Senate GOP Endorses Repeal Of Student Loan Forgiveness And IDR Plans

Republican lawmakers in the Senate on Tuesday unveiled their version of the higher education component of the “big, beautiful” reconciliation bill that was passed by their House counterparts last month. And it’s not great news for borrowers pursuing certain student loan forgiveness programs or hoping for more affordable payments based on their income.

While GOP senators would make some modest changes to the House bill, most of the House-passed provisions repealing key student loan forgiveness and affordable repayment programs would remain intact. This increases the likelihood that the changes would make it into the final version of the bill and ultimately become law.

“While Biden and Democrats unfairly attempted to shift student debt onto taxpayers that chose not to go to college, Republicans are taking on the root causes of the student debt crisis to lower the cost of tuition and improve Americans’ access to opportunities that set them up for success,” said Senator Bill Cassidy (R-La.), Chair of the Senate Committee on Health, Labor, Education, and Pensions, in a statement on Tuesday accompanying the release of the bill’s text.

Here’s what student loan borrowers should know, and what comes next.

Senate Bill Would Retain Major Changes To Student Loan Forgiveness And Repayment

According to the text of the bill, Senate Republicans would largely retain the changes to federal student loan forgiveness and repayment plans proposed by the House, which would represent the most significant reforms to the financial aid system in a generation. These include:

• A repeal of most existing income-driven repayment plans, which provide affordable monthly payments to borrowers based on their income and family size, as well as a pathway to student loan forgiveness after 20 or 25 years in repayment. The bill would repeal the ICR, PAYE, and SAVE plans, as well as a newer and more affordable version of IBR. Borrowers under these plans would be moved into a modified version of the “older” IBR plan, which could result in substantial monthly payment increases.
• The creation of a new IDR plan called the Repayment Assistance Plan, or RAP. RAP would operate similarly to other IDR plans in that it would base monthly payments on a borrower’s income. RAP would also feature some notable benefits, including an interest subsidy that would prevent runaway balance growth and the ability to gradually pay down loan principal. But RAP would increase monthly payments for the lowest-income borrowers, and would stretch out the repayment term to 30 years before a borrower could qualify for student loan forgiveness.

The bill would also:

• Eliminate eligibility for student loan forgiveness under Public Service Loan Forgiveness, or PSLF, for medical and dental residents. The bill would appear to preserve PSLF for everyone else, similar to the House version.
• Repeal Biden-era regulations that have made it easier for borrowers to qualify for student loan forgiveness based on certain kinds of school misconduct or a campus closure.
• Restrict the Department of Education’s authority to enact new regulations expanding pathways to student loan forgiveness and other debt relief.
• Eliminate the Graduate PLUS program, and significantly limit the Parent PLUS program.
• Restrict affordable repayment options for Parent PLUS borrowers by eliminating the ICR plan and preventing Parent PLUS borrowers not already enrolled in income-driven repayment from accessing any repayment plan based on income.

There are also some notable changes in the Senate version of the bill compared to the House version. Perhaps the change with the largest impact on current student loan borrowers is that for the RAP plan, while the House version would allow borrowers to exclude spousal income by filing taxes as married-filing-separately, the Senate version would appear to include spousal income in the monthly payment calculation for RAP, regardless of their marital tax filing status. The Senate bill also has a slightly higher cap for Parent PLUS borrowing ($65,000) compared to the House bill; but advocacy groups have warned that this would still force many families to rely on costlier (and risker) private student loans.

“American higher education has lost its purpose,” said Senator Cassidy. “Students are graduating with degrees that won’t get them a job and insurmountable debt that they can’t pay back. We need to fix our broken higher education system, so it prioritizes student success and ensures Americans have the skills to compete in a 21^st century economy. President Trump and Senate Republicans are focused on delivering results for American families and this bill does just that.”

Advocacy Groups Slam Changes To Student Loan Forgiveness And IDR Plans

Several advocacy organizations for consumers and borrowers were highly critical of the proposed changes to federal student loan forgiveness and repayment programs, arguing that they would lead to substantial increases to monthly payments for many Americans currently in repayment.

“The bill would move all borrowers enrolled in existing IDR plans into a modified version of the Income-Based Repayment plan that would require borrowers to pay 15% of their income above 150% of the federal poverty line — a change that would significantly increase the monthly bills of most borrowers currently enrolled in IDR plans,” said the National Consumer Law Center in a statement in April. “The amended IBR plan would also require many borrowers to make payments for longer than under current plans — 20 years for people who borrowed only for undergraduate programs, and 25 years for people who borrowed at least one loan for graduate education. These changes would pull the rug out from existing borrowers by requiring them to pay more and longer than under the terms set out in their loan contracts.”

“There’s no other way to see this reconciliation legislation than as a blatant attack on student borrowers and young people striving for economic opportunity,” said Alex Lundrigan, federal policy manager of Young Invincibles, in a statement in April. “The changes to repayment plans will skyrocket monthly payments, even mine, limit access to college for low-income students, and stifle upward mobility for millions. But the cruelest blow? These cuts are being used to bankroll massive tax breaks for corporations and the ultra-wealthy, offering no real relief for working-and middle-class Americans during a cost-of-living crisis. It’s a gut-wrenching reversal of national priorities.”

What Comes Next For Changes To Student Loan Forgiveness And Repayment

For now, nothing should change for federal student loan borrowers, as the bill must go through several more steps before it can become law. The bill must be approved by a Senate committee before it can go the Senate floor for a full vote. From there, the bill would likely return to the House for approval of any changes made between the Senate and House versions. Given narrow margins Republicans hold in both chambers of Congress, party leaders cannot afford to lose many votes if there are policy disagreements.

Nevertheless, the fact that the Senate has largely endorsed the higher education proposals included in the House bill does not bode well for student loan forgiveness and IDR plans. And the news comes just as the Department of Education also begins to ramp up collections efforts against those in default on their federal student loans. Borrowers should remain vigilant, and should be prepared for payments to increase by next year if the bill ultimately passes Congress and is signed into law by President Trump.