WASHINGTON, D.C. — Major changes to the federal student loan system are one step closer to becoming law after Senate Republicans advanced a proposal to significantly restructure how students and families borrow and repay education debt.
The provisions are part of a larger federal budget bill introduced by Senate Health, Education, Labor and Pensions (HELP) Committee Ranking Member Bill Cassidy (R‑LA), and they aim to limit borrowing, simplify repayment options, and reduce federal subsidies. Education analysts say the changes would represent the most dramatic overhaul of student aid policy in decades.
TWO REPAYMENT PLANS TO REPLACE MULTIPLE OPTIONS
The proposal would consolidate all existing income-driven repayment (IDR) plans—including SAVE, PAYE, REPAYE, and IBR—into just two options:
- A standard fixed repayment plan, based on the amount borrowed and repaid over 10 to 25 years.
- A new income-based repayment plan, where borrowers would pay a set percentage of their income (between 1–10%) for up to 30 years. Unpaid balances would be forgiven after that time.
These changes are aimed at simplifying the student loan system and reducing long-term federal liabilities.
LOAN CAPS FOR GRADUATE AND PARENT BORROWERS
The plan would also place strict new limits on federal student loan amounts:
- Graduate students would be limited to $20,500 per year in unsubsidized loans, with a lifetime maximum of $50,000 for professional degrees (including law and medicine).
- Parent PLUS loans would be capped at $20,000 annually.
Currently, Parent PLUS and Grad PLUS loans have no formal borrowing caps, allowing families to borrow up to the cost of attendance.
SUBSIDIZED LOANS AND OTHER BENEFITS WOULD BE ELIMINATED
Several existing federal loan benefits would be eliminated under the plan:
- Subsidized loans—which currently prevent interest from accruing while a student is in school—would be phased out.
- Grad PLUS loans would also be eliminated entirely.
- Economic hardship deferments and other administrative forbearance protections would be significantly reduced or removed.
The proposal would also raise the full-time course load requirement for Pell Grant recipients to 30 credits per year, potentially affecting eligibility for some students.
CONCERNS FROM FINANCIAL AID ADVOCATES
Higher education groups have warned that the proposed changes could make college less accessible to low-income students and families.
Melanie Storey of the National Association of Student Financial Aid Administrators (NASFAA) said the loss of Grad PLUS loans and subsidized protections may push borrowers toward private lenders, who typically charge higher interest and offer fewer protections.
LEGISLATIVE STATUS
As of June 2025, the proposal has advanced through committee but has not yet reached a full Senate vote. If passed, it would need to be reconciled with the House version of the budget and signed into law by the president. No final enactment date has been set.
NOTE TO STUDENTS AND FAMILIES
Financial aid experts recommend that current and future borrowers closely monitor developments in Congress. If enacted, the reforms could alter borrowing limits, eliminate some protections, and reshape repayment strategies.
