Senate Bill Caps Loans And Cuts Repayment Plans

Late Friday, the Senate released their full version of the One Big Beautiful Bill (PDF File), taking into account changes from the Senate Parliamentarian that blocked several key provisions earlier in the week.

For higher education, the bill contains many of the key provisions that were proposed earlier:

• Eliminating Grad PLUS Loans
• Lower student loan borrowing limits
• Changes to student loan repayment plans for both new and existing borrowers
• Changes to deferment, forbearance, and loan rehabilitation

However, the bill also has a few provisions that are less strict that prior versions, with longer time periods for existing borrowers to change repayment plans, continuing to allow medical residency to count for Public Service Loan Forgiveness.

Here are the key aspects of the bill.

Student Loan Borrowing Limits

Federal student loans allowed nearly unlimited borrowing through Grad PLUS and Parent PLUS programs. That structure is set to change. The final Senate version of the One Big Beautiful Bill eliminates Grad PLUS loans altogether and sets caps on how much students and parents can borrow starting in July 2026.

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 per year, per student
• Grad Direct Loans: Continue $20,500 annual limit, and $100,000 total limit (Masters Degrees)
• Professional Students: $50,000 loan limit, and $200,000 total limit (Law, Medicine)

Graduate and professional limits are in addition to undergraduate limits.

Note: There is a three academic year grace period for borrowers who already received a Grad PLUS loan or Parent PLUS loan prior to June 30, 2026.

The bill also requires loan amounts to be prorated for part-time enrollment and allows colleges to set lower limits if applied consistently across a program. 

Changes To Student Loan Repayment Plans

The Senate plan creates a two-option repayment structure for all new federal student loans disbursed on or after July 1, 2026. Existing plans, including the IBR and PAYE programs, as well as ICR and other options, will be eliminated for new borrowers.

Borrowers who took out loans before July 1, 2026, will not be immediately affected. However, the bill sets a hard transition date of July 1, 2028. By that time, all borrowers using legacy income-driven plans, such as PAYE, SAVE, or ICR, must shift into either the new RAP or the revised version of IBR.

Going forward for PSLF, there will only be RAP. Existing borrowers will have their existing PSLF-eligible plans.

Here's how RAP compares with IBR.

Note: The timeline for SAVE will likely be much sooner than 2028. More likely in mid-2026.

New Borrowers (Loans After July 1, 2026)

New borrowers will choose between a fixed-payment Standard Plan or a new income-based option called the Repayment Assistance Plan (RAP). Borrowers will default into the new standard repayment plan.

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

RAP calculates payments based on a sliding percentage of adjusted gross income, ranging from 1% to 10%. Monthly payments start at a minimum of $10 and are reduced by $50 for each dependent. Unpaid interest is not charged to the borrower, and a monthly principal match of up to $50 helps lower balances. Loans are forgiven after 360 qualifying monthly payments, or 30 years.

You can explore our Repayment Assistance Plan (RAP) Calculator here.

Some updates on the RAP:

Borrowers can switch between RAP and the Standard Plan at any time.

Payments made under the new RAP plan will count toward Public Service Loan Forgiveness (PSLF).

There is NO marriage penalty for RAP - borrowers can file taxes separately to only have one spouse's income count. The Senate bill previously had language that would have created a marriage penalty, but that was eliminated in favor of the House bill language.  

However, certain types of loans, such as Parent PLUS and consolidation loans that repaid Parent PLUS debt, are excluded from RAP and must be repaid under the Standard Plan. This continues to block Parent PLUS borrowers from affordable repayment plans and Public Service Loan Forgiveness.

Existing Borrowers (Loans Before June 30, 2026)

Borrowers who took out loans before June 30, 2026, will not be immediately affected. However, the bill sets a hard transition date of July 1, 2028. By that time, all borrowers using legacy income-driven plans, such as PAYE, SAVE, or ICR, must shift into either the new RAP or the amended version of IBR.

Amended IBR

Under the new IBR structure, borrowers with loans originating before July 1, 2014, will pay 15% of discretionary income and receive forgiveness after 25 years (Old IBR). Those with loans issued on or after that date will pay 10% of discretionary income, with forgiveness after 20 years (New IBR). Discretionary income is defined as income above 150% of the federal poverty line. 

The bill repeals the statutory authority for the ICR plan and terminates PAYE and SAVE. Those enrolled in these plans will be forced to switch to one of the remaining options by the 2028 deadline.

Borrowers who do not make a plan selection will be automatically placed in either RAP or IBR, depending on eligibility. The law requires borrowers to repay all eligible loans under a single repayment plan, although exceptions are made for consolidation and Parent PLUS loans.

If existing borrowers move to RAP, their prior qualifying payments made under the previous repayment plan would also count towards RAP loan forgiveness.

Consolidation Loans

After July 1, 2026, borrowers consolidating loans will be limited to the Standard or RAP, as long as the consolidation loan doesn't include a PLUS loan.

Parent PLUS Loan Borrowers (Existing, Consolidation, Double-Consolidated)

It get's wonky for Parent PLUS loan borrowers. 

For new Parent PLUS Loans after July 1, 2026, the only option to repay will be the standard plan.

For existing Parent PLUS borrowers, if you haven't consolidated, you're not eligible for ICR. But it does appear you can consolidate your loan by June 30, 2026, and switch into ICR, so that you can qualify to move to amended IBR between July 1, 2026 and June 30, 2028.

For existing consolidated and double-consolidated Parent PLUS borrowers (paying on ICR, IBR, PAYE, or SAVE), you're allowed to migrate into Old IBR, which is based on 15% of your discretionary income. This migration will happen by June 30, 2028.

Other Student Loan Changes

There are so other student loan changes that are important to mention.

Deferment and Forbearance

The bill significantly cuts deferment and forbearance options for borrowers. Economic hardship and unemployment deferments will be eliminated for loans disbursed on or after July 1, 2027. Instead, borrowers are expected to use income-driven repayment plans like RAP or IBR.

Discretionary forbearance is limited to a maximum of nine months within any 24-month period. This restriction aims to prevent long-term loan balance growth due to interest accrual during extended periods of paused payments.

Loan Rehabilitation

For borrowers in default, the bill expands access to loan rehabilitation. A borrower can now rehabilitate a loan twice, instead of only once. The minimum monthly payment required for rehabilitation increases to $10.

New College Accountability "Do No Harm Standard"

The bill introduces a “Do No Harm” accountability standard, barring federal student loans from being used at programs whose graduates consistently earn less than would have been earned without attending. Basically, colleges with negative ROI.

Specifically, undergraduate programs lose eligibility if, for at least two out of three consecutive years, the majority of their graduates earn less than the median income of a high school graduate in the same state.

A parallel rule applies to graduate and professional programs, but compares graduate earnings to the median for in‑state bachelor’s degree holders in the same field.

Programs that fail to meet this earnings benchmark for two of three years are made ineligible for Title IV federal loan funding.

Changes To Pell Grants And Financial Aid

For Pell Grants, the bill makes several eligibility changes. It requires foreign income to be counted in income calculations and excludes families with a Student Aid Index more than twice the maximum Pell Grant from receiving aid. Students with full cost-of-attendance scholarships will also be ineligible.

It also allows family farms and family business assets to be excluded from the FAFSA.

Workforce Pell Grants are expanded to include short-term programs between 150 and 599 clock hours that meet certain outcome-based standards. These programs must demonstrate high completion rates, strong job placement, and earnings gains above 150% of the federal poverty line.

What Happens Next?

The Senate’s version of the One Big Beautiful Bill signals a major shift in how federal aid supports higher education. With new borrowing limits, new repayment plans, and stricter rules around deferment, the legislation seeks to lower student loan borrowing, but at what cost?

Ultimately, if enacted, this legislation could reshape who can borrow for college, how much they pay, and what counts as “worth it.”

With its sweeping scope and specific timelines, it may take years to assess its real-world impacts. The Senate's version of the bill is expected to be voted on within a day or two, at which point it will head to the House. The goal has been to get the full bill passed before Independence Day.

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