Topline

The House passed the Senate’s version of President Donald Trump’s sweeping domestic policy bill Thursday, sending it to Trump to sign, as the bill proposes a major overhaul of student loan programs and repayment plans that restricts how much students can borrow and the payment plans they use to pay the loans back.

The bill changes existing caps on federal student loans, but the final version tones down more extreme limits that had been proposed in the initial version passed by the House. The bill limits parents to borrowing $20,000 per year for each child, with a $65,000 total cap per student. It also limits graduate students to $20,500 per year in loans and $100,000 in total, while students in professional schools, like medical school, are limited to $50,000 in loans per year and $200,000 in total. The Senate slightly raised the overall lifetime cap on student loans from the original House version, now capping all federal student loans that a borrower receives—excluding Parent PLUS loans—at $257,500. Those limits will all take effect on July 1, 2026, but students who are already borrowing money will be allowed to use the old rules until they finish their program of study.

The final bill gets rid of the Graduate PLUS loan program, eliminating the loans past July 1, 2026. Senators watered down restrictions from the original House bill, however, getting rid of language that would have limited when parents could take out loans and eliminated subsidized loans for undergrads. The Senate also tried to keep the restrictions on non-citizens receiving student aid, but the Senate Parliamentarian said lawmakers could not impose those restrictions.

The final bill abolishes most of the current options borrowers have to repay their student loans, instead giving borrowers the choice of only a standard repayment plan or a new Repayment Assistance Plan (RAP) based on annual income. The standard repayment plan means borrowers will pay back their loan at a fixed rate each month. Loans of up to $25,000 will be paid over the course of 10 years, loans of up to $50,000 will be paid over 15 years, loans of up to $100,000 will be paid over 20 years and loans over that amount will be spread out over 25 years. RAP replaces existing income-driven repayment plans, but still allows borrowers to make their monthly payments based on income. Borrowers pay rates based on their annual income (including their spouse’s income), which ranges from $120 per year for those making less than $10,000 (divided up into $10 monthly payments) to 10% of gross annual income for those making over $100,000. Unlike previous income-based plans, RAP allows borrowers’ remaining loans to be forgiven after 30 years of making payments—up from 20 or 25 years under current plans—and has a minimum payment of $10 each month, while low-income borrowers have been able to qualify for $0 repayments.

While the initial House and Senate versions of the bill would have forced all existing borrowers paying off loans to switch to the new repayment plans, the Senate Parliamentarian struck that down, ruling senators cannot pass it with only a simple majority. The final bill restricts anyone who takes out loans after July 1, 2026, to only repay them through the new standard repayment plan or RAP, but keeps existing income-based repayment plans in place for those who are already paying off loans.

The final bill got rid of previous restrictions the House originally proposed on Pell Grants for part-time students, but disqualifies students from Pell Grants if their student aid index—a number demonstrating a student’s financial need, based on their families’ financial resources and expenses—is at least twice the maximum Pell Grant given that year. The bill also establishes a new Pell Grant program for short-term workforce training programs, and says borrowers aren’t eligible for Pell Grants during any term where they’re already receiving other student aid (whether federal, state, from the institution or from private sources) that covers their full cost of attendance.

Trump’s policy bill gets rid of rules that allow borrowers to temporarily have their loan payments deferred due to unemployment or economic hardship, which will apply to borrowers who take out loans starting in July 2025. The bill also places new limits on forbearance—a temporary pause on loan payments—which states loans can’t be in forbearance for more than nine months during any 24-month period. The legislation does help borrowers by allowing them to now rehabilitate their loans twice, rather than once. That refers to when borrowers can get out of being in default on their loans by making a certain number of on-time payments under a rehabilitation agreement.

The new restrictions on federal student loans could force more students and parents to turn to private lenders, which account for less than 10% of all student loans issued. Private loans have many disadvantages compared with federal ones, as they typically have higher interest rates, are not eligible for income-based repayment plans and don’t offer forgiveness programs. When it comes to paying off loans, SBPC projects RAP will broadly increase borrowers’ payments compared with previous Biden-era income-based payment plans designed to help borrowers make lower payments. The average borrower with a college degree will pay $2,928 more per year than under the Biden-era SAVE plan, SBPC estimates, and the bill also means borrowers will spend longer paying off their loans than they would under current rules.

42.5 million. That’s the number of borrowers with outstanding federal student loan debt as of the second quarter of 2025, according to the Department of Education.

Student loan debt has become a key political issue over the past few years, as Democrats have fought for loan forgiveness and the Biden administration sought to provide sweeping debt relief, only to have Republicans challenge it in court and the Supreme Court strike it down. While the Biden administration still made numerous piecemeal moves to forgive Americans’ debt, the Trump administration has not followed suit, with Education Secretary Linda McMahon saying in April that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.” Trump has ordered the student loan portfolio to move under the Small Business Administration as he seeks to abolish the Department of Education, and he has also sought to restrict loan forgiveness for public servants so that it excludes employees working at organizations opposed to his policy agenda. Most notably, the Trump administration resumed debt collections May 5 for borrowers who have defaulted on their student loans, after collections had been on pause since the COVID-19 pandemic. The move is expected to impact millions of borrowers who haven’t paid their loans for approximately nine months, and the Trump administration intends to garnish a portion of workers’ wages if their loans remain unpaid.