April 30, 2025 — Press Release

 

Proposal Comes as Department of Education Removes Student Loan Forgiveness Progress Tracker from StudentAid.gov

WASHINGTON – Yesterday, House Republicans advanced legislation that would dramatically reshape federal student aid, including radically restructuring student loan repayment plans, restricting access to Pell grants, and making it harder for students to obtain relief if their school has engaged in school misconduct or their school closes. The proposed changes are part of the ongoing budget reconciliation process and endeavor to pay for tax cuts for the wealthy by cutting federal student aid and reducing the debt relief and affordable repayment programs low-income student loan borrowers depend on. The proposal threatens to make it harder for low-income students to attend college, while people who already have student debt could see their monthly payments more than triple. 

“The bill reflects how out of step the drafters are with low-income Americans. House Republicans propose charging low-income students more interest by ending the subsidized loan program for students with financial need; more than tripling monthly bills for borrowers currently enrolled in SAVE; and requiring that even families living below the poverty line reallocate $120 each year from funds that would otherwise go towards food, rent, or medication or face default,” said Abby Shafroth, co-director of advocacy at the National Consumer Law Center. 

The bill would significantly change the income-driven repayment program, both for current and future student loan borrowers. The bill would move all borrowers enrolled in existing IDR plans into a modified version of the Income-Based Repayment plan that would require borrowers to pay 15% of their income above 150% of the federal poverty line – a change that would significantly increase the monthly bills of most borrowers currently enrolled in IDR plans. The amended IBR plan would also require many borrowers to make payments for longer than under current plans – 20 years for people who borrowed only for undergraduate programs, and 25 years for people who borrowed at least one loan for graduate education. These changes would pull the rug out from existing borrowers by requiring them to pay more and longer than under the terms set out in their loan contracts. 

The bill would also change future borrowers’ repayment options, providing them with only two options: a new standard repayment plan of up to 25 years, or the “Repayment Assistance Plan” or RAP, which would use a new formula to calculate payments and require many borrowers to pay hundreds more per month as compared to current IDR plans. The RAP plans would also require borrowers to make qualifying payments for a whopping 30 years before borrowers would qualify to have any remaining balance cancelled — far longer than the existing IDR plans, which offer cancellation after 10 to 25 years. 

“The changes in this bill will add to the growing number of low-income older adults still burdened by student loan debt, and will make it more likely that low-income Americans will still be paying student loans for their own education when their children are in college,” said Kyra Taylor, senior attorney at NCLC. 

Additionally, the bill would roll back reforms that made it easier for students who had been harmed by school fraud or closures to access relief.

“This bill will make it harder for students who have been harmed by school misconduct to obtain relief. It rolls back common sense regulations that would streamline relief for borrowers where the Department of Education has evidence that the school lied and used deception to enroll students in low-quality programs and borrowers that did not complete their program because their school closed,” said Taylor. “The bill also stops the Department from improving these programs in the future and does not add additional accountability tools to stop bad actors from profiting off of taxpayer dollars.” 

For additional information on the Closed School Discharge and Borrower Defense programs check out recent NCLC issue briefs, Debt Without a Degree: Preserving Protections for Students When Schools Close and Borrower Defense: What Will Happen to Students in Debt Because They Were Scammed by Their School if the 2022 Rule is Rescinded? 

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