Know the Changes:
How the Republican Budget Law Affects Students, Borrowers, and College Access
Updated October 16, 2025
Author: Chenelle Hammonds, Senior Policy Associate
The visual aids below highlight some of the biggest changes under the GOP budget law with implications for students, student loan borrowers, and higher education institutions. If you're an educator, student leader, advocate, or community organizer, we encourage you to use these visuals to educate those directly impacted in your community about the major changes ahead.
We Build Progress thanks Protect Borrowers for their thoughtful insights and additions.
How Are Student Loan Repayment Options Changing Under the Republican Budget Law?
Under the Republican budget law, borrowers now face fewer and more expensive options for repaying student loans.
Repayment plans have been consolidated into just two options:
A new Repayment Assistance Plan (RAP) and
A new standard fixed repayment plan
Previous income-driven repayment (IDR) plans like SAVE, PAYE, IBR, and ICR (see Table A) have been eliminated for new borrowers, reducing flexibility and limiting income-based options that help borrowers manage their payments more affordably. Current borrowers will be able to remain in IDR based plans until July 1, 2028 or switch into income-based repayment (IBR).
DATES TO KNOW:
July 1, 2026: Borrowers taking on new loans after this date will only be eligible for the new standard plan or RAP.
July 1, 2028: Current borrowers on IDR plans will be automatically reassigned to the RAP plan or IBR.
Table A: Borrower Repayment Plans — Before vs. After GOP Budget Law
* Standard plan fixed payments based on amount borrowed:
Up to $25,000 borrowed – 10-year fixed term
$25,000-$50,000 borrowed – 15-year fixed term
$50,000-$100,000 borrowed – 20-year fixed term
$100,000+ borrowed – 25-year fixed term
Sources: H.R.1 - One Big Beautiful Bill Act;Federal Student Aid
Under the Republican Budget Law, Student Loans Will Cost More and Take Longer to Pay Off
From SAVE to RAP: How Your Annual Student Loan Costs Could Jump
The Student Borrower Protection Center estimates that under RAP:
The average borrower with a Bachelor’s degree will pay $348 more per month ($4,168 more per year) under the GOP budget law than under the SAVE plan it eliminated.
The average borrower with some college but no degree will pay $147 more per month ($1,761 more per year) under the GOP budget law than under the SAVE plan it eliminated.
The average family of four headed by a borrower with a Bachelor’s degree will pay $402 more per month ($4,824 more per year) under the GOP budget law than under the SAVE plan it eliminated.
Graph 1: Annual Repayments Before GOP Budget Law (SAVE Plan) vs. After (RAP Plan)
Source: Protect Borrowers
Table B: Loan Caps — What’s Changing for Current and Future Undergraduate Students and Families
What this means for students:
While annual borrowing caps for undergraduates remain unchanged, the GOP budget law limits how much parents can borrow through Parent PLUS loans, which let parents of dependent undergraduates borrow up to the cost of attendance to help their dependent undergraduate children.
As a result of new caps on Parent PLUS loans, families who previously relied on these loans to cover costs above the undergraduate loan cap will face new obstacles. New caps could force students and families to turn to higher-risk and higher-cost private loans that carry higher interest rates and lack consumer protections and benefits, like affordable repayment options and pathways to cancellation. This change may make it significantly harder for students to finance their education, particularly for families of color, working-class families, and first-generation students who are less likely to be able to access financing in the private market.
What this means for Parent PLUS borrowers:
In addition to the new caps described above, new parent borrowers will no longer have access to any income based repayment options and instead will be locked into a standard fixed repayment schedule based on how much debt they took on and with no path to forgiveness. This will leave families even more vulnerable to unmanageable debt and could raise the risk of defaults for families experiencing job loss or a drop in income. Working-class and middle-income families, or families with stretched incomes, will lose a vital tool for investing in their children’s upward mobility.
Table C: Loan Caps — What’s Changing for Current and Future Graduate Students
Sources: H.R.1 - 119th Congress (2025-2026): One Big Beautiful Bill Act; Subsidized and Unsubsidized Loans | Federal Student Aid; Grad PLUS loans | Federal Student Aid; The Institute for College Access and Success|.
*Lifetime cap is $157,500 (including undergrad loans) or $257,500 for Independent students or for students who qualified for additional undergraduate borrowing limits because their parents were denied a Parent PLUS loan.
*Existing borrowers enrolled in a program by June 30, 2026 are exempt from new borrowing caps for three years.
What this means for graduate students:
Under the GOP budget law, new graduate students will face severe borrowing limits that do not cover the actual cost of many degree programs. After hitting the loan caps, without the option to pursue Grad PLUS loans, any remaining tuition or living-cost gap must be filled with institutional aid or private loans, which have higher interest rates and fewer protections. That shift puts many students of color—who disproportionately rely on federal aid to enter fields like medicine, nursing, law, and education—at risk of being saddled with high-interest private debt or shut out of these programs and careers altogether. This could result in a direct hit to workforce diversity in key sectors: for example, African-Americans make up 13% of the U.S. population but hold just 5.2% of physician roles. Moreover, the law hands institutions authority to tighten access even further, by giving them discretion to cut student loan limits below these federal baselines.
Pell’s Shrinking Safety Net
Pell Grants are designed to help low-and moderate-income undergraduate students pay for college. Since their creation in 1972, they’ve helped 80 million students attend college and have provided crucial support for nearly one-third of college students annually. But with tuition and fees climbing exponentially faster than grant maximums, Pell Grants today are far less helpful in paying for college costs than they once were.
While the Republican budget law added $10.5 billion in mandatory funding to keep the program temporarily afloat, it didn’t increase funding enough to stabilize the program in the coming years or boost Pell’s maximum grant award enough to cover rising tuition costs, leaving the program underfunded and stretched far too thin. In other words, Congress partially filled a financial gap rather than restoring Pell’s purchasing power. Taken together with the amount of money that has been funneled away from the federal government for student aid, students end up with far less support.
The Republican budget law also expands Pell Grant eligibility to short-term job training programs, which opens up the Pell Grant to thousands of unaccredited program providers with insufficient oversight. Without adequate oversight, these programs risk draining funds from Pell Grants for short-term training programs with weak guardrails and questionable outcomes. The new provision comes at a time when Pell Grants are already facing another looming shortfall, further threatening access for students who depend on them the most.
Graph 2: Share of Education Costs Covered by Pell Grants – Then vs. Now
Source: NAICU, using latest available data.
Who’s Protected and Who’s Left Out with New Pell Changes
Students who receive other grant aid (from state programs, colleges, or private scholarships) that equals or exceeds their total cost of attendance will no longer qualify for Pell, even if they meet the federal need requirement.
This change is expected to impact many students, especially student athletes on full-ride scholarships, who previously could receive Pell alongside their athletic scholarship and use the remaining aid to pay for additional expenses like housing, food, and books.
Students with a Student Aid Index (SAI)* at or above twice the maximum Pell award will now be ineligible for Pell Grants.
This change will mostly affect families with more moderate incomes but high-value assets that the Free Application for Federal Student Aid (FAFSA) includes as income (i.e., rental properties, investment accounts, large savings).
Foreign income is now included in FAFSA aid calculations. This means that income earned abroad must be reported in full, regardless of whether it is taxed in the United States.
Families with income both within and outside the U.S. may see higher calculated aid indexes than in the past.
Families who own certain properties will once again be allowed to omit their assets from Pell eligibility calculations. The GOP budget law restores previous exemptions that allowed family farms and small businesses to be left out of FAFSA’s need analysis and, for the first time, adds family-owned commercial fishing businesses. This means those assets will be excluded from consideration when determining a family’s ability to pay for college.
Effectively, these restored exemptions will likely benefit rural white families, who make up the overwhelming majority of farm, commercial fishery, and small business owners.
* SAI is a formula-based number calculated from FAFSA data that is used to determine a student’s financial need, and used by schools to determine aid. Accountability Gaps at Colleges
For years, predatory for-profit colleges have used deceptive marketing tactics, inflated graduate rates and job placement claims, and high-pressure recruitment to target nontraditional, low-income, and first-generation students with overpriced degrees and little return on investment. These institutions left countless students with worthless credits or credentials and mountains of debt. In response, the Biden Administration finalized the Gainful Employment rule to hold career programs accountable by requiring them to prove that graduates could actually get jobs and repay their loans.
The Republican budget law introduces a new accountability framework that takes a similar step toward ensuring students receive minimum value from their programs. The standards will apply more broadly across all programs—undergraduate and some graduate programs—instead of narrowly applying to career programs at for-profit colleges and non-degree programs. However, unlike the Gainful Employment rule, which required programs to show that graduates earned enough to repay their debts and that their earnings were higher than those of high school graduates, the new system looks only at students’ earnings—not the heavy debt burdens programs might saddle them with.
This new framework also shields underperforming "certificate" programs from scrutiny, despite them having shown modest to no increases in wages and overall lower rates of employment. This, combined with the Trump administration’s dismantling of key protections for student borrowers and taxpayers, may lead to a boon for predatory, for-profit educational industries.
Elite Targets, Student Consequences
The Republican budget law also targets wealthy universities with a higher tax. It raises the Trump-era endowment tax—a penalty on investment earnings at wealthy private institutions, allegedly as a way to hold these universities accountable for, in the administration’s view, promoting the universities' perceived political ideologies. But financial pressure doesn’t stay at the top: it’s already rippling down.
Some universities have announced layoffs, hiring freezes, and budget cuts in anticipation of higher taxes and sweeping federal changes. At the same time, colleges may raise tuition prices or trim aid packages to cover new costs. Nearly half of endowment spending already goes to financial aid, and highly endowed colleges often use that cushion to offer more generous aid packages.
In totality, the Republican budget law creates an uneven oversight landscape. The law extends accountability standards to more programs, but with notable loopholes, while simultaneously imposing steep penalties on certain universities as political retribution. The result is that low-income students may bear the brunt—either through continued exposure to costly programs that provide little return, or through reduced aid.
Bottom Line
From student loans and Pell Grants to borrower protections and school accountability, the Republican budget law reshapes higher education in ways that will be felt for decades. Understanding these changes and their impacts on student borrowers is key to engaging in informed conversations about the future of higher education. By sharing information, we can help students and communities better understand what is at stake.