A new budget proposal, supported by Republicans, is upsetting borrowers and advocates for student loans because it calls for significant changes to federal student loan programs. As the Republicans continue to pressure students to raise money, the plan, which is a part of a larger federal budget proposal backed by President Donald Trump, may have a significant impact on millions of Americans who owe money for college.
The House Education and Workforce Group has estimated savings of $330 billion over modifications to repayment plans and federal assistance plans like Pell Grants, and the House Budget Committee has passed the bill, which aims to slash government spending to help pay for tax cuts. Sen. Bill Cassidy (R-La.) Read the following post to learn more.
GOP Budget Bill Could Eliminate Relief Options
President Trump’s massive tax and spending bill’s higher education component was put forth by Republican senators in the U.S. Senate on June 10. The so-called “One Big Beautiful Bill Act” has 71 pages that will significantly reduce the number of repayment options and impose new limits on student loan borrowing. Republicans submitted a harsher bill in the U.S. House of Legislatures in late April, while the Senate version is less aggressive. Despite the fact that it will probably be further diluted because of congressional budget regulations, the legislation’s scope suggests significant changes to the way Americans pay for education may soon be implemented.
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Many student loan programs were eliminated or severely reduced by GOP members in the House when President Donald Trump ordered them to find billions of dollars in government spending reductions. They suggested eliminating undergraduate student loan subsidies in April. The government covers the interest on federal direct subsidized loans while the students are enrolled in classes (and for a brief grace period after graduating). A major modification to Pell Grants, federal subsidies that assist lower-income students in paying for college, was one of the main items in the original bill that college access advocates criticized the most. House Republicans sought to raise the minimum number of credits required for Pell Grant eligibility each semester.
US Federal Student Loan 2025 – Overview
| Article Name | GOP Budget Bill Could Eliminate These Relief Options for Student Loan Borrowers: Explained Here |
| Country | US |
| Administration by | President Trump’s |
| Increased GDP | 0.8% |
| Year | 2025 |
| Category | Finance |
What is the New GOP Bill Plan?
The “One, Big, Beautiful” settlement bill was passed by the House on Thursday, May 22, 2025. It addresses the endings of the 2017 Tax Cuts and Jobs Act (TCJA) and makes extra modifications to US spending and tax policy. According to the analysis, the tax provisions in the bill would raise GDP over the long term by 0.8 percent. Under the bill’s provisions, federal tax revenue would drop by $4 trillion between 2025 and 2034. Incorporating the anticipated 0.8 percent long-term GDP growth into the dynamic score of the tax provisions, the dynamic score drops to $3.1 trillion, indicating that 22 percent of the tax cuts are funded by economic growth.
Some of the income reduction was offset by the bill’s net spending cutbacks of roughly $1.5 trillion, which resulted in a dynamic increase in the budget deficit of $1.7 trillion over ten years. Overall, if the TCJA expired as planned, the bill would stop tax hikes on 62% of taxpayers. Nevertheless, it confuses the tax code’s structure and leaves economic growth on the table by enacting new, narrowly targeted provisions and sunsetting the most pro-growth ones, such as bonus depreciation and R&D expensing. If spending is reduced by $1.7 trillion, the House-passed budget resolution would permit a $4.5 trillion increase in the deficit from tax cuts during the following ten years.
Impact of the New GOP Bill
Even though the law hasn’t passed yet, its current wording indicates that borrower safeguards would be significantly reduced, and that the removal of unemployment and economic hardship deferments will be one of its most controversial features. These are established relief procedures that enable borrowers of federal student loans to temporarily suspend payments while they are experiencing financial difficulties in order to eventually prevent interest from being charged on subsidized loans during the deferment term. The House plan calls for the phase-out of these options for new loans made on or after July 1, 2025.
In the Senate version, the deadline is July 1, 2026, one year later. The U.S. Department of Education reports that as of the 2nd quarter of 2025, some 150,000 debtors were taking advantage of the jobless deferment, and 70,000 of them were eligible for economic poverty deferments. Without these safeguards, more borrowers would choose forbearance, which permits payments to be delayed but doesn’t stop interest from accruing. This frequently leads to a higher loan total when repayment starts up again.
The law also aims to simplify the repayment process by combining existing income-driven repayment choices, like SAVE, Income-Contingent Repayment, and PAYE, into a single option. A borrower under the proposed scheme may end up paying an additional $2,928 annually compared to the current SAVE system, according to the Student Borrower Protection Centre. After July 1, 2026, new federal loan borrowers would only be able to choose between this plan and a standard repayment schedule. The new structure would include modifications to repayment as well as an extension of the forgiveness term to 30 years. The proposal would eliminate new subsidized loans for undergraduates and restrict access to PLUS loans for graduate students and parents.
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