS borrowers still lose by not having access to RAP. Parent PLUS loan borrowers with existing consolidation loans on ICR will transition to the amended IBR plan. But, Parent PLUS loan borrowers that are not on ICR will be forced into the standard plan with no access to income driven repayment or PSLF.
What Was Left Out
The Senate version removed several contentious reforms included in the House bill, including:
- Ending Subsidized Loans: The House version phased out subsidized federal loans for new borrowers. The Senate did not include this.
- Cost of Attendance Formula: A new “median cost of program” formula, proposed by the House, was left out of the Senate draft.
- Forbearance Cuts: The Senate kept forbearance options intact, keeping the House’s plan to eliminate economic hardship and unemployment deferments for new loans, but allowing forbearances for up to 9 months per 24 month period.
- Department Oversight Changes: The Senate bill softens restrictions on the Department of Education’s rule-making authority, which were tightened in the House version.
The differences suggest a more moderate path forward. While the House bill was designed to drastically reshape federal student aid, the Senate version seems to focus on one change at a time - specifically the new repayment plans. Still, with a Republican-led House and a narrowly divided Senate, neither version is likely to pass unchanged.
What Happens Next
The biggest shift is still the repayment structure. Families should expect that the new Repayment Assistance Plan will replace IDR options for new loans beginning with the 2026-2027 academic year.
Students borrowing before that date can still access the old IBR plan. The legislation also ensures that even those in current SAVE-plan forbearance will be moved into the amended IBR plan within nine months of the law’s enactment, if passed (which is a change from the six months proposed by the House - again signaling repayment likely won't resume for SAVE borrowers until mid-2026).
It's important to note that since the House and Senate plans are not the same, more negotiations will have to take place before the final bill can be voted on and approved.
If Congress can agree on a final package by the end of the year, students entering college in fall 2026 will face a very different borrowing system than students today.
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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.