Republican lawmakers on Monday introduced a proposal to overhaul the nation’s student loan system, including eliminating a popular repayment plan that had helped millions save money on their debt payments.
The proposal, which was released by the House Committee on Education and the Workforce, would save more than $330 billion, according to a statement by Committee Chairman Tim Walberg, a Republican from Michigan.
The plan comes as Republicans move to slash federal spending in order to pass legislation that would extend President Trump’s 2017 tax cuts, as well as add measures such abolishing taxes on tips. The student loan proposal also takes aim at a major repayment program that sparked a lawsuit from Republican states last year over allegations the plan would result in lost revenue.
The new GOP proposal is aimed at “addressing the root causes of skyrocketing college costs,” Walberg said in a statement.
The Republican plan could result in higher costs for people with college debt, with a typical borrower with a bachelors degree paying almost $3,000 more per year versus other government repayment plans, according to the Student Borrower Protection Center, an advocacy group for people with student debt.
The Republican proposal, which is in its early stages, may face changes as it progresses through the legislative process. Here’s what to know.
How could income-based repayment plans change?
For Americans with student debt, the Republican proposal would eliminate existing income-contingent repayment arrangements, including the Saving on a Valuable Education, or SAVE, plan, which was created in 2023 by the Biden administration. These plans typically link a person’s monthly loan payment to their income, with the goal of ensuring that borrowers aren’t burdened with excessive loan costs.
SAVE proved popular with student borrowers, with more than 8 million enrollees by the time it was paused last year by the courts. The program was heralded by President Biden at the time as “the most affordable student loan plan ever.”
Under the Republican proposal, the four existing income-based plans would be replaced with one program called the “repayment assistance plan.” This would calculate monthly payments based on a borrower’s adjusted gross income, ranging from 1% to 10% of that amount.
Borrowers would need to repay their loans for a maximum of 30 years, the proposal states. Under the SAVE plan, a borrower’s student loan could be wiped out after 10 years.
“Based on our review of this proposal, contrasted with the benefits and protections available to borrowers under the Saving on a Valuable Education (SAVE) repayment plan, we found that a typical borrower will see monthly student loan costs spike by hundreds of dollars per month, or thousands of dollars per year,” Mike Pierce, executive director of the Student Borrower Protection Center, said in an April 28 letter to Republican lawmakers.
What other repayment plans would be available?
The GOP plan would offer another option for repaying student loans called the “standard repayment plan.” That would allow borrowers to repay their loans with a fixed monthly payment, with terms that extend from 10 to 25 years, based on the amount borrowed.
For instance, people with less than $25,000 in debt could repay their loans over 10 years, while those with $25,000 to $50,000 in loans would have 15 years of repayments, according to the proposed bill.
How could Pell grants change?
Under the Republican plan, the Pell grant program — geared to low- and middle-income students — would face new limits.
For instance, the proposal would change the definition of a full-time student to someone with at least 15 credit hours per semester, up from the current 12 credit hours. It would also bar students who are attending half-time from receiving Pell grants.
The plan would also make it tougher for families that own assets, yet have low incomes, to qualify for Pell grants.
What other changes could occur?
The Republican plan would scrap Grad PLUS loans, which are for graduate and professional students, as well as subsidized loans for undergraduate students, where students don’t have to pay interest on the loans while in school.
The plan would also require undergrad students to take out their maximum loan amount — $50,000 under the proposal, up from $31,000 currently — before their parents could take out a Parent PLUS loan to cover the rest of their cost of attending college.
The Parent PLUS loans would be capped at $50,000, versus the current limit, which amounts to the total cost of attendance minus any student aid the student receives.
