Republican lawmakers advanced the Student Success and Taxpayer Savings Plan this week after it cleared a key procedural vote in the House Education and Workforce Committee. The bill is part of a broader effort by GOP lawmakers in Congress to simultaneously advance two key Trump administration priorities through the budget reconciliation process: expand and make permanent sweeping tax cuts that are set to expire at the end of this year, and offset the costs of those tax cuts by slashing government spending. And student loan repayment programs are in these lawmakers’ crosshairs.
“The bill passed by Committee Republicans today not only would save taxpayers over $350 billion but also bring much-needed reform in three key areas: simplified loan repayment, streamlined student loan options, and accountability for students and taxpayers,” said Education and Workforce Committee Chairman Tim Walberg (R-MI) in a statement on Tuesday. “I’m proud of the Committee’s work today to finally stand up and end the status quo of endless borrowing.”
The Student Success and Taxpayer Savings Plan, if it is enacted, would make the most significant changes to federal student loan repayment and forgiveness programs in a generation. And if the plan becomes law in its current form, millions of federal student loan borrowers may be kicked out of their current repayment plan and pushed into a different program. In many cases, this could result in much higher monthly payments. Here’s a breakdown.
New student loan repayment plans would replace several other programs
Under the terms of the Republican plan, the roughly dozen or so current federal student loan repayment plan options would be reduced to just two.
One plan would have fixed payments based on what is required to pay off the loan balance in full over a term ranging from 10 to 25 years, depending on the initial balance. This “Standard” plan would replace existing Standard, Extended, and Graduated repayment plans, although current borrowers in repayment would maintain access to these plans; these current plans would not be available for new loans disbursed on or after July 1, 2026.
The bill would have even more significant impacts on income-driven repayment (IDR) plans.
The Student Success and Taxpayer Savings Plan would replace the four current IDR options — Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE) — with a new IDR program called the Repayment Assistance Plan (RAP). New loans disbursed on or after July 1, 2026, would only be able to access the RAP plan. But unlike prior versions of this Republican proposal, not all borrowers currently enrolled in IDR would be grandfathered into existing plans.
Some student loan borrowers may be forced to change IDR plans
If the bill is enacted, current student loan borrowers who are enrolled in SAVE, ICR and PAYE would be forced to move into the IBR plan as those three plans are phased out. This will likely cause payments to increase, at least for borrowers who have been in SAVE and PAYE, because IBR uses a more expensive repayment formula.
Monthly student loan payments may increase by around 33% for those enrolled in PAYE, and potentially much higher for those who have been in the SAVE plan (possibly two or three times their present monthly payment amount).
In addition, the bill does away with a newer version of IBR for borrowers who first took out loans on or after July 1, 2014. These borrowers would be forced into the older version of IBR, which, like PAYE borrowers, would increase their payments by 33% or more as well.
Strangely, Parent PLUS borrowers who have consolidated their loans and are currently enrolled in ICR (or, if they “double consolidated,” the SAVE plan) will be automatically moved to IBR. For some Parent PLUS borrowers, this could actually reduce their payments, since ICR tends to be a more expensive plan. But all other Parent PLUS borrowers would be locked out of all IDR plans under the terms of the bill — a potentially catastrophic scenario for parent borrowers who subsequently experience a reduction in their income and cannot afford the other available fixed repayment plan options.
RAP plan extends student loan forgiveness timeline
Any borrower — except for Parent PLUS borrowers — could opt into the new RAP plan, which is a replacement IDR option envisioned in the new Republican bill. RAP uses a complicated repayment formula that gradually increases the percentage of a borrower’s income that is used to calculate their monthly student loan payments.
For middle-income borrowers, monthly payments under RAP would be fairly similar to PAYE and the newer version of IBR, but more expensive than the SAVE plan. But RAP would likely be much more expensive for low-income borrowers due to minimum monthly payment requirements that are not part of other IDR plans. Higher-income borrowers would also likely pay more under RAP.
RAP does allow for eventual student loan forgiveness, like the other IDR plans. However, RAP would not lead to loan forgiveness until after the borrower has been in repayment for 30 years. This is five years longer than the 25-year loan forgiveness term for the older versions of IBR and ICR, as well as for graduate school borrowers enrolled in SAVE. And it’s 10 years longer than the 20-year loan forgiveness term for new IBR, PAYE, and undergraduate borrowers enrolled in SAVE. When factoring in the potentially higher payments under RAP for certain borrowers, this may make RAP significantly more costly when compared to existing IDR plans.
Depending on where a borrower falls on the income spectrum, it’s possible that certain middle-income borrowers may have lower payments under RAP than they would under IBR, assuming current borrowers are pushed into that plan from PAYE and SAVE. That might make switching to RAP tempting. However, these borrowers should be aware that — if this bill is enacted — making that switch would stretch out their student loan forgiveness term to 30 years. Furthermore, under the terms of the bill, any borrower who opts into RAP would be making a permanent switch; borrowers cannot leave RAP once they have enrolled.
For student loans disbursed on or after July 1, 2026, RAP would be the only IDR option available under the terms of the legislation.
Advocates slam new student loan bill
Advocacy organizations were quick to criticize the new Republican bill to remake student loan repayment.
“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 this week. “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.”
For now, the bill is not law, and it must go through several more procedural steps before that can happen. And it is quite possible that certain provisions of the legislation may change before it ultimately gets signed into law. But student loan borrowers, particularly those enrolled in IDR plans, should remain vigilant and prepare for the very real possibility of higher payments in the coming months.
