How Trump's big spending bill will overhaul repayment for millions of student-loan borrowers

• Congress passed Trump's "big beautiful bill" on July 3.
• It includes major changes to student-loan repayment and caps on borrowing.
• It eliminates existing income-driven repayment plans, including SAVE, replacing them with just two options.

It could soon get harder for student-loan borrowers to get affordable monthly payments.

Congress passed President Donald Trump's "big beautiful bill" — a major spending package — on July 3, meaning a slew of proposals to change the way student-loan borrowers take out and pay off their debt is becoming law.

The bill eliminates existing income-driven repayment plans and replaces them with two less generous options, along with adding new restrictions on the types of loans parents and graduate students can take out. It also limits borrowers' abilities to place their loans on deferment if they're facing financial hardship.

Linda McMahon, Trump's education secretary, lauded the bill's passage in a post on X, saying that it "simplifies the overly complex student loan repayment system" and "reduces federal student loan borrowing amounts to help curb rising tuition costs."

"A truly beautiful bill for the American people," she said.

Borrower advocates and Democratic lawmakers said the bill will hurt Americans repaying their student loans. Sen. Elizabeth Warren said in a statement that student-loan payments will go up as a result of the legislation, and Natalia Abrams, president of the advocacy group Student Debt Crisis Center, said that "this dangerous bill abandons millions of borrowers, leaving them with few, often inaccessible repayment options and deepening their financial insecurity.

Here's how the bill will impact millions of federal student-loan borrowers.

A student-loan repayment overhaul

New student-loan borrowers will face fewer available repayment options as a result of the spending bill. The bill will eliminate existing income-driven repayment plans and replace them with two repayment options.

The first option is called the Repayment Assistance Plan. It would set borrowers' payments at 1-10% of their income, depending on their income levels, with a minimum monthly payment of $10. Unpaid interest is waived under this plan, and any remaining balance will be forgiven after 30 years.

It's less generous than former President Joe Biden's SAVE plan, which the bill eliminates. SAVE would have allowed borrowers with original balances of $12,000 or less to receive loan forgiveness after 10 years of payments, and it reduced payments on undergraduate loans from 10% to 5% of a borrower's discretionary income.

The SAVE plan is blocked in court pending a final legal decision, and with the bill's passage, the 8 million borrowers enrolled in SAVE have between July 2026 and July 2028 to enroll in a new plan.

The second option is a new standard repayment plan, which sets fixed payments for 10-25 years based on the borrowers' original balance. While existing standard plans typically have a fixed repayment period, this new plan's repayment period would vary based on the original amount borrowed.

Along with fewer repayment plans, the bill eliminates borrowers' ability to defer their student-loan payments in the event of economic hardship and unemployment, leaving standard forbearance as the only option to delay payments.

It also eliminates the graduate PLUS program, which allowed borrowers at graduate and professional schools to borrow up to the full cost of attendance for their education. The bill retains the parent PLUS program, which allows parents to take on student loans for their kids' educations, but places a $65,000 lifetime cap.

In addition to repayment changes, the bill takes on college accountability: It ensures that programs in which graduates don't earn more than the median high school graduate in their state will lose federal student-loan eligibility. The legislation also extends the Pell Grant to shorter-term programs, which McMahon has previously pushed for.