The U.S. Senate has taken a significant step toward reshaping student loan repayment options, a move that will impact millions of borrowers across the country.
This includes changes that affect not only parents but also graduate students, who rely heavily on federal loans for advanced degrees.
The new proposals, part of the broader spending legislation backed by President Donald Trump, aim to simplify and restructure current income-driven repayment programs, which have long been a staple for managing educational debt.
According to Business Insider, these changes could lead to fewer repayment options and more stringent borrowing limits for future borrowers.
Key Provisions of the Senate’s Student Loan Reform Bill
Senator Bill Cassidy, the chair of the Senate Education Committee, revealed the education portion of the Republican-backed spending bill on Tuesday.
“We need to fix our broken higher education system, so it prioritizes student success and ensures Americans have the skills to compete in a 21st century economy,” Cassidy said in a statement.
“President Trump and Senate Republicans are focused on delivering results for American families, and this bill does just that.”
Among the proposed changes are the elimination of current income-driven repayment plans, including the Pay As You Earn (PAYE), Income-Contingent Repayment, and former President Joe Biden’s SAVE plan, in favor of two new repayment options.
New Repayment Plans: Standard vs. Repayment Assistance
The new repayment system would offer two main plans: the Standard Repayment Plan and the Repayment Assistance Plan.
The Standard Plan would allow borrowers to pay fixed amounts over 10 to 25 years based on the original amount they borrowed, while the Repayment Assistance Plan would base payments on 1-10% of a borrower’s income, with a $10 minimum monthly payment.
After 30 years, any remaining balance would be forgiven, and unpaid interest would be waived.
These changes align with similar proposals already passed by the House, and if signed into law, it would mean fewer options for borrowers to repay their loans under less generous terms than current plans.
Impact on Borrowing Limits for Graduate and Parent Loans
Another significant aspect of the bill is its focus on capping loans for graduate and parent borrowers.
Graduate PLUS loans, which currently allow students to borrow up to the full cost of attendance, would be eliminated.
Unsubsidized loans for graduate school would be capped at $20,500 per year, while professional degree loans (e.g., law school) would be limited to $50,000 per year.
Additionally, Parent PLUS loans would be capped at $20,000 per student per year.
Concerns Over Borrowing Limits and Deferment Changes
Critics of the bill, including Melanie Storey, president of the National Association of Student Financial Aid Administrators, have voiced concerns over the proposed loan caps and the elimination of deferment options.
“There are several concerning aspects of this bill that would ultimately make college less affordable for students,” Storey said. These include:
“The elimination of the Grad PLUS loan program, the elimination of deferment options for student loan borrowers facing economic hardship or unemployment, and new limits imposed on the Parent PLUS loan program that may drive borrowers to riskier private loans, which are not available to all borrowers.”
Storey also emphasized that the changes could make “student debt much harder to repay” and warned that they could “unleash an avalanche of student loan defaults.”
The bill would also eliminate the option of loan deferment for borrowers facing economic hardship or unemployment — a provision that has raised alarms among financial aid advocates.
Looking Ahead: The Bill’s Future in the Senate
The proposed changes to the student loan system could still undergo revisions before they reach the Senate floor for a vote later this summer.
As part of a broader effort to address federal spending, the bill also signals ongoing shifts in the government’s approach to student debt.
Notably, President Trump’s administration restarted collections on defaulted loans on May 5, with the expectation of starting wage garnishments for defaulted borrowers later this summer.
While the future of the bill remains uncertain, its potential to reshape student loan repayment has already sparked debate and concerns among borrowers, advocates, and lawmakers alike.
