The GOP budget bill reduces student loan repayment options and limits borrowing. What you need to know
Republican lawmakers are proposing major student loan changes, which will affect current and future borrowers.
Congress is one step closer to passing a Republican-led federal student loan change.”One big beautiful invoice. “The Senate passed a small version of the budget bill earlier this week, but is now back in the House.
If the House decides to pass the bill as is – and there may be more modifications, so there is nothing final – borrowers can see the big changes Student loanthere are only two options, including reductions in the current repayment plan, both of which have longer repayment periods. Experts warn that longer time frames for new repayment plans could result in borrowers paying their education debts much longer than expected.
“This can cause situations where borrowers will pay off longer periods and the overall costs may rise (when) under this plan,” said Elaine Rubin, student loan policy expert and director of corporate communications at Edvisors.
Existing borrowers may maintain access to income-based repayment plans, but anyone who borrows after July 2026 will be subject to the new rules. Millions Save the borrower Once the administrative tolerance period ends, it may be forced into a new plan.
Nothing has been finalized yet, but here is how the bill will affect student loans and long-term finances if passed.
What is your budget invoice repayment plan for your new student loan?
The latest draft of the Senate bill and the previous draft of the House are both outlined in two new repayment plans, a standard repayment plan and a repayment support plan.
Student loans borrowed after July 1, 2026 are limited to these two repayment plan options.
1. Standard repayment plan
The current standard repayment plan spans 10 years. The proposed standard plan will expand Repayment window Depending on the amount of debt, from 10 to 25 years:
Standard repayment plan layer
| The amount of debt | Repayment period |
|---|---|
| Under $25,000 | 10 years |
| $25,000- $50,000 | 15 years |
| $50,000-100,000 | 20 years |
| Over $100,000 | 25 years |
A longer repayment plan could mean more affordable monthly payments, but you will end up in longer debt and paying more interest overall. Consider this example of a $40,000 loan at a rate of 6.53%.
Standard repayment plan costs
| Repayment period | Monthly payment | Total Interest Cost |
|---|---|---|
| Current Standard Plan (10 years) | $455 | $14,576 |
| Proposed Standard Plan (15 years) | $349 | $22,839 |
2. Repayment support plan
The new repayment support plan replaces all current income-driven repayment plans, adjusting payments from 1% of adjusted gross income to 10%, with a minimum payment of $10 per month.
If you earn 3% from $10,000 to $20,000, $20,000 to $30,000, 3%, or 2% from $30,000 to $40,000, if you earn 2%, you will have to pay 1% of your AGI. Borrowers under $10,000 pay $10 per month, while those who earn more than $100,000 pay 10%.
The loan payments apply first to interest, then to charge, and ultimately to the principal. Because the wrap plan includes interest exemptions, you will be exempt from unpaid interest if your monthly payment does not cover the amount of interest accrued for that month. It could help alleviate the frustration of old student loan repayment plans (except SAVE).
Additionally, the plan proposes a minimum principal balance reduction of $50 each month. So if your monthly payment is $100, but $60 is heading towards interest and fees, you’ll only be paying $40 on your principal balance. The government is tipping the remaining $10 so it will reach the $50 threshold.
Monthly payments will decrease by $50 per dependency, so if you have $250 in loan payments and two children, you will be paying $150 a month on your RAP plan. If you have a $100 student loan payment, you will need to pay a minimum of $10 a month.
“Borrowers may benefit from changes,” said Elaine Rubin, student loan policy expert at Edvisors and director of corporate communications. “Dependants may have a direct impact on payments, so they may create more affordable monthly payments, but these borrowers will be locked in repayments for a longer period of time.”
However, laps have a longer timeline than they are now Income-driven repayment plans -30 years for 20 or 25, this is how you could end up paying more for longer.
“We are worried that we will increase the elderly population who are still in student debt,” he said. Betsy Mayottpresident and founder of the Student Loan Advisor Institute. “Longer debt can affect home purchase, other credit costs, and of course retirement.”
What changes can current student loan borrowers expect?
Under the proposed plan, current borrowers may have the option to move to a new plan or to an income-based repayment plan.
Under the proposed plan, existing borrowers (loans taken by July 1, 2026) will have access to the current version of the IBR plan, with 15% of their discretionary income being allowed or 20 years later, depending on when they received the loan, paying 10%.
Millions of borrowers have signed up for valuable education savings ( Save the plan) After the court breaks down the plan, it is still waiting for a resolution. Borrowers’ payments will be suspended and the loan will remain in general tolerance, but it is unclear when payments will resume. However, plans they move may likely result in monthly payments and longer repayment periods.
Let’s go back to the example of a $40,000 loan at a 6.53% interest rate. Assuming you’re a single filer with an annual income of $60,000, here’s what your monthly payment and repayment timeline looks like in your current plan and RAP.
Save vs. New Repayment Plan
| Repayment plan | Monthly payment | Time to pay back | Total payment amount |
|---|---|---|---|
| Store (10%) | $207 | 25 years | $62,100 |
| IBR (borrowed by July 1, 2014) | $457 | 25 years | $137,100 |
| IBR (borrowed after July 1, 2014) | $304 | 20 years | $72,960 |
| The proposed wrap | $250 | 30 years | $90,000 |
“When it comes to rap plan regulations, there will be winners and losers,” he said. Robert Farringtonstudent debt expert and founder of a university investor. “The 30-year time frame is long and can make the overall cost more expensive for some, while other borrowers can benefit from interest and key subsidies.”
Your monthly loan payments can decrease in laps, but depending on your income, long time frames can cause obstacles to your long-term financial goals. If you graduate at the age of 22, you may be required to pay a student loan until you reach the age of 52.
According to analysis By the Student Borrower Protection Center, the new lap could cost a typical save borrower an additional $2,929 a year.
“This is similar to indentured servants.” Mark Cantrowitzstudent loans and financial aid expert. “It mainly affects borrowers who have lived under or near the poverty line for decades, which are more than half of borrowers on income-driven repayment plans.”
Parents and borrowers may be excluded from all income-driven repayment options.
“The updated Senate bill will make it impossible for parents and loan borrowers to access affordable, income-driven repayment plans.
What other student loan changes are there in the budget invoice?
Several other Republican laws have proposed Student loan changes. There are some of the main ones.
There is no option to exclude spouse income
Under the proposal of the new Senate, rap Married borrower payments It is based on both spouses’ income, even if you submit taxes separately.
“The (Senate bill) could reintroduce the ‘marriage penalty’ for student loan borrowers and significantly increase payments,” Farrington said. “It’s ironic that these student loan plans can be very expensive for bills that support families.”
Postponement and restrictions on tolerance
Both the House and Senate plans aim to eliminate delays in economic hardships and reduce the time frame of tolerance to nine months over 24 months. Currently, borrowers can request delays in financial difficulties for up to three years for 12 months over three years.
“Historically, Congress has never removed profits from existing borrowers, but it appears that both the House and Senate do so,” Mayotto said.
Reduced borrowing restrictions
House Republicans proposed restrictions Borrowing Undergraduate students will go up to $50,000, for graduate programs, up to $100,000, for professional programs. They also want to keep their parents and loans down at $50,000 and eliminate grades and loans. Senate Republicans have proposed a $200,000 cap for the specialist program and a $65,000 cap for parent borrowers.
According to Kantrowitz, these new restrictions could reduce access to the university for some students.
“Loan restrictions can affect low- and middle-income students enrolled in high-cost universities, where federal lending restrictions may not be sufficient,” he said. “They may have to resort to private student loans, but that may not be available.”
Mayott also says he is worried about a lower availability of loans.
“If tuition fees are not reduced, many students who reach maximum federal loan eligibility will not be able to ultimately qualify for a degree and earn their degree,” Mayotto says. “Demonstration and no degree are one of the biggest default metrics in our student loan portfolio.”
Pell Grant Limitations
Republican lawmakers will fund Pell Grants but will strengthen eligibility requirements. The House version sources a bar on how “full-time” research is defined. For example, students must earn 30 credits per year to qualify, rather than the current 24.
“This especially affects low-income students who have to work full-time while they are enrolled in college,” says Kantrowitz. “It’s especially tough for community college students.”
The Senate version of the bill prevents students from receiving Pell grants if they receive sufficient scholarships to cover attendance costs.
School accountability
Both House and Senate bills measure school success differently, but require federal aid to be related to school performance. The house version is based on the school’s excellent federal student loan balance not being repaid. The Senate is linking school federal aid to bump students to the extent they reach revenue after participating in school programs.