Republican lawmakers have introduced a sweeping new plan to overhaul the U.S. student loan system, and it is stirring up a lot of concern—especially if you or someone you know depends on federal aid like Pell Grants or income-based repayment plans.
What is the Republican proposal on student loans?
The proposal, rolled out by the House Committee on Education and the Workforce, includes capping the value of Pell Grants that can be used toward student loan repayment. This is just one part of a broader effort to cut federal spending and redirect funds toward extending the Trump-era tax cuts.
Committee Chairman Tim Walberg of Michigan described the plan as a way to “address the root causes of skyrocketing college costs,” but for millions of Americans, it could mean paying significantly more for their student loans each year.
How does the GOP plan change Pell Grant benefits?
If you received a Pell Grant to help pay for college, this part may hit home. Traditionally, Pell Grants have not only helped students afford tuition but have also been factored into some student loan forgiveness and repayment relief programs. The new GOP proposal, however, places a cap on how much of your student loan balance can be forgiven or reduced based on having received a Pell Grant.
Essentially, even if you qualified for maximum Pell Grant support, this new cap would limit how much of that could count toward lowering your student debt in income-based repayment programs. That could translate to longer repayment terms or higher monthly payments—particularly for lower-income borrowers.
What happens to the SAVE plan and other income-driven repayment options?
Under this proposal, Republicans want to eliminate all current income-driven repayment plans, including the popular SAVE plan. Created by the Biden administration in 2023, SAVE allowed borrowers to make payments based on their income and offered forgiveness after 10 to 20 years. It was praised as the “most affordable student loan plan ever,” and over 8 million borrowers enrolled before it was paused by court orders.
In its place, Republicans want to launch a new program called the “Repayment Assistance Plan.” This plan would calculate monthly payments as 1% to 10% of a borrower’s adjusted gross income, but it could extend repayment for up to 30 years.
That is a long time to carry student debt—and the savings many borrowers saw under SAVE would essentially vanish.
Mike Pierce, executive director of the Student Borrower Protection Center, put it bluntly:
“A typical borrower will see monthly student loan costs spike by hundreds of dollars per month, or thousands of dollars per year.”
How will this impact the average borrower?
Let us say you are a borrower with a bachelor’s degree and you were relying on the SAVE plan to manage your payments. Under the Republican proposal, you could end up paying an extra $3,000 a year, according to the Student Borrower Protection Center.
That is no small change—especially when you consider the rising cost of living, rent, groceries, and everything else. It is even more stressful for borrowers who were already struggling to make ends meet while paying off student loans.
This change could affect thousands of Americans who counted on these programs not just as financial support, but as part of their long-term plan to achieve stability after graduation.
Why are Republicans making these changes?
The short answer: to save money. The Republican proposal aims to cut more than $330 billion from the federal budget. Those savings, lawmakers say, could go toward extending tax breaks and eliminating certain taxes, like the ones on tips for service workers.
But that savings comes at a cost for borrowers. If the plan goes through, it would mean fewer repayment options and more out-of-pocket costs—especially for low- and middle-income Americans who benefited most from Pell Grants and income-based repayment plans.
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