The CSLA Institute has been tracking the progress of the current budget reconciliation bill, which is making its way through the US House of Representatives and the US Senate.  The following is an update for CSLP and the clients they advise. 

• Two bill versions are being negotiated, and the final outcome is subject to further changes. If a bill can be agreed upon, the final version may look different than either of these. The bill will likely be more than 1,400 pages, of which 70 or so are focused on reforming FSA, so much of the negotiations will be focused on other parts.

• The bills will need regulations for implementation, and the details of how the changes in the bill that pass will be made more explicit. Usually, advocates and borrowers can provide input into the regulations through a rule negotiation process; however, both bill versions eliminate the requirement for public feedback. This means there will be no usual input before regulations are enacted.

• Generally, it’s best not to overreact to proposals, as many proposals to reform Federal Student Aid over the years have never been enacted. In this case, the likelihood of the bill passing is high, and some provisions are based on “the date of enactment,” so more care is warranted than usual.

Where the House and Senate versions of the “One Big Beautiful Bill Act” Align

This bill provides the Secretary of Education with instructions to transition all student loan borrowers in administrative forbearance or an ICR plan into the IBR plan over nine months.

Creation of the RAP plan 

Both bills are creating a new IDR plan, the RAP plan, where borrowers must make payments of no more than 10% of their annual income.  The amount due starts at $10/mo for those who make under $10,000/yr.  The payment as a percentage of income starts at 1% for those who make more than $10,000/yr and increases by 1% for each additional $10,000 in income earned until a maximum payment of 10% of income.  Interest more than the required payment is covered by the government, and payments that reduce the principal balance are matched by the government by up to $50/mo.  Any remaining balance is forgiven after 30 years of on-time payments.

Elimination of ICR plan.

Both bills seek to remove the Secretary’s authority to offer ICR plans. This means eliminating PAYE, ICR, and REPAYE/SAVE while preventing any future administration from creating similar plans under this authority.

Eliminating the Graduate Plus Program, Subsidized Stafford Loans, and Limiting Unsubsidized Loans.

The bills aim to cap the amount of federal loans available to borrowers at the median cost of attending a school and $50,000 for undergraduate students and limit the amount for graduate and professional students. By capping at the median cost for undergraduate students, by default ½ the programs will not be able to be covered in their entirety by federal student loans.

• The versions differ in the amount available to graduate and professional students. Still, both have significant reductions over currently available options.  The net result is that the current ability to borrow the “full cost of attendance” for graduate and professional students will not be an option. Many graduate and professional students will be required to find other sources of aid.

• Reducing the amount of aid available from the federal government reduces the value of PSLF and IDR, including the new RAP plan, as many graduates (undergraduate and graduate borrowers) will have to manage both Federal and Private student debt. 

Reduces access and availability to Pell Grants 

This will shift more of the cost of attending undergraduate studies onto families. When coupled with the limits set at the median price of attendance for a program, this will likely shift more borrowing onto private markets.

Public Service Loan Forgiveness eliminates time served 

Applies to borrowers in a medical or dental residency program.

• The Senate version clarifies that this only applies to borrowers who took out a loan after June 30, 2026.

Sunsets Existing Repayment Plans

 Applies to any borrower taking a loan after July 1, 2026.

• The House version of the bill eliminates the “special terms” for borrowers after 2014 in IBR, while the Senate version keeps this provision in place for borrowers with loans issued from July 2014 to July 2026. 

Termination of Partial Financial Hardship (PFH) for Income-Based Repayment.  

This provision would allow borrowers to choose IBR even if their income is higher than what their payment would be based on a 10-year repayment period when the borrower first made the election.

• The PFH provision does not remove the section stating that the payment shall not exceed the amount based on a 10-year repayment period when the borrower first made the election.
• By eliminating the PFH, ED can ensure that all borrowers in ICR plans can be moved to IBR even if it means a significant increase in payment (e.g., PAYE to IBR), which would be more than what their payment would be based on a 10-year repayment period.
• Eliminating the PFH does not remove the interest capitalization required when a borrower makes payments that would have been based on a 10-year repayment period when the borrower first made the election (payment cap) instead of a reduced payment calculated on their income.

Created a term “excepted consolidation loan,” 

This closes the double-consolidation loophole and prevents these loans from repayment in the new RAP plan or IBR.  However, the term “excepted consolidation loan” excludes consolidation loans that were in repayment under an ICR at the time of the bill’s enactment.

• In theory, consolidation loans and double consolidation loans being paid under ICR or PAYE would be eligible for IBR; however, in practice, it will be tough for the servicers to determine eligibility for IBR or RAP in the future.  NSLDS now has a plus indicator on consolidation loans that will likely make changing and approving IBR or RAP plans for older borrowers difficult for servicers to differentiate from borrowers not on ICR at the time of enactment.

Consolidation loans made on or after July 1, 2026

These are only eligible for the standard repayment and RAP plans, even if the loans being repaid were made before that date.

Summary

We do not know the bill’s outcome, whether it will pass, and, if it does, what form or provisions it will contain. Further, we don’t have the regulatory and sub-regulatory guidance that will follow the passage to implement the change in law.  

Due to the similarities between the two versions of the bill, there are many consensuses on the reshaping of Federal Student Aid. If the bill does pass, significant changes are on the horizon, both for new and existing student loan borrowers. What’s certain is that if this bill passes in its current version, the federal government will reduce its role in funding education for future borrowers.  

The new RAP plan will likely be the only IDR plan available to future borrowers. Still, with the reduced loan limits and extended repayment terms toward forgiveness, the new plan may not provide much relief for future graduate and professional students.  

Furthermore, many more borrowers will be navigating repayment for federal and private loans, pushing their monthly cost of repaying their education well above the current limits to repay loans on just federal loans.  

As for current borrowers, the sunsetting of currently available repayment plans is troubling. 

The House bill only leaves the 15% version of IBR standing. It would mean an increase in payments by 50% and an additional 5 years of repayment for borrowers who began taking out loans as far as 18 years ago.  

While the Senate’s version is still punitive to current borrowers, it preserves the 10% version of IBR. This means borrowers who took out loans between 10/1/07 and 7/1/2014 will lose access to PAYE and the 10% of income for the 20-year repayment option. 

With Congress seemingly set on requiring ED to move all borrowers from the current administrative forbearance and ICR plans into IBR within 9 months of the bill’s passage, many people are facing an unexpected and unplanned increase in their payments.  The result could be devastating to their finances. 

The bill is also very concerning for parent borrowers as consolidation loans in Parent PLUS loans or consolidation loans that paid Parent PLUS loans are considered “excepted consolidation loans” and “excepted loans,” making them ineligible for the RAP plan.  Both bills leave uncertainty around the treatment of current Parent Plus borrowers who have consolidated (or double-consolidated) their loans and are currently in an IDR plan or the SAVE forbearance. 

The language directing the secretary to move borrowers in ICR plans and Administrative forbearance does not mention excepting any loan types or borrowers from that directive.

However, bills later define “excepted consolidation loans” and prevent their access to IBR but exclude from that definition consolidation loans that were being repaid under an ICR as of the bill’s enactment date. This seems to allow all current borrowers in ICR or PAYE to be transitioned to IBR. Still, it leaves some uncertainty around parent borrowers in the SAVE forbearance and their ability to be transitioned to IBR.