Senate GOP’s Student Loan Overhaul: What Borrowers Need to Know

Senate Republicans have introduced a comprehensive student loan reform plan as part of the “One Big Beautiful Bill Act.” The education section of this legislative draft outlines wide-reaching changes to student loan repayment, borrowing limits, and school accountability. While presented as a more moderate approach than the House version, the Senate proposal still includes major structural changes that could significantly affect borrowers.

Key Takeaways

• Elimination of Existing IDR Plans: The proposal ends access to all current income-driven repayment (IDR) plans—including SAVE, PAYE, REPAYE, and ICR—for new borrowers. These would be replaced by a new “Repayment Assistance Plan” (RAP) with standardized terms.
• Only Two Repayment Options Going Forward: Borrowers taking out new loans after July 1, 2026, would choose between a 10-year fixed repayment plan or RAP. RAP would base payments on a borrower’s adjusted gross income (AGI), ranging from 1% to 10%, with a minimum of $10 per month. The plan includes interest subsidies and modest principal matching for on-time payments. Forgiveness would be available after 30 years (360 payments).
• RAP and Spousal Income: The Senate bill specifies that for married borrowers filing taxes separately, a spouse’s income would not be included in RAP’s AGI calculation.
• Grad PLUS and Parent PLUS Loans Phased Out: The bill terminates new Grad PLUS and Parent PLUS loans issued after July 1, 2026. It also introduces new aggregate borrowing caps for other loan types, including a $50,000 lifetime cap on Parent PLUS loans per borrower.
• Accountability Rules for Schools: Instead of imposing financial penalties on institutions for borrower defaults, the proposal would remove access to federal aid from programs whose graduates consistently earn less than individuals with only a high school diploma.
• Changes to Pell Grant Eligibility: The Senate version avoids stricter credit-hour requirements proposed in the House bill. However, it does set a threshold using the Student Aid Index (SAI) to exclude higher-income students from eligibility. It also proposes $10.5 billion in additional funding for fiscal year 2026 to address the program’s projected shortfall.

What Happens Next: Understanding the Legislative Process

At this stage, the Senate GOP proposal is still a draft—it has not yet been formally introduced or passed by the Senate. This means it is not yet law, and many of its provisions could be revised, delayed, or removed altogether during the legislative process.

Here’s how the process typically unfolds:

1. HELP Committee Review and Vote
   The committee will formally introduce the bill, review its language, and potentially revise it before voting to advance it to the full Senate.
2. Full Senate Consideration
   If approved by the committee, the bill would go to the full Senate for debate, amendments, and a vote. It would need a simple majority to pass if done through budget reconciliation.
3. House of Representatives Review
   If passed by the Senate, the bill then heads to the House. Lawmakers there may accept it, amend it, or propose their own version.
4. Reconciliation and Final Approval
   If there are differences between the House and Senate versions, they must be reconciled into a single unified bill.
5. Presidential Signature
   Once both chambers pass the final version, it goes to the President to be signed into law.

Why it matters:
Some provisions—like the elimination of IDR plans—are written to take effect immediately upon enactment. That makes the pre-passage window crucial for borrowers who want to lock in options under the current system.

Implementation Timeline

While the borrowing caps would begin on July 1, 2026, several other provisions—such as the removal of IDR access and changes to Parent PLUS consolidation—would become effective immediately once the bill is signed into law.

Parent PLUS Borrowers: The Most at Risk

Of all the changes proposed, none are more concerning than those impacting Parent PLUS borrowers. These families could face some of the harshest consequences if the bill becomes law.

Key concerns include:

• Parent PLUS borrowers currently rely on consolidation into a Direct Loan to access Income-Contingent Repayment (ICR).
• The Senate bill would eliminate ICR for new enrollees immediately upon enactment.
• Parent PLUS borrowers would be excluded from the new Repayment Assistance Plan (RAP).
• Without ICR or RAP, remaining options would include standard, extended, or graduated plans—none of which are income-driven or offer forgiveness.
• The bill sets a $50,000 aggregate cap on Parent PLUS loans per borrower, regardless of the number of dependent students.

Borrowers should consider acting promptly:

• Those who have not yet consolidated or enrolled in ICR risk losing access to affordable repayment.
• Fixed repayment plans can be unaffordable and lack any forgiveness option.

We strongly recommend that affected borrowers schedule a consultation with the Student Loan Sherpa team as soon as possible to evaluate their situation and make any necessary changes before the bill passes.

Bottom Line

This bill has the potential to reshape federal student loan policy for years to come. Borrowers should stay informed and take proactive steps now, especially if they rely on current IDR plans or hold Parent PLUS loans.

As always, we’ll continue to monitor developments closely and provide timely updates as the legislation progresses.