Student loan borrowers will have fewer repayment options under GOP megabill
The Senate narrowly exceeded its megabill of expenses on Tuesday evening. The Chamber aims to vote on the bill and send it to President Donald Trump by July 4, but it is not clear if the Republicans have the votes to adopt the bill in its current form.
Among the many provisions to reduce federal spending and increase tax revenue, the bill establishes major changes for federal borrowers for student loans.
Most of the changes in the borrowing of students, such as the lower limits to higher loans, will not have an impact on borrowers who are not educated and currently in reimbursement. But those who contract loans next summer and afterwards, as well as 8 million borrowers awaiting new savings measures on a precious reimbursement plan focused on education income, can expect less reimbursement options if the Chamber adopts the bill as is.
The modification of the reimbursement plans could be one of the most impactful provisions of the bill for federal borrowers of current and future federal student loan.
Two years to choose from two plans
The Senate bill has narrowed the number of reimbursement options currently available for federal student loan borrowers with two plans: a standard reimbursement plan and a new income focused on known income under the name of reimbursement assistance plan. Borrowers on one of the currently existing reimbursement plans, with the exception of the backup plan, will be able to keep their plans and their monthly payments.
Borrowers whose loans are dispersed on July 1, 2026 at the latest and those who are currently registered in the safeguard plan – who are in an administrative tolerance since the federal courts prevented the plan from entering into force in July 2024 – will only have the two reimbursement plan options.
Borrowers on the safeguard plan should probably choose another plan anyway if the federal courts retain the temporary injunction against it. Under the legislation of the Republicans, these borrowers will have between July 2026 and July 2028 to choose a new plan. After July 1, 2028, borrowers will be automatically transferred to the income -based reimbursement plan.
The new standard plan will give borrowers a fixed monthly payment so that their loans are reimbursed between 10 and 25 years, depending on the size of their loans. The current standard plan has a 10 -year loan duration, regardless of the amount borrowed.
The reimbursement assistance plan will calculate monthly payments between 1% and 10% of the discretionary income of a borrower, down compared to current offers which fix payments to 10%, 15% or 20% of the income of a borrower.
An analysis revealed that the monthly payments of borrowers could increase hundreds of dollars on rap, compared to their payments on the backup plan.
