Huge changes to monthly student loan repayments under new Republican plan

Daily Mail​

02-05-2025

House Republicans have unveiled their plan to change how millions of Americans pay back their student loan debt.
The move, which will upend Obama and Biden-era policies, comes as the Trump administration has vowed no 'mass loan forgiveness'. The administration is also gearing up to garnish people's wages starting May 5 if they have defaulted on their student loans.
The GOP framework officially repeals former President Joe Biden 's SAVE plan, which offered lower monthly payments than any other income-driven repayment plan.
It also massively simplifies how people repay federal student loans. According to higher education expert Mark Kantrowitz there are currently 12 ways to make payments on student loans, some of which are holdovers from the Obama administration.
Republicans want to narrow it down to two options. Under their plan, borrowers would be able to pay back their debt with fixed payments over the next 10 to 25 years, or through a new income-driven repayment plan called the 'Repayment Assistance Plan.'
Under RAP borrowers' monthly payments would be set as a share of their income. For instance, if someone makes between $10,000 and $20,000, they would be obligated to pay 1 percent of that toward their loans.
At the higher end of the scale people with incomes of $100,000 or more would have to pay 10 percent.
Students who took out loans before July 1, 2026, will still have access to the myriad of repayment plans. The new changes Republicans are proposing will only affect people who take out loans after that date.
Economist Jason Delisle, a nonresident senior fellow at the Urban Institute, recently put together his best estimate of what a single-person household would end up paying every month.
Delisle compared the House Republican concept to the income-based repayment plan passed under former President Barack Obama.
People making $30,000 all the way up to $70,000 would actually pay less each month under the GOP plan, according to Delisle.
The only groups who would have to pay more are those bring in no income, those who make $20,000 a year and people who earn upwards of $100,000.
The Republicans also want to put strict caps on how much individuals can take out in debt, limiting undergraduates and graduate students to $50,000 and $100,000, respectively.
Not only that but colleges and universities will be required to pay 'a portion of their students' unpaid loans based on how much of a return on investment the degree provided.'
The legislation came out of the House Committee on Education and Workforce, chaired by Rep Tim Walberg (R-Mich), and is set to be included in the massive reconciliation bill that is still taking shape.
Reconciliation is a legislative process that allows certain bills to pass in the Senate with just a 51-vote majority, bypassing the filibuster which requires a 60-vote supermajority.
House Speaker Mike Johnson has set a goal of passing the reconciliation package, which Trump calls his 'big beautiful bill,' by Memorial Day and sending it to the Senate.
Another key component of the education plan is that it purports to cut $330 billion in federal spending, a measure taken to finance the extension of Trump's 2017 tax cuts.
The education committee's ranking member, Rep. Bobby Scott (D-Va.), attacked the proposal as a giveaway to the wealthy during the committee markup on Tuesday.
'This current reconciliation plan would increase costs for colleges and students, limit students' access to quality programs … and then take the so-called 'savings' to pay for more tax cuts for the wealthy and the well-connected,' Scott said.
Extending the 2017 Tax Cuts and Jobs Act would lead to a $4.5 trillion decrease in federal revenue over the next 10 years, according to the nonpartisan Tax Foundation.
The foundation also found that even though GDP would rise 1.1 percent, that would only offset $710 billion in losses, which is why Republicans are eager to find areas of spending to cut.
Finding new revenue sources can also offset the decline in tax money, and a major source will soon become the more than 42.7 million student loan borrowers - who owe a collective $1.6 trillion.
More than 5 million have not made a payment in the past year, according to the Department of Education. That number is expected to grow as an additional 4 million borrowers are approaching default status.