GOP Student Loan Reform: What Borrowers Should Know (June 2025)

In late June, GOP student loan reform efforts hit a major procedural hurdle in the Senate. The original proposal, which aimed to end several income-driven repayment plans and tighten forgiveness rules, was challenged by a Senate rules advisor. While some of the most sweeping changes were blocked, a revised bill passed a key vote on June 29 and is still very much alive.

Here’s what has happened, what changed, and what borrowers should be paying attention to now.

Senate Parliamentarian’s Ruling (June 26, 2025):

What is the Senate Parliamentarian?

The Senate Parliamentarian is a nonpartisan advisor who interprets procedural rules in the Senate. Their role is especially important when Congress tries to pass legislation using budget reconciliation.

Note: Budget reconciliation is a process that allows a bill to bypass the Senate filibuster and pass with just a simple majority (51 votes instead of 60), but the bill must primarily affect federal spending or revenue.

What is the Byrd Rule?

The Byrd Rule limits what can be included in a reconciliation bill. To qualify, a provision must:

• Primarily impact the federal budget (not just change policy)
• Not increase the federal deficit outside of the reconciliation time window
• Not be “incidental” to budget changes

What Did the Parliamentarian Block?

• Provisions that would have immediately forced current borrowers off their existing income-driven repayment (IDR) plans:
  • Income-Contingent Repayment (ICR)
  • Pay As You Earn (PAYE)
  • Saving on a Valuable Education (SAVE)

    The blocked sections would have required these borrowers to leave their plans and switch into a single modified Income-Based Repayment (IBR) plan or another alternative, leading to potentially higher monthly payments for many.

    Important Note: While the Parliamentarian blocked this forced transition, the bill still includes a separate repeal of ICR’s statutory authority and mandates a phased transition for current ICR borrowers by July 1, 2028.

• Proposals to end Public Service Loan Forgiveness (PSLF) eligibility for medical and dental residents.

  These borrowers typically work in nonprofit hospitals and qualify for forgiveness after 10 years of payments. The original bill would have excluded their residency years from PSLF credit, but this change was also blocked.

What Remained in the Bill?

The Parliamentarian allowed:

• Repealing IDR plans for new borrowers who take out loans after the bill takes effect
• Continuing to develop a new repayment plan for future borrowers (known as the Repayment Assistance Plan, or RAP)

Several other provisions, such as rules related to school misconduct and borrower forgiveness, were still under review at the time.

GOP Response: Revised Senate Bill (June 29, 2025)

After the Parliamentarian’s ruling, Senate Republicans updated the bill to make it compliant with reconciliation rules. On June 29, the updated GOP student loan reform bill passed a procedural vote (51–49), which allows it to move forward for full debate and possible passage.

Changes to Income-Driven Repayment (IDR) Plan Repeal

The bill phases out access to ICR, PAYE, and SAVE for new borrowers who take out loans after July 1, 2026.

For current borrowers with ICR loans (called “covered income contingent loans”):

• A mandatory transition will occur by July 1, 2028.
• ◦These borrowers must choose either the new Repayment Assistance Plan (RAP) or the revised Income-Based Repayment (IBR) plan under Section 493C.
• If no choice is made, the Department of Education will automatically enroll them in one of these two plans.

For current borrowers on PAYE or SAVE:

• The bill does not set a specific termination date for these plans.
• However, it amends the legal authority under which these plans operate and blocks new enrollment after July 1, 2026.
• This means that while existing users may remain for now, the underlying legal framework has changed, and further regulatory action could affect their future availability or terms.

For Parent PLUS borrowers with double-consolidated loans:

• Borrowers already enrolled in PAYE or SAVE are specifically protected and allowed to remain on their current plan until at least June 30, 2028.

PSLF Residency Provision Removed

The proposal to end PSLF credit for medical and dental residents has been removed. That means:

• Residency years will still count toward PSLF, as they do now.
• The earlier plan to eliminate that credit was likely blocked due to lack of direct budget impact.

Parent PLUS Loan Repayment Changes

• ICR will still be phased out as the only available income-driven plan for Parent PLUS borrowers.
• But borrowers now have more time to act:
  • Deadline to consolidate Parent PLUS loans into a Direct Consolidation Loan: July 1, 2026
  • Deadline to enroll in ICR: June 30, 2028
• The bill also explicitly protects double-consolidated Parent PLUS loans that are already enrolled in plans like PAYE or SAVE.

Forgiveness for School Misconduct and Closures

• The revised bill immediately nullifies the Biden-era rules that expanded access to:
  • Borrower Defense to Repayment (for school fraud or misconduct)
  • Closed School Discharge (for schools that shut down mid-enrollment)
• For loans originated before July 1, 2035, the Department of Education will revert to the more restrictive rules that were in effect as of July 1, 2020.
• Borrowers seeking discharge will now face stricter eligibility criteria and less favorable terms compared to the 2022 regulations.
• The bill also limits the Department’s ability to issue any new rules that would increase program costs by more than $100 million, making it unlikely that more generous borrower protections will return soon.

What Happens Next for GOP Student Loan Reform

The bill is part of a much larger legislative package called the One Big Beautiful Bill Act, which includes major tax cuts and federal spending reforms.

Here’s what’s next in the process:

• Full Senate debate is currently underway. The final vote could take place as early as Monday.
• If the bill passes the Senate, it will return to the House of Representatives for a final vote.
• President Trump has publicly stated he wants to sign the bill into law by July 4.
• Further revisions could still be made, including to the student loan sections.

Where We Are Now in the Legislative Process

This table summarizes the steps involved in passing this reconciliation bill and where things currently stand: