AMERICAN taxpayers are at risk of having to shell out more cash each month for certain loan payments under a new law addressing the federal government’s budget.
Experts are warning that the legislation could implement changes detrimental to certain Americans with student loan repayments.
Americans with student loans could be negatively impacted by new legislation[/caption]
President Donald Trump’s One Big Beautiful Bill Act was signed into law on July 4, officially implementing a range of budget adjustments.
Thanks to the megabill, Americans will see tax breaks and deductions for things such as tips, increased spending on initiatives like border security and deportations, and other changes.
One of the major switch-up affects student loan programs, sparking concerns that borrowers will be confronted with much higher payments each month.
The One Big Beautiful Bill is rolling out some of the biggest changes to the student loan system in years, including adjusting the types of student loan repayment plans available to Americans.
Repayment plans will be reduced to two main choices under the bill for new borrowers beginning on July 1, 2026 as popular plans like SAVE, Pay As You Earn, and Income-Contingent Repayment are axed.
Borrowers will have to pick a standard repayment plan or a new Repayment Assistance Plan, or RAP, between July 2026 and July 2028.
The standard repayment plan will have a term length dependent on the amount borrowed, ranging from 10 to 25 years.
The Repayment Assistance Plan will require 30 years of payments – up from 20 years to 25 years – before a borrower can qualify for loan forgiveness.
OTHER IMPENDING CHANGES
In addition to reducing the types of repayment plans, Trump’s One Big Beautiful Bill will impact the amount of money that students can borrow from the federal government.
It will get rid of the Graduate PLUS Program, a repayment option that allows graduate or professional students to borrow up to the full cost of attendance.
Under the new legislation, graduate students will face a cutoff of $100,000 for lifetime loans, while medical and law students will be capped at $200,000.
The cap for Parent PLUS loans will also be set at a $65,000 per dependent student and will not be eligible for repayment programs.
The new legislation will also affect how student loan deferment works, eliminating deferment options for those struggling due to unemployment or economic hardship.
Borrowers will, however, be permitted to rehabilitate defaulted loans twice instead of just once.
Student Loan Statistics
- Student loan debt in the US is over $1.777 trillion
- Federal student loan debt accounts for 92.2%
- Average federal student loan debt amount per person is $38,375
- Students at a public university borrow $31,960 on average to attain a bachelor’s degree
Credit: Education Data Initiative
Other changes under the bill include Pell Grant eligibility, including the establishment of Workforce Pell Grants for individuals in career or technical-based education programs.
EXPERT OPINION
Senator Bill Cassidy, chairman of the Senate Health, Education, Labor and Pensions Committee, was a key figure in the passage of the One Big Beautiful Bill.
“President Trump and I want to preserve the American Dream for working and middle America,” said Cassidy.
“We keep taxes low, cut taxes on tips, overtime, and Social Security, extend the Child Tax Credit, fix our broken education system, support our military, secure our border, and build a business environment that creates better paying jobs.”
On the other hand, critics and student advocates have warned that the changes and new repayment plans will bump up the monthly payments for most borrowers.
“This reconciliation bill will be catastrophic for millions of Americans by restricting access to higher education and exacerbating the student debt crisis for both federal and private student loans,” said Student Debt Crisis Center president Natalia Abrams, per News Nation Now.
“While it is difficult to imagine how much worse the student debt crisis can become, this reconciliation bill does exactly that.”
The deferment changes, for example, will leave students experiencing hardship in a difficult situation because the Repayment Assistance Plan provides no way for borrowers to halt their payments during tough times.
Experts also fear that the limits on loans for graduate students will prevent prospective students from pursuing higher education or even encourage more private loans, which have higher interest rates and can be harder to get.
“This bill is a dangerous attack on students, working families, and communities across the country,” said Aissa Canchola Bañez, policy director for Student Borrower Protection Center.
“By gutting financial aid programs, shredding the student loan safety net, weakening protections, and pushing millions of students and families into the riskier and more expensive private student loan market, policymakers are doubling down on a rigged system where a quality higher education is reserved for the richest Americans while the rest of us are left to fend for ourselves and forced to take on a lifetime of debt.”
Beyond tweaking the student loan repayment system, Trump’s One Big Beautiful Bill will roll out a major tax break for seniors after a “landmark” change.
The bill could also cost taxpayers tens of millions of dollars after a “payment error” linked to SNAP benefits.
President Donald Trump signed the One Big Beautiful Bill Act into law on July 4[/caption]
Under Trump’s One Big Beautiful Bill, Americans may see their monthly student loan payments increase[/caption]
