Reconciliation Bill Advances Student Aid Revamp, With Colleges on the Hook for Unpaid Loans
A sweeping reconciliation bill approved by the House early May 22 would bring massive changes to federal student loans and financial aid, while slashing $330 billion in education-related spending.
The bill narrowly passed by a mostly party-line vote of 215–214. The proposed changes are part of broader Republican efforts to reduce federal spending and help offset the cost of extending trillions of dollars in tax cuts from President Donald Trump's first term along with new tax relief measures.
'President Trump's America First agenda is finally here, and we are advancing that today,' House Speaker Mike Johnson (R-La.) said after the bill's passage.
The budget features what's known as the
Loan and Aid Reforms
For student loans, the proposal seeks to consolidate income-driven repayment programs into a single option called the Repayment Assistance Plan, or RAP. Borrowers who take out federal student loans after July 1, 2026, would have to choose between RAP and the standard repayment plan.
In contrast to the Biden administration's SAVE Plan, which allows borrowers to pause payments for up to a year due to economic hardship, RAP does not offer deferments based on financial difficulty or unemployment. It would also shorten the borrower's discretionary forbearance period from 12 months to nine.
Beyond loan repayment changes, the bill would cap the amount of financial aid students can receive each year to the national median cost of attendance for their program of study.
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While the bill includes $10.5 billion in new funding for the Pell Grant program from fiscal 2026 to 2028 to address projected shortfalls, it would simultaneously raise the bar of eligibility. To qualify for a Pell Grant, a full-time student would have to be enrolled in at least 30 credit hours per academic year, up from the current 24.
At the same time, the bill proposes to stop providing Grad PLUS loans, starting July 1, 2026, and eliminate subsidized loans for undergraduate students after that date. These types of loans do not accrue interest while the student is in college and for six months after leaving school.
Moreover, the bill would cap total unsubsidized loan borrowing at $50,000 for undergraduate students, $100,000 for graduate students, and $150,000 for those in professional degree programs. Students would have to exhaust their unsubsidized loan options before their parents could take out Parent PLUS loans, which currently allow parents to borrow up to the 'cost of attendance' for their children.
For colleges and universities, the bill includes a 'skin-in-the-game' accountability provision, requiring them to repay the government a portion of the unpaid loan balances of their former students.
The Path Ahead
Many of these provisions are inherited from the
With Trump in office, the higher education measures have a clear path to becoming law if the Senate passes the reconciliation bill with identical provisions.
'Today we cleared a huge hurdle, and we are one step closer to delivering on our promise to the American people to cut government waste,' Rep Tim Walberg (R-Mich.), chairman of the House Education Committee,
'It's time we stopped asking taxpayers to foot the bill for our broken student loan system that has left borrowers in trillions of dollars of debt and has caused college costs to balloon. It's time we stopped asking a factory worker in Michigan or a rancher in Texas to subsidize the student debt of a lawyer in Manhattan.
'I urge my colleagues in the Senate to end the status quo and get this bill to the president's desk.'
Student loan borrower advocates were quick to denounce the bill. Mike Pierce, executive director of the Student Borrower Protection Center, criticized the measure during a Senate hearing on Wednesday and urged lawmakers to reject it.
'Rather than check the abuses of the executive branch, congressional Republicans appear ready to abuse the reconciliation process to rewrite higher education policy—shrinking access to federal financial aid, cutting or eliminating grants for about two-thirds of Pell recipients, removing guardrails that protect students from predatory schools, and placing enormous pressure on state higher education budgets,' Pierce
'The result will push millions of families into the private loan market and, in the same bill, gut the CFPB [Consumer Financial Protection Bureau], the regulator charged with protecting these very same families.'
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