On Tuesday, Republicans on the House education committee revealed a comprehensive plan aimed at reshaping the federal student loan system while proposing over $330 billion in cuts to federal spending. These reductions are intended to help finance the extension of President Trump’s tax cuts.
The proposed changes would eliminate existing income-contingent loan repayment options, replacing them with a singular ‘Repayment Assistance Plan.’ Additionally, the plan seeks to abolish the Grad PLUS loan program and impose stricter limits on Parent PLUS loans. A notable feature of the proposal is a clause mandating that colleges and universities reimburse the federal government a fraction of the debt incurred when their students default on loans.
During the plan’s presentation, which is known as a committee ‘markup,’ education committee chairman Rep. Tim Walberg of Michigan voiced concerns regarding the current state of student loans. He emphasized the need for reform by stating, “If there is any consensus when it comes to student loans, it’s that the current system is effectively broken and littered with incentives that push tuition prices upward.”
In contrast, the committee’s ranking member, Democratic Rep. Bobby Scott of Virginia, criticized the Republicans’ proposal. He argued that the plan would escalate costs for colleges and students and severely limit their access to quality educational programs, all while redirecting ‘savings’ towards tax cuts benefiting wealthier individuals.
As part of a reconciliation package, the Republicans will only require a simple majority in the Senate and solid support in the House to advance the proposal. Despite uncertainties surrounding its passage, the plan enjoys considerable support from the Republican majority.
One of the central components of the new plan is the reduction of loan repayment options to a more simplified format. For new borrowers taking out federal student loans after July 1, 2026, there will no longer be the Biden administration’s generous SAVE Plan, or other repayment plans like Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE).
Instead, borrowers will have access to two repayment options: a ‘Standard Repayment Plan’ with fixed monthly payments ranging from 10 to 25 years, and the new ‘Repayment Assistance Plan’ that adjusts monthly payments based on the borrower’s total adjusted gross income. Notably, this plan also waives any unpaid interest not covered by monthly payments.
One significant change that borrowers will need to adapt to is the new repayment term limit. While previous plans offered forgiveness after 20 or 25 years, the Repayment Assistance Plan introduces a maximum duration of 360 payments, equating to 30 years.
For those who took out loans before the July 2026 cut-off date, they will have access to a revised version of the old Income-Based Repayment plan.
In addition to loan repayment restructuring, Republicans are also proposing vital changes to the Pell Grant program, which provides financial aid to low-income students. The plan advocates for an increase in the definition of full-time college attendance to 30 credit hours per year to qualify for maximum Pell amounts, alongside a requirement that Pell recipients be at least half-time enrolled (15 credit hours) for eligibility.
These alterations could result in significant reductions in aid for numerous Pell recipients. However, the plan aims to broaden access to Pell Grants by including students who are enrolled in short-term workforce training programs.
More changes are anticipated for Grad PLUS loans, Parent PLUS loans, and subsidized loans for undergraduate students. Under the new proposal, the Grad PLUS loan program will be terminated for graduate school students after July 1, 2026, and subsidized loans for undergraduate students will also be eliminated.
Moreover, Republicans intend to set borrowing caps based on the median cost of attendance for students within the same program of study nationwide, which could restrict loan availability for those desiring to pursue higher-cost education options.
The proposed borrowing limits would establish new caps for undergraduate loans at $50,000, graduate students at $100,000, and professional programs at $150,000.
The Parent PLUS loan program will also face considerable adjustments. This program, often a controversial avenue for funding college education, typically carries higher interest rates, contributing to burdensome debt for borrowers, particularly among families of color.
To mitigate these issues, Republicans seek to impose an aggregate borrowing limit of $50,000 on Parent PLUS loans, coupled with a requirement that families utilize all available unsubsidized loans before turning to Parent PLUS for additional funding needs.
One remarkable aspect of the Republican reconciliation package introduces ‘skin-in-the-game accountability’ for colleges. This provision mandates that schools reimburse the federal government for a portion of the unpaid loans incurred by their students, accounting for the total cost of their programs and the post-graduation earnings of the students. If students fail to graduate, this reimbursement calculation will factor in the completion rate of the institution or specific program.
Penalties for institutions could arise from late or missed payments, potentially jeopardizing their access to the federal student loan program altogether.
As the proposal gains traction among Republicans, its ramifications for students and institutions alike remain to be seen.
image source from：https://www.npr.org/2025/04/30/nx-s1-5381149/trump-republicans-student-loan-repayment
