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It will soon get harder to pay off your student loans. On Friday, President Trump signed the One Big Beautiful Bill Act into law, restructuring the federal student loans system and making it more difficult to finance your education through loans.
“This bill can only be described as one big mistake, the consequences of which will negatively affect college students, borrowers, and their families for years to come,” said Sameer Gadkaree, president and CEO of The Institute for College Access & Success (TICAS).
“By increasing the amount, riskiness and duration of student loan debt, the bill directly reduces the likelihood that current borrowers and future students can do better financially than their parents. The rushed legislation is sure to have unintended consequences, but it is equally sure to achieve one clear objective: fewer college graduates to support our nation’s economy and workforce.”
Two Worse Plans to Pick From
The bill wipes out current income-based repayment plans and replaces them with two less equitable options.
The first is the “Repayment Assistance Plan” (RAP), which determines monthly student loan payments based on your income level, ranging from 1% to 10%, with a minimum payment of $10. RAP waives unpaid interest and forgives any remaining balance after 30 years.
This option is less forgiving than former President Biden’s “Saving on a Valuable Education” (SAVE) plan, which the bill supersedes. SAVE reduced payments on undergraduate loans from 10% to 5% of a borrower’s income and forgave loans after 10 years for borrowers with original balances of $12,000 or less.
Currently, the SAVE plan is blocked in court pending a final decision. Eight million borrowers enrolled in the SAVE plan, awaiting the decision, may have at least a year to enroll in a new plan, between July 2026 and July 2028.
The second option is a standard repayment plan that establishes fixed payments for a period of 10 to 25 years, depending on the principal balance. The duration of repayment would depend on the original amount borrowed.
Time to Rebudget
Borrowers at all income levels will face higher monthly payments under the new plan, according to a report from the Student Borrower Protection Center.
“Based on our review of this proposal, contrasted with the benefits and protections available to borrowers under the Saving on a Valuable Education (SAVE) repayment plan, we found that a typical borrower will see monthly student loan costs spike by hundreds of dollars per month, or thousands of dollars per year,” read a report sent to senators Bill Cassidy and Bernie Sanders.
The center’s report found that:
- A typical current borrower with a degree will pay an additional $2,929 per year in student loan payments compared to the SAVE plan.
- A typical current borrower with some college but no degree will pay an additional $1,761 per year when compared to the SAVE plan.
- A typical family of four, headed by a borrower with a bachelor’s degree, will pay an additional $2,808 per year when compared to the SAVE plan.
It also noted that borrowers under RAP would have to make monthly payments for 30 years, compared to SAVE, which provided debt relief after 10, 20 or 25 years, depending on the amount borrowed.
The bill also eradicates borrowers’ ability to defer payments in the face of economic hardship or unemployment. Further, it reduces the total period a borrower may be in standard forbearance, or a short-term pause of payments, which remains the only option to temporarily delay payments.
The Cost of Higher Education
The bill also terminates the Graduate PLUS program, which previously allowed graduate and professional students to borrow up to the full cost of attendance. Students already enrolled in the program are exempt.
It also places a lifetime borrowing cap of $65,000 per student on the parent PLUS loan program, regardless of how many years a student spends in college. New borrowing caps include:
- Graduate students can borrow up to $100,000
- Law or medical students can borrow up to $200,000
- Parents can borrow up to $65,000 per student via Parent PLUS
Pell grants, funds given to low-income students, also face new restrictions. Changes to the student aid index, a household income calculation that determines whether you qualify for the grant, make fewer students eligible. There’s also an increase in the number of credits needed to qualify as full-time and receive a Pell Grant award.
What This Means for Americans
Currently, nearly one in three Americans, an estimated 5.8 million people, are delinquent on their payments (meaning they haven’t made a payment in over 90 days) and may be plunging toward default. After 270 days past due, the borrower automatically defaults, leaving their paychecks subject to collection by the U.S. Department of Education.
TransUnion estimates that a third of newly delinquent borrowers, or 1.8 million people, will default on their payments by July 2025. Another one million are expected to default the following month in August an additional two million more in September.
For those who default on their payments, an additional clause of the bill has expanded the loan rehabilitation program. Currently, borrowers can use this program just once; the bill increases the maximum use to two. If you are at risk of defaulting, take advantage of this program or contact your loan provider to negotiate a settlement or refinance.
For students who may hit the cap for federal loans, we strongly advise against turning to private loans. Private loans provide limited protections, extremely high interest rates, fewer repayment options and aggressive collection tactics. Exhaust your federal loan options first and consider attending a school with a lower cost of attendance.
While the full implementation of the bill will take some time, Gadkaree warns of the repercussions that will ripple across the education sector.
“From Congress to the White House, it’s painfully apparent that federal policymakers are divesting from higher education access, success and affordability,” she said.
“This misguided direction will reverse 60 years of progress toward increased educational attainment and undermine the longtime consensus on the need to invest in a globally competitive workforce. The result will be a less prosperous nation.”
