The new budget bill narrowly passed by House Republicans aims to restructure the federal student loan system and dramatically reshape financial aid. The proposal, dubbed the “Big Beautiful Bill”, outlines longer repayment terms, the elimination of long-standing loan options like Grad PLUS loans, and puts restrictions on Pell Grant eligibility that could impact hundreds of thousands of students.

Though the legislation has no clear path in the Senate and faces strong opposition from Democrats and higher education groups, it represents the most ambitious attempt in recent years to overhaul how Americans finance college.

Many of these reforms have been on the Republican radar for a while, with an attempt last year called the College Cost Reduction Act. Where this goes in the Senate, and if it is signed into law, is still to be seen.

Subsidized And Grad Plus Loans Targeted For Elimination

Among the bill’s most controversial provisions is the elimination of subsidized loans for new borrowers starting in the 2026-2027 academic year. These loans, which do not accrue interest while a student is in school, have helped millions of low-income students reduce the long-term cost of borrowing. 

The bill also phases out Grad PLUS loans and dramatically restricts Parent PLUS borrowing.

Under the proposal, parents would only be allowed to borrow after their student has taken out the maximum in unsubsidized loans. Total Parent PLUS student loan borrowing would be capped at $50,000. 

Graduate students would face a lifetime borrowing limit of $150,000. These change for grad students come with a three-year grace period for current students who have already borrowed under these programs.

30 Year Student Loan Repayment Term And Plan Changes

The bill would end access to current income-driven repayment plans for future borrowers and introduce a new structure with up to 30 years of repayment based on income and loan size.

Borrowers with balances over $100,000 would be placed in a 25-year standard repayment plan by default, unless they qualify for a new assistance option based on income. The new standard repayment plan would be a tiered repayment approach:

• Loans Under $25,000: 10 Years
• Loans $25,000 to $50,000: 15 Years
• Loans $50,000 to $100,000: 20 Years
• Loans Over $100,000: 25 Years

Current IDR plan borrowers (including those in the SAVE forbearance) would move into the amended IBR plan, which is based on the existing old IBR plan.

The proposed Repayment Assistance Plan (RAP) would base monthly payments on a borrower’s adjusted gross income, with a sliding scale ranging from 1% to 10% of income. Payments would be capped for low-income borrowers, and those with children would see reductions in their monthly payment by $50 per month per child.

While the plan promises loan forgiveness after 30 years, it offers less flexibility than current IDR options and phases out SAVE, PAYE, and ICR for new borrowers.

Cuts To Pell Grants

The bill would reduce the number of students eligible for full Pell Grants by increasing the number of credits required to receive full aid. 

Currently, students taking 12 or more credits per term qualify for the maximum grant of $7,395. The new plan would raise the threshold to 15 credits, cutting grants by $1,479 for many full-time students who only take 12 units.

This could make it harder for low-income students since many may also be balancing work and school – making it difficult to take more units to qualify for a full Pell Grant.

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