Republicans plan to overhaul the federal student loan system. Here's what to know

Republicans on the House education committee publicly unveiled their plan Tuesday to remake the federal student loan system while also cutting more than $330 billion in federal spending to help offset the cost of extending President Trump's tax cuts.

The Republican proposal includes eliminating previous income-contingent loan repayment options and replacing them with one "Repayment Assistance Plan." It also ends the Grad PLUS loan program, sets strict limits on Parent PLUS loans and envisions a new system whereby colleges and universities are forced to reimburse the federal government for a share of the debt when their students fail to repay their loans.

During the plan's unveiling Tuesday — what is known as a committee "markup" — the education committee's Republican chairman, Rep. Tim Walberg of Michigan, said, "If there is any consensus when it comes to student loans, it's that the current system is effectively broken and littered with incentives that push tuition prices upward. Schools have no reason to lower costs or ensure degrees align with employer needs, all while students and taxpayers pay the price."

The committee's ranking member, Democratic Rep. Bobby Scott of Virginia, made clear, though, that there's no consensus on Republicans' proposed remedy: "This current reconciliation plan would increase costs for colleges and students, limit students' access to quality programs … and then take the so-called 'savings' to pay for more tax cuts for the wealthy and the well-connected."

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Because the proposal is part of a reconciliation package, Republicans only need a simple majority in the Senate — and a unified front in the House — to pass it.

In other words, it's no sure thing, but it's as close to a sure thing as Congress gets these days.

Here's a quick run-through of some of the key changes Republicans outlined:

Shrinking loan repayment options to a two-plan system

For new borrowers taking out federal student loans after July 1, 2026, gone will be the Biden administration's generous SAVE Plan, as well as a host of previous repayment plans including Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE).

In their place will be two options: 1) a "Standard Repayment Plan" with fixed monthly payments across a range of 10 to 25 years and 2) a "Repayment Assistance Plan" that bases monthly payments on a borrower's total adjusted gross income. The plan also waives unpaid interest that isn't covered by the monthly payment, according to a Republican fact sheet.

The maximum term of this new income-based repayment plan will take some getting used to for borrowers: While previous plans offered forgiveness after 20 or 25 years, the Repayment Assistance Plan comes with a maximum repayment term of 360 payments — or 30 years.

For borrowers who took out loans before July 1, 2026, they will have access to an updated version of the old Income-Based Repayment plan.

Cuts to Pell Grants

Republicans want to make a few significant changes to the Pell Grant program for low-income students. They proposed increasing the definition of full-time college attendance, which is required for students to receive the maximum Pell amount, to 30 credit hours per year. They also plan to require that Pell students be enrolled at least halftime, or 15 credit hours per year, to qualify for any Pell award at all.

These changes, according to an analysis by the National College Attainment Network, would result in a significant cut in aid for many Pell recipients.

There is one way Republicans want to expand access to Pell: by opening the grants up to students who attend short-term workforce-training programs.

Changes coming to Grad PLUS, Parent PLUS and subsidized loans for undergraduates

After July 1, 2026, Republicans plan to end the Grad PLUS loan program for graduate school borrowers as well as subsidized loans for undergraduate borrowers, where the government covers interest on the loans while the borrower is still enrolled in school.

Republicans also want to cap the total amount a student can borrow each year based on "the median cost of attendance for students enrolled in the same program of study nationally," according to the Republican fact sheet.

In other words, if a student wants to attend a program with an unusually high cost relative to other schools nationwide, federal loans might not cover the full bill.

There would also be new borrowing caps, or "aggregate limits," for undergraduates ($50,000), graduate students ($100,000) and professional programs ($150,000).

The Parent PLUS loan program would see big changes too. Parent PLUS has been controversial because it comes with a higher interest rate than traditional federal loans and has led to nagging debts for many older borrowers, but it has also been an important tool for many families of color who lack generational wealth to put their children through college.

Republicans want an aggregate limit of $50,000 on Parent PLUS borrowing. What's more, they will require students to take out the maximum available unsubsidized loans before families can fill in the remaining gap with Parent PLUS.

"Skin-in-the-game accountability" for colleges

One novel proposal in Republicans' reconciliation package would change the fundamental terms colleges and universities agree to when they participate in the federal loan program.

It would require schools to reimburse the federal government "for a percentage" of the loans their students fail to repay, calculating that percentage "based on the total price the institution charges students for a program of study and the value-added earnings of students after they graduate or, in the case of students who do not graduate, the completion rate of the institution or program."

The change would also include penalties to schools for late or missed payments that could culminate in a college losing access to the federal student loan program altogether.

While Republicans push for new accountability from schools, they are also ending older provisions to protect borrowers when their school suddenly closes or if they believe they were enticed to enroll with false promises about potential work or earnings.

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