The broad sweeping budget bill that just passed congress has major impacts in numerous areas including the federal student loan system. Signed by President Donald Trump on July 4, the nearly 900-page legislation dramatically rolls back many Biden-era policies, including those offering student debt relief.
The impact is not just for those who’ve already borrowed for their education, but for those who will apply beginning July 1, 2025.
Student Loan Repayment Overhaul
The bill significantly scales back flexible repayment options.
All of the previously existing income contingent repayment plans are gone, loan forgiveness programs that have been in place for years and alters payment requirements that previously benefited disadvantage lower-income families.
The exception is for the eight million borrowers enrolled in Biden’s SAVE (Saving on a Valuable Education) repayment plan will stay in limbo awaiting a judge’s decision about the program’s legality. SAVE adjusted monthly payments based on income and forgave balances after a set number of years.
In its place, only two repayment options will remain:
Standard Repayment Plan – Borrowers repay loans with a fixed monthly payment over a period of 10 to 25 years based strictly on the size of their loan, with no income considerations. The current standard plan has a loan term of 10 years, regardless of the amount borrowed.
Repayment Assistance Plan – Payments range from 1% to 10% of discretionary income, but this plan offers fewer protections than previous income-driven repayment programs.
Borrowers whose loans are dispersed on or after July 1, 2026 and those enrolled in SAVE, ICT or PAYE will have between July 2026 and June 30, 2028 to select a new plan. If they don’t act, they’ll be automatically placed into the Repayment Assistance Plan on July 1, 2028.
Loan Forgiveness Programs Slashed
The bill also guts longstanding federal loan forgiveness programs, including those that benefit public service workers and those working in low-income fields. Many borrowers who expected relief after years of qualifying payments will now face full repayment, with no forgiveness in sight.
Borrowing Caps for Students and Parents
The legislation also eliminates the Graduate PLUS Program, which allows students going to graduate or professional school to cover the full cost of attendance. In an effort to curb what supporters call “overborrowing,” the bill introduces lifetime borrowing caps for federal student loans:
Graduate students: $100,000
Medical and law students: $200,000
Parent PLUS loans: $65,000
Parent PLUS loans, which many families rely on to bridge tuition gaps, will no longer qualify for repayment programs, placing a greater financial burden on middle- and lower-income families.
Fewer Options for Deferment and Forbearance
Borrowers facing financial hardship will also have fewer safety nets. Borrowers struggling to repay their loans will no longer be able to defer due to unemployment or economic hardship, but it would also give borrowers the ability to rehabilitate defaulted loans twice instead of the current one time that is allowed.
Pell Grant Expansion
The bill expands Pell Grant use for short-term training programs – often designed to quickly prepare students for in-demand jobs. Before this bill passed, Pell Grants could only be used for programs that are at least 600 clock hours and 15 weeks long. The Workforce Pell portion, which will go into effect on July 1, 2026 and includes a number of metrics and provisions that were part of other bipartisan versions introduced in recent years.
Impacts on Future Borrowers
There’s a lot more in the bill, still to be sorted out. While current borrowers—over 40 million Americans—may not be immediately affected, new borrowers and students planning graduate or professional degrees will feel the changes most acutely.
The bill’s student loan provisions reflect a broader ideological shift—away from income-based relief and toward fixed, limited borrowing. While Republican leaders argue these measures promote personal responsibility and fiscal discipline, critics warn they could deepen inequities in higher education access and saddle millions with long-term debt.
What Else is in the Bill?
Beyond student loans, the bill:
Makes Trump’s 2017 tax cuts permanent
Provides narrow tax breaks for tips and overtime
Introduces new business benefits
Rolls back clean energy tax credits from the Biden era
Cuts Medicaid, potentially leaving 12 million Americans uninsured
Reduces access to the Supplemental Nutrition Assistance Program (SNAP) for 2 million people
Contributing sources included USA TODAY, student loan sherpa and The Hill.
I notice that you failed to report that the bill will end taxes on social security for 88% of recipients. That will help about 56 million middle- and lower-income senior citizens.