Senate Bill Overhauls Student Loans: Key Changes and Impacts

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The recent senate bill on student loans represents a significant shift in the way federal education loans will be managed, especially impacting both current and future borrowers. Released on June 27, 2025, the bill, often referred to as the “One Big Beautiful Bill,” lays out comprehensive changes designed to simplify repayment processes while imposing stricter borrowing limits.

What You Need to Know About the Overhaul

Under the new provisions, borrowers who take out federal student loans after July 1, 2026, will face two primary repayment options. The plans are designed to ease financial stress while ensuring that the federal loan program remains sustainable. The Standard Plan allows for level payments over a set period, while the new Repayment Assistance Plan (RAP) bases payments on the borrower’s income.

New Changes for Future Borrowers

For new borrowers, there is a notable reduction in borrowing limits on Parent PLUS loans, capped at $20,000 annually and a total of $65,000. Furthermore, Grad PLUS loans will be phased out entirely. Instead, graduate students will have a cap of $20,500 annually and a lifetime limit set at $100,000. For professional students, the limits will stand at $50,000 annually and a $200,000 lifetime total.

The repayment terms also change significantly. Monthly payments with the RAP can start as low as $10, but for those earning over $100,000 annually, payments can reach 10% of their adjusted gross income. A significant benefit is that unpaid interest will not accrue, granting a degree of flexibility to borrowers.

Impact on Existing Borrowers

Those who have already taken out loans will not experience immediate changes; however, between July 2026 and July 2028, current income-driven repayment plans (ICR, PAYE, and SAVE) will be eliminated. Borrowers will be required to transition to a modified version of the Income-Based Repayment (IBR) system.

This transition mandates that borrowers previously using ICR or PAYE choose between the new IBR and RAP plans, ensuring continuity in their repayment journey. Existing Parent PLUS borrowers must also consolidate their loans before July 30, 2026, to retain access to income-driven repayment options.

Elimination of Certain Deferments

Furthermore, the bill removes significant deferment and forbearance options, including economic hardship and unemployment deferments. This shift aims to direct borrowers towards more permanent solutions, thus emphasizing the importance of selecting an appropriate repayment plan early on.

Future Legislative Steps

As the Senate prepares to vote on this bill shortly, it will return to the House of Representatives before heading to the President for approval. The intention is to enact these changes before the July 4 holiday, marking a major legislative milestone affecting college funding and student financial health in America.

This new legislation is poised to reshape the landscape of student loans, and it is critical for current and future students to remain informed about these reforms. The changes may simplify processes for some, yet they also have the potential to complicate repayment for others, thus requiring careful navigation moving forward.

Frequently Asked Questions

What does the Senate Bill change about student loans?

The bill introduces new repayment plans, limits borrowing amounts, and eliminates some existing deferments, significantly altering how student loans work.

When do these changes take effect?

The new provisions apply to borrowers taking out loans after July 1, 2026, while existing borrowers will transition to new plans by July 2028.

How will my repayment amounts change?

Payments for new borrowers will be based on income under the RAP or fixed based on the loan amount, reducing financial strain on borrowers.

Are Parent PLUS loans affected?

Yes, new Parent PLUS loans will only have repayment options under the Standard Plan, significantly limiting repayment flexibility.

What should current borrowers do?

Current borrowers should plan accordingly and consider consolidating their loans by June 30, 2026, to maintain access to income-driven repayment options.