House Passes Trump's ‘One Big Beautiful Bill', Here's What It Means For Student Loan Forgiveness And Repayment

Forbes

22-05-2025

In the early hours of May 22, House Republicans passed President Donald Trump's "One Big Beautiful Bill," a sweeping package of tax breaks and spending cuts passed after an all-night session. The 1,000-page bill, which narrowly passed 215-214 at dawn, carries significant implications for student loan forgiveness and repayment. Tucked within the multitrillion-dollar legislation are dramatic changes to federal student aid: A complete overhaul of income-driven repayment plans, a new Repayment Assistance Plan, new caps on borrowing, and more. GOP leaders hail these reforms as overdue fixes to a broken system that will save taxpayers billions, while critics warn the bill raises costs for students to fund tax cuts elsewhere.
Under the House GOP plan, the spaghetti bowl of income-driven repayment plans would be simplified to just two choices for future borrowers. Gone would be programs like PAYE, ICR, and the Biden administration's contested SAVE plan, all eliminated in favor of a simplified system. Starting July 1, 2026, new federal student loan borrowers would have only a Standard Repayment Plan with fixed payments over 10 to 25 years, or the new Repayment Assistance Plan, which ties payments to income. This means the menu of IDR options borrowers have grown accustomed to over the past decade would be largely wiped away.
House Education Committee Chairman Rep. Tim Walberg (R-Mich.) argues this streamlining is needed to fix a system "littered with incentives that push tuition prices upward," according to NPR. By contrast, Democrats like Rep. Bobby Scott (D-Va.) say the GOP remedy would "increase costs for colleges and students" and then use "so-called 'savings' to pay for more tax cuts for the wealthy." Republicans project over $330 billion in savings from the education provisions alone, signaling how central the student loan changes are to fund the bill's broader agenda.
RAP is the centerpiece of the GOP's student loan overhaul, billed as a single, simpler, income-driven plan for 40 million borrowers. Your monthly payment under RAP is tied to your income on a sliding scale. Borrowers will pay a small percentage of their total income, between 1% and 10% depending on their earnings, with lower earners paying less and higher earners paying more.
RAP fixes a major pitfall of earlier income-driven plans: Accruing interest that makes balances balloon over time. Under RAP, if a borrower's payment doesn't fully cover the monthly interest, the government waives the remaining interest. This means borrowers will no longer see their loan balances grow just because they can't afford full interest each month, a feature hailed as ending the cycle of negative amortization.
With these borrower safeguards comes a longer timeline. RAP extends the repayment term to a maximum of 360 qualifying payments before any remaining balance is forgiven, a full 5 to 10 years longer than today's IDR plans, which promise forgiveness after 20 or 25 years. For many graduate borrowers with large balances, the extra years mean they'll likely pay off their debt in full before hitting the forgiveness mark under RAP, effectively receiving no forgiveness. Another limitation is that once a borrower opts into RAP, they cannot switch to another plan later. This one-way door could give some borrowers pause before committing to RAP's rules long-term.
Beyond repayment plans, Trump's bill imposes significant new limits on student borrowing and aid. For the first time, federal student loans would face aggregate caps: undergraduates could borrow a maximum of $50,000 total, graduate students up to $100,000, and professional students up to $150,000. These caps aim to prevent students from accumulating six-figure debts but could also push students who hit the limit toward private loans. The bill eliminates the Grad PLUS loan program. 'We know that private loans have much less protections… The more we push folks out of the federal market and into the private market, the less borrowers have safeguards if things go wrong," warns Aissa Canchola Bañez of the Student Borrower Protection Center to NPR.
Several other noteworthy changes would reshape federal aid:
In sum, these measures seek to curb how much students can borrow and put schools on notice for their graduates' outcomes. But they also risk making it harder to finance degrees: Graduate students, for instance, may need to find private loans once federal loans hit the new cap, likely at higher interest and with no forgiveness safety net.
Public Service Loan Forgiveness, the program that forgives student debt for nonprofit and government workers after 10 years, isn't directly altered in the House bill's education section. However, a late provision in the broader package could indirectly put PSLF at risk for many borrowers. In the tax portion of Trump's bill, House Republicans inserted a clause giving the Treasury Department unilateral authority to revoke the tax-exempt status of any 501(c)(3) nonprofit organization it deems supporting terrorism. Crucially, if a nonprofit employer were stripped of its 501(c)(3) status under this law, employees of that organization would instantly lose eligibility for PSLF since the program requires working for a nonprofit or public employer.
The House-passed Big Beautiful Bill now heads to the Senate, where its overall fate will be decided. However, significant changes appear unlikely when it comes to the student loan provisions. Republicans are advancing the package via budget reconciliation, meaning it only needs a simple majority in the Senate. With the GOP holding the chamber and eyeing the bill's $4.9 trillion tax cuts and spending priorities, party leaders likely have little appetite to remove the education cuts that help pay for it.
The savings from the student loan reforms, estimated at over $300 billion, are financing other parts of Trump's agenda. If senators watered down the loan provisions, they'd have to plug a large budget hole elsewhere.
Therefore, aides suggest that the core student loan measures will remain largely intact through Senate negotiations. Some tweaks are possible, but observers note that Republicans view these education changes as both good policy and fiscal necessity. "Bottom line, it's time to fix this broken cycle… that leaves students worse off than if they never went to college," Rep. Walberg said of the plan to Business Insider, signaling the party's commitment to seeing it through.
A new student loan forgiveness and repayment regime is likely on the horizon. If enacted, current federal loan borrowers would see significant changes by 2026, and future borrowers would face a very different landscape of college financing. Income-driven repayment will become less generous on paper but more predictable; forgiveness will be rarer but delivered in trickles along the way.