Latest news with #TimWalberg
Yahoo
2 days ago
- Business
- Yahoo
GOP student loan plan sparks debate over higher payments, fewer options
WASHINGTON (NEXSTAR) — Republican lawmakers are proposing major changes to federal student loan repayment plans, sparking sharp debate among education policy experts and borrower advocates. Tucked inside the over 1,000-page 'Big Beautiful Bill,' the GOP-backed measure would eliminate existing income-driven repayment (IDR) options introduced during the Biden administration. In their place, the plan introduces two simplified repayment paths: a fixed payment plan and a new income-driven alternative. At a March hearing, Rep. Tim Walberg (R-Mich.), the chairman of the House Education and Workforce Committee, championed the provision. He says an overhaul is long overdue. 'This bill cleans up the mess,' Walberg said. 'It streamlines student loan options and creates accountability for students and taxpayers.' Under the proposal, most borrowers would be automatically enrolled in a fixed payment plan with terms ranging from 10 to 25 years—similar to a mortgage. The new income-driven option would adjust monthly payments based on income but would require even the lowest earners to pay a minimum of $10 monthly. The plan retains a Biden-era policy that waives unpaid interest for borrowers who make consistent payments. Conservatives say the changes will encourage repayment and reduce costs to taxpayers. 'The student loan portfolio is headed toward a fiscal cliff,' said Madison Marino, an education policy expert with the Heritage Foundation. 'Only 38% of borrowers are currently repaying their loans. This program is very reasonable.' But critics argue the bill could make repayment harder for millions of Americans. 'What this bill is going to do is lock borrowers into much higher payments for the long term,' said Persis Yu, Deputy Executive Director of the Student Borrower Protection Center. 'The effects are going to be devastating—both for borrowers and for the broader economy.' The bill passed the House without a single Democratic vote and now heads to the Republican-controlled Senate, where its future remains uncertain. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
22-05-2025
- Business
- Yahoo
Trump's tax bill makes big changes to student loans and financial aid
Lower loan limits. Fewer repayment options. A 30-year path to forgiveness. New Pell restrictions. Those are among the major changes coming to the federal student lending program under measures Republicans included in their sweeping tax and budget bill that passed the House early Thursday. The legislation is designed to rationalize the government's famously convoluted education loan program while saving around $351 billion. Unlike the current system, the overhaul would require pretty much every borrower — including the lowest earners — to at least make small payments toward their loans, and they would have a narrower chance of getting their debt canceled. "It's no secret that colleges have exploited the availability of uncapped federal lending and generous forgiveness programs to raise prices rather than improve access and affordability,' Rep. Tim Walberg, who chairs the Education and Workforce Committee, said at an April 29 hearing. 'Streamlining loan options as done in this bill will increase affordability for students and families as well as curtail the extent to which schools use taxpayer dollars to line their pocketbooks by loading students up with debt they can't repay.' But some outside experts have suggested that the reforms, including a complicated new system for determining how much students can receive in aid each year, could end up making aspects of the loan program more confusing for families, while also limiting access to federal aid for many lower-income students. Here are the key things to know. The student loan program has become notorious for its baffling array of repayment plans, which have accumulated over time as previous administrations have stacked new, more generous options atop one another. Those choices have been made messier by federal court rulings that blocked all or parts of some plans over the past year. President Biden's SAVE plan, for instance, is entirely on hold, as are the loan forgiveness features of Pay As You Earn and its successor, REPAYE. The GOP bill would prune the system to just a pair of options — one standard plan, and one linked to income — both designed to make monthly payments manageable for borrowers. The new standard plan would still require fixed monthly payments. But instead of automatically being placed on a 10-year repayment schedule, like in today's program, former students would have between 10 and 25 years to pay down their debts depending on how much they borrowed — similar to how federal consolidation loans work today. Read more: Can you change your student loan repayment plan? Meanwhile, the alphabet soup of plans that currently set payments based on a borrower's income — ICR, IBR, PAYE, REPAYE, and SAVE — would be slimmed down to a single option. The new Repayment Assistance Plan will require participants to pay between 1% and 10% of their income toward their loans, with higher earners owing more. Notably, the bill would ban the Secretary of Education from modifying the two new plans, so a future president couldn't make their terms more lenient. 'I'd say this step toward simplification is a massive improvement when it comes to making these programs understandable to the general public,' said Beth Akers, an education expert at the right-leaning American Enterprise Institute. The new Repayment Assistance plan is in some ways less generous than some of the options that have been available until recently. For instance, current income-driven plans drop monthly payments to $0 per month for the lowest earners. The new proposal would require a minimum $10 monthly payment. Instead of forgiveness after 20 or 25 years, the new plan would require 360 on-time payments, or essentially 30 years. Read more: How to apply for IDR forgiveness The reforms also eliminate subsidized loans, which don't begin charging interest until repayment begins, as well as forbearance and deferments for unemployment and economic hardship. Still, the new income-linked plan would have some borrower-friendly features. For instance, the government would waive unpaid interest each month instead of adding it back to a borrower's balance, as long as enrollees make their minimum payment. It would also offer matching principal payments of up to $50 a month and make payments lower for parents. The bill would not change the way interest rates are calculated. There's at least one quirk of the Repayment Assistance Plan that could frustrate a few participants. Because of the way payments increase with income, there's a chance some borrowers may end up losing money if they get a small raise, because their payment could theoretically go up more than their earnings — the sort of phenomenon income tax brackets, for instance, are designed to avoid. A spokeswoman for the Education and Workforce Committee suggested that borrowers in that situation wouldn't necessarily be losing money, since they'd save on interest by paying their loans faster. What about borrowers who already have loans? Some could end up with higher monthly payments. The proposal would terminate SAVE, PAYE, and REPAYE and transfer them into the existing Income-Based Repayment plan, with monthly payments set at 15% of discretionary income, and offer forgiveness after 20 years for undergraduate debt and 25 years for graduate student loans. PAYE and REPAYE had offered monthly payments at 10% of discretionary income. Under the new program, many Americans would be able to borrow significantly less for school. For undergraduates, the lifetime Stafford Loan limit would be set at $50,000, higher than the current $31,000 cap for dependent students, but lower than the $57,000 cap for those who are independent. At the same time, Parent PLUS loans, which today are uncapped, would max out at $50,000 per parent across all of their children. Grad PLUS loans, which allowed unlimited borrowing for advanced degree programs, are getting the ax entirely. Instead, borrowers will be limited to $100,000 in loans for graduate programs and $150,000 for professional programs. The caps are meant to tamp down on rampant tuition inflation and prevent overborrowing, but some experts are concerned they will simply push some students toward private lenders, especially in fields like law and medicine, who charge higher interest rates and offer fewer protections. 'It sounds like a massive play to increase the private student loan market,' said Julie Margetta Morgan, president of The Century Foundation and a former Department of Education official under the Biden administration. There are major changes in store for how financial aid eligibility is calculated. Today, that math is based on the cost of attending the school where the student intends to enroll. Under the rule Republicans have proposed, each student's aid would be based on the median cost of attending a similar program of study nationally. So the aid for an engineering major at MIT would be based on the cost of engineering programs across the country, for instance. The measure is being pitched as a way to help students pick lower-cost programs. "The opaque tuition pricing model used today by colleges and universities is extremely confusing to borrowers and plays a large part in high costs,' said an Education and Workforce Committee spokeswoman. They added that the new aid formula is designed to help students 'be more informed consumers when comparing programs at different institutions.' But some experts told Yahoo Finance that they were baffled by how the system would function in practice, or what it would mean for the typical student's aid package. It's also unclear if the Department of Education has the data collection capability to manage such a new system, since its statistics team has been cut down to three employees as part of recent layoffs. 'I have no idea what it's going to do,' said Rachel Fishman, director of higher education at the think tank New America. 'I don't think anybody understands what it is going to do.' The Pell Grant program, which provides aid to low- and moderate-income households, would also see an overhaul. Some of the changes would limit access for part-time students. For instance, undergrads would need to be enrolled at least half-time to qualify for any aid and would have to take a full course load of at least 15 credits per semester to receive a maximum grant, instead of the current 12 credits. At the same time, the GOP would make more short-term certificate courses that offer vocational training for workers like truck drivers and nursing assistants Pell-eligible, by lowering the minimum length of a program to 8 weeks from the current 15. Fishman said she was worried that the combined changes would lead to more 'stratification' in higher education. 'We're taking away your ability to get a bachelor's if you're working on the side, but if you want to get a short-term credential to get a really low-paying job, go ahead,' she said. One thing that won't be getting a huge overhaul: The Public Service Loan Forgiveness program, which cancels the remaining debt for nonprofit and government employees after they make 10 years of payments. The program has long been a target for conservatives — the Heritage Foundation's Project 2025 advocated for eliminating it. But the GOP's bill only makes one change: Payments by medical and dental residents wouldn't qualify for forgiveness. Read more: How to apply for Public Service Loan Forgiveness One of the biggest changes to the lending program would be aimed at colleges themselves. The bill includes a 'skin-in-the-game' provision that would essentially put schools on the hook for paying back a portion of their students' loans if they miss payments and potentially cut them off from federal aid programs entirely. The idea, which has been discussed in Washington policy circles for some time, is intended to create more accountability in higher education without singling out for-profit colleges. But some critics worry that it could disincentivize colleges from enrolling lower-income students, who are at higher risk of failing to pay back their loans. Partly to prevent that, the bill includes a new grant program for colleges that gives them more funding based on a formula that rewards enrolling and graduating lower-income students. To qualify, the colleges would have to offer students a guaranteed maximum price to complete their degree when they first enroll. Still, lobbying associations that represent universities are unhappy with the potential for new penalties, arguing in a recent letter that they would create 'enormous negative consequences' that 'unduly penalize the very institutions serving the largest numbers of those students who struggle most in the labor market: low income, first generation, and underrepresented student populations.' Jordan Weissmann is a senior reporter at Yahoo Finance. Sign up for the Mind Your Money newsletter
Forbes
22-05-2025
- Business
- Forbes
House Passes Trump's ‘One Big Beautiful Bill', Here's What It Means For Student Loan Forgiveness And Repayment
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.
Yahoo
22-05-2025
- Business
- Yahoo
Trump's tax bill makes big changes to student loans and financial aid
Lower loan limits. Fewer repayment options. A 30-year path to forgiveness. New Pell restrictions. Those are among the major changes coming to the federal student lending program under measures Republicans included in their sweeping tax and budget bill that passed the House early Thursday. The legislation is designed to rationalize the government's famously convoluted education loan program while saving around $351 billion. Unlike the current system, the overhaul would require pretty much every borrower — including the lowest earners — to at least make small payments toward their loans, and they would have a narrower chance of getting their debt canceled. "It's no secret that colleges have exploited the availability of uncapped federal lending and generous forgiveness programs to raise prices rather than improve access and affordability,' Rep. Tim Walberg, who chairs the Education and Workforce Committee, said at an April 29 hearing. 'Streamlining loan options as done in this bill will increase affordability for students and families as well as curtail the extent to which schools use taxpayer dollars to line their pocketbooks by loading students up with debt they can't repay.' But some outside experts have suggested that the reforms, including a complicated new system for determining how much students can receive in aid each year, could end up making aspects of the loan program more confusing for families, while also limiting access to federal aid for many lower-income students. Here are the key things to know. The student loan program has become notorious for its baffling array of repayment plans, which have accumulated over time as previous administrations have stacked new, more generous options atop one another. Those choices have been made messier by federal court rulings that blocked all or parts of some plans over the past year. President Biden's SAVE plan, for instance, is entirely on hold, as are the loan forgiveness features of Pay As You Earn and its successor, REPAYE. The GOP bill would prune the system to just a pair of options — one standard plan, and one linked to income — both designed to make monthly payments manageable for borrowers. The new standard plan would still require fixed monthly payments. But instead of automatically being placed on a 10-year repayment schedule, like in today's program, former students would have between 10 and 25 years to pay down their debts depending on how much they borrowed — similar to how federal consolidation loans work today. Read more: Can you change your student loan repayment plan? Meanwhile, the alphabet soup of plans that currently set payments based on a borrower's income — ICR, IBR, PAYE, REPAYE, and SAVE — would be slimmed down to a single option. The new Repayment Assistance Plan will require participants to pay between 1% and 10% of their income toward their loans, with higher earners owing more. Notably, the bill would ban the Secretary of Education from modifying the two new plans, so a future president couldn't make their terms more lenient. 'I'd say this step toward simplification is a massive improvement when it comes to making these programs understandable to the general public,' said Beth Akers, an education expert at the right-leaning American Enterprise Institute. The new Repayment Assistance plan is in some ways less generous than some of the options that have been available until recently. For instance, current income-driven plans drop monthly payments to $0 per month for the lowest earners. The new proposal would require a minimum $10 monthly payment. Instead of forgiveness after 20 or 25 years, the new plan would require 360 on-time payments, or essentially 30 years. Read more: How to apply for IDR forgiveness The reforms also eliminate subsidized loans, which don't begin charging interest until repayment begins, as well as forbearance and deferments for unemployment and economic hardship. Still, the new income-linked plan would have some borrower-friendly features. For instance, the government would waive unpaid interest each month instead of adding it back to a borrower's balance, as long as enrollees make their minimum payment. It would also offer matching principal payments of up to $50 a month and make payments lower for parents. The bill would not change the way interest rates are calculated. There's at least one quirk of the Repayment Assistance Plan that could frustrate a few participants. Because of the way payments increase with income, there's a chance some borrowers may end up losing money if they get a small raise, because their payment could theoretically go up more than their earnings — the sort of phenomenon income tax brackets, for instance, are designed to avoid. A spokeswoman for the Education and Workforce Committee suggested that borrowers in that situation wouldn't necessarily be losing money, since they'd save on interest by paying their loans faster. What about borrowers who already have loans? Some could end up with higher monthly payments. The proposal would terminate SAVE, PAYE, and REPAYE and transfer them into the existing Income-Based Repayment plan, with monthly payments set at 15% of discretionary income, and offer forgiveness after 20 years for undergraduate debt and 25 years for graduate student loans. PAYE and REPAYE had offered monthly payments at 10% of discretionary income. Under the new program, many Americans would be able to borrow significantly less for school. For undergraduates, the lifetime Stafford Loan limit would be set at $50,000, higher than the current $31,000 cap for dependent students, but lower than the $57,000 cap for those who are independent. At the same time, Parent PLUS loans, which today are uncapped, would max out at $50,000 per parent across all of their children. Grad PLUS loans, which allowed unlimited borrowing for advanced degree programs, are getting the ax entirely. Instead, borrowers will be limited to $100,000 in loans for graduate programs and $150,000 for professional programs. The caps are meant to tamp down on rampant tuition inflation and prevent overborrowing, but some experts are concerned they will simply push some students toward private lenders, especially in fields like law and medicine, who charge higher interest rates and offer fewer protections. 'It sounds like a massive play to increase the private student loan market,' said Julie Margetta Morgan, president of The Century Foundation and a former Department of Education official under the Biden administration. There are major changes in store for how financial aid eligibility is calculated. Today, that math is based on the cost of attending the school where the student intends to enroll. Under the rule Republicans have proposed, each student's aid would be based on the median cost of attending a similar program of study nationally. So the aid for an engineering major at MIT would be based on the cost of engineering programs across the country, for instance. The measure is being pitched as a way to help students pick lower-cost programs. "The opaque tuition pricing model used today by colleges and universities is extremely confusing to borrowers and plays a large part in high costs,' said an Education and Workforce Committee spokeswoman. They added that the new aid formula is designed to help students 'be more informed consumers when comparing programs at different institutions.' But some experts told Yahoo Finance that they were baffled by how the system would function in practice, or what it would mean for the typical student's aid package. It's also unclear if the Department of Education has the data collection capability to manage such a new system, since its statistics team has been cut down to three employees as part of recent layoffs. 'I have no idea what it's going to do,' said Rachel Fishman, director of higher education at the think tank New America. 'I don't think anybody understands what it is going to do.' The Pell Grant program, which provides aid to low- and moderate-income households, would also see an overhaul. Some of the changes would limit access for part-time students. For instance, undergrads would need to be enrolled at least half-time to qualify for any aid and would have to take a full course load of at least 15 credits per semester to receive a maximum grant, instead of the current 12 credits. At the same time, the GOP would make more short-term certificate courses that offer vocational training for workers like truck drivers and nursing assistants Pell-eligible, by lowering the minimum length of a program to 8 weeks from the current 15. Fishman said she was worried that the combined changes would lead to more 'stratification' in higher education. 'We're taking away your ability to get a bachelor's if you're working on the side, but if you want to get a short-term credential to get a really low-paying job, go ahead,' she said. One thing that won't be getting a huge overhaul: The Public Service Loan Forgiveness program, which cancels the remaining debt for nonprofit and government employees after they make 10 years of payments. The program has long been a target for conservatives — the Heritage Foundation's Project 2025 advocated for eliminating it. But the GOP's bill only makes one change: Payments by medical and dental residents wouldn't qualify for forgiveness. Read more: How to apply for Public Service Loan Forgiveness One of the biggest changes to the lending program would be aimed at colleges themselves. The bill includes a 'skin-in-the-game' provision that would essentially put schools on the hook for paying back a portion of their students' loans if they miss payments and potentially cut them off from federal aid programs entirely. The idea, which has been discussed in Washington policy circles for some time, is intended to create more accountability in higher education without singling out for-profit colleges. But some critics worry that it could disincentivize colleges from enrolling lower-income students, who are at higher risk of failing to pay back their loans. Partly to prevent that, the bill includes a new grant program for colleges that gives them more funding based on a formula that rewards enrolling and graduating lower-income students. To qualify, the colleges would have to offer students a guaranteed maximum price to complete their degree when they first enroll. Still, lobbying associations that represent universities are unhappy with the potential for new penalties, arguing in a recent letter that they would create 'enormous negative consequences' that 'unduly penalize the very institutions serving the largest numbers of those students who struggle most in the labor market: low income, first generation, and underrepresented student populations.' Jordan Weissmann is a senior reporter at Yahoo Finance. Sign up for the Mind Your Money newsletter Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-05-2025
- Business
- Yahoo
Trump's tax bill makes big changes to student loans and financial aid
Lower loan limits. Fewer repayment options. A 30-year path to forgiveness. New Pell restrictions. Those are among the major changes coming to the federal student lending program under measures Republicans included in their sweeping tax and budget bill that passed the House early Thursday. The legislation is designed to rationalize the government's famously convoluted education loan program while saving around $351 billion. Unlike the current system, the overhaul would require pretty much every borrower — including the lowest earners — to at least make small payments toward their loans, and they would have a narrower chance of getting their debt canceled. "It's no secret that colleges have exploited the availability of uncapped federal lending and generous forgiveness programs to raise prices rather than improve access and affordability,' Rep. Tim Walberg, who chairs the Education and Workforce Committee, said at an April 29 hearing. 'Streamlining loan options as done in this bill will increase affordability for students and families as well as curtail the extent to which schools use taxpayer dollars to line their pocketbooks by loading students up with debt they can't repay.' But some outside experts have suggested that the reforms, including a complicated new system for determining how much students can receive in aid each year, could end up making aspects of the loan program more confusing for families, while also limiting access to federal aid for many lower-income students. Here are the key things to know. The student loan program has become notorious for its baffling array of repayment plans, which have accumulated over time as previous administrations have stacked new, more generous options atop one another. Those choices have been made messier by federal court rulings that blocked all or parts of some plans over the past year. President Biden's SAVE plan, for instance, is entirely on hold, as are the loan forgiveness features of Pay As You Earn and its successor, REPAYE. The GOP bill would prune the system to just a pair of options — one standard plan, and one linked to income — both designed to make monthly payments manageable for borrowers. The new standard plan would still require fixed monthly payments. But instead of automatically being placed on a 10-year repayment schedule, like in today's program, former students would have between 10 and 25 years to pay down their debts depending on how much they borrowed — similar to how federal consolidation loans work today. Read more: Can you change your student loan repayment plan? Meanwhile, the alphabet soup of plans that currently set payments based on a borrower's income — ICR, IBR, PAYE, REPAYE, and SAVE — would be slimmed down to a single option. The new Repayment Assistance Plan will require participants to pay between 1% and 10% of their income toward their loans, with higher earners owing more. Notably, the bill would ban the Secretary of Education from modifying the two new plans, so a future president couldn't make their terms more lenient. 'I'd say this step toward simplification is a massive improvement when it comes to making these programs understandable to the general public,' said Beth Akers, an education expert at the right-leaning American Enterprise Institute. The new Repayment Assistance plan is in some ways less generous than some of the options that have been available until recently. For instance, current income-driven plans drop monthly payments to $0 per month for the lowest earners. The new proposal would require a minimum $10 monthly payment. Instead of forgiveness after 20 or 25 years, the new plan would require 360 on-time payments, or essentially 30 years. Read more: How to apply for IDR forgiveness The reforms also eliminate subsidized loans, which don't begin charging interest until repayment begins, as well as forbearance and deferments for unemployment and economic hardship. Still, the new income-linked plan would have some borrower-friendly features. For instance, the government would waive unpaid interest each month instead of adding it back to a borrower's balance, as long as enrollees make their minimum payment. It would also offer matching principal payments of up to $50 a month and make payments lower for parents. The bill would not change the way interest rates are calculated. There's at least one quirk of the Repayment Assistance Plan that could frustrate a few participants. Because of the way payments increase with income, there's a chance some borrowers may end up losing money if they get a small raise, because their payment could theoretically go up more than their earnings — the sort of phenomenon income tax brackets, for instance, are designed to avoid. A spokeswoman for the Education and Workforce Committee suggested that borrowers in that situation wouldn't necessarily be losing money, since they'd save on interest by paying their loans faster. What about borrowers who already have loans? Some could end up with higher monthly payments. The proposal would terminate SAVE, PAYE, and REPAYE and transfer them into the existing Income-Based Repayment plan, with monthly payments set at 15% of discretionary income, and offer forgiveness after 20 years for undergraduate debt and 25 years for graduate student loans. PAYE and REPAYE had offered monthly payments at 10% of discretionary income. Under the new program, many Americans would be able to borrow significantly less for school. For undergraduates, the lifetime Stafford Loan limit would be set at $50,000, higher than the current $31,000 cap for dependent students, but lower than the $57,000 cap for those who are independent. At the same time, Parent PLUS loans, which today are uncapped, would max out at $50,000 per parent across all of their children. Grad PLUS loans, which allowed unlimited borrowing for advanced degree programs, are getting the ax entirely. Instead, borrowers will be limited to $100,000 in loans for graduate programs and $150,000 for professional programs. The caps are meant to tamp down on rampant tuition inflation and prevent overborrowing, but some experts are concerned they will simply push some students toward private lenders, especially in fields like law and medicine, who charge higher interest rates and offer fewer protections. 'It sounds like a massive play to increase the private student loan market,' said Julie Margetta Morgan, president of The Century Foundation and a former Department of Education official under the Biden administration. There are major changes in store for how financial aid eligibility is calculated. Today, that math is based on the cost of attending the school where the student intends to enroll. Under the rule Republicans have proposed, each student's aid would be based on the median cost of attending a similar program of study nationally. So the aid for an engineering major at MIT would be based on the cost of engineering programs across the country, for instance. The measure is being pitched as a way to help students pick lower-cost programs. "The opaque tuition pricing model used today by colleges and universities is extremely confusing to borrowers and plays a large part in high costs,' said an Education and Workforce Committee spokeswoman. They added that the new aid formula is designed to help students 'be more informed consumers when comparing programs at different institutions.' But some experts told Yahoo Finance that they were baffled by how the system would function in practice, or what it would mean for the typical student's aid package. It's also unclear if the Department of Education has the data collection capability to manage such a new system, since its statistics team has been cut down to three employees as part of recent layoffs. 'I have no idea what it's going to do,' said Rachel Fishman, director of higher education at the think tank New America. 'I don't think anybody understands what it is going to do.' The Pell Grant program, which provides aid to low- and moderate-income households, would also see an overhaul. Some of the changes would limit access for part-time students. For instance, undergrads would need to be enrolled at least half-time to qualify for any aid and would have to take a full course load of at least 15 credits per semester to receive a maximum grant, instead of the current 12 credits. At the same time, the GOP would make more short-term certificate courses that offer vocational training for workers like truck drivers and nursing assistants Pell-eligible, by lowering the minimum length of a program to 8 weeks from the current 15. Fishman said she was worried that the combined changes would lead to more 'stratification' in higher education. 'We're taking away your ability to get a bachelor's if you're working on the side, but if you want to get a short-term credential to get a really low-paying job, go ahead,' she said. One thing that won't be getting a huge overhaul: The Public Service Loan Forgiveness program, which cancels the remaining debt for nonprofit and government employees after they make 10 years of payments. The program has long been a target for conservatives — the Heritage Foundation's Project 2025 advocated for eliminating it. But the GOP's bill only makes one change: Payments by medical and dental residents wouldn't qualify for forgiveness. Read more: How to apply for Public Service Loan Forgiveness One of the biggest changes to the lending program would be aimed at colleges themselves. The bill includes a 'skin-in-the-game' provision that would essentially put schools on the hook for paying back a portion of their students' loans if they miss payments and potentially cut them off from federal aid programs entirely. The idea, which has been discussed in Washington policy circles for some time, is intended to create more accountability in higher education without singling out for-profit colleges. But some critics worry that it could disincentivize colleges from enrolling lower-income students, who are at higher risk of failing to pay back their loans. Partly to prevent that, the bill includes a new grant program for colleges that gives them more funding based on a formula that rewards enrolling and graduating lower-income students. To qualify, the colleges would have to offer students a guaranteed maximum price to complete their degree when they first enroll. Still, lobbying associations that represent universities are unhappy with the potential for new penalties, arguing in a recent letter that they would create 'enormous negative consequences' that 'unduly penalize the very institutions serving the largest numbers of those students who struggle most in the labor market: low income, first generation, and underrepresented student populations.' Jordan Weissmann is a senior reporter at Yahoo Finance. Sign up for the Mind Your Money newsletter
