Major student loan changes just came one step closer to becoming law

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14 hours ago

WASHINGTON – Congress is closer than it's been in a long time to massively reforming college financial aid.
On June 10, GOP lawmakers in the U.S. Senate proposed their version of the higher education section of President Trump's tax and spending megabill. The 71-page portion of the so-called "One Big Beautiful Bill Act" would set new caps on student loan borrowing while drastically cutting the number of repayment plans.
Read more: Republicans propose massive overhaul of student loans, Pell Grants
The Senate's version of the legislation is less aggressive than the bill that Republicans in the U.S. House of Representatives introduced in late April.
While it will likely be further watered down due to congressional budget rules, the scope of the legislation indicates big changes will be enacted soon to how Americans pay for college.
When President Donald Trump asked Republicans to find billions of dollars in federal spending cuts, GOP lawmakers in the House drew up measures to eliminate or dramatically curb many student loan programs.
In April, they proposed cutting subsidized loans altogether for undergraduates. When students take out a federal direct subsidized loan, the government pays the interest while they're in school (and for a short grace period after the students complete their studies).
That idea didn't survive in the Senate version of the bill, which was expected to be slightly more moderate than the House proposal.
Read more: Could Trump fail on tax bill? Why going 'big' doesn't always work out as planned
Other elements of the House version remain, however. Like the House bill, the Senate measure proposes cutting the number of student loan repayment plans to just two. That change would kill former President Joe Biden's Saving on a Valuable Education, or SAVE, program, which former Education Secretary Miguel Cardona repeatedly called the "most affordable repayment plan ever." SAVE has been stalled in court for months, placing roughly 8 million people in forbearance.
The Senate bill would also dramatically curb lending for graduate students and parents (though at lower caps than House Republicans wanted). Ben Cecil, a senior education policy advisor at Third Way, a center-left think tank, said he was pleased to see the bill appeared to make compromises.
"These loan limits are much more reasonable," he said.
Melanie Storey, president of the National Association of Student Financial Aid Administrators, said she was "relieved" some of the "most harmful" provisions of the House bill had been nixed.
"Still, there are several concerning aspects of this bill that would ultimately make college less affordable for students," she said, including changes that "may drive borrowers to riskier private loans, which are not available to all borrowers."
One of college access groups' biggest criticisms of the initial bill was a significant change to Pell Grants, federal subsidies that help lower-income students pay for college.
House Republicans wanted to increase the number of credits students would need to take each semester to be eligible for Pell Grants. The Center for American Progress, a progressive think tank, estimated that two out of three Pell recipients could've lost their grants or received smaller ones if that requirement were enacted.
The Senate version takes a softer approach, codifying a provision to more fully exclude higher-income students qualify for Pell funds.
At the same time, the bill expands Pell Grants in ways that could waste money, according to critics such as Sameer Gadkaree, president of The Institute for College Access & Success, a college affordability group.
'While the Senate nixed most of the House's proposed cuts to the Pell Grant program and averts a looming funding shortfall, it regrettably threatens the program's long-term stability by extending Pell eligibility to unaccredited programs that are unlikely to pay off for students," Gadkaree said in a statement.
One of the biggest distinctions between the House and Senate versions of the bill is that they lay out two entirely different sets of new accountability rules for colleges.
The House proposal would fine colleges for leaving students on the hook for unpaid student loan debt. The Senate's framework suggests taking federal financial aid away from college programs if they can't prove that students who graduate are earning more than they would have without a degree.
Mike Itzkowitz, who served in the Education Department under President Barack Obama, said that concept has bipartisan support.
"I don't know anyone who would be willing to fork over their time to take on loans to earn less than a high school graduate," he said.
But it's possible that particular provision won't survive special Senate rules. To avoid needing the support of Democrats, Republicans are trying to pass Trump's "Big, Beautiful Bill" using the budget process. That strategy comes with challenges, however, namely that the bill must only make changes that spend money or save money.
Significant reforms to college oversight might go too far, said Jon Fansmith, the senior vice president of government relations at the American Council on Education, the main association for colleges and universities.
"This process isn't designed to do complicated policymaking," he said. "I really do worry about rushing something through without understanding what we're doing."
Zachary Schermele is an education reporter for USA TODAY. You can reach him by email at [e-mail]. Follow him on X at @ZachSchermele and Bluesky at @zachschermele.bsky.social.
This article originally appeared on USA TODAY: GOP student loan overhaul is getting closer to becoming law