$330 Billion In Cuts May Target Student Loan Forgiveness and Repayment Plans After Key GOP Vote

Republican lawmakers in Congress cleared a major procedural hurdle last week by narrowly passing a budget framework that calls for hundreds of billions of dollars in cuts across the federal government. If these cuts are ultimately enacted, it could lead to significant rollbacks to federal student loan forgiveness and repayment plans. 

“Today’s final adoption of the budget resolution reflects both chambers’ collective commitment to enacting President Trump’s full agenda as quickly as possible to fulfill our promises to the American people,” said House Speaker Mike Johnson (R-LA) in a statement last Thursday. 

The passage of the budget framework was a key step as GOP lawmakers in the House and Senate try to extend and make permanent an array of massive tax cuts. They hope substantial reductions in government spending will help offset the associated costs of those cuts. Lawmakers hope to implement these changes through a legislative process called budget reconciliation, which can be passed through a simple majority vote in both the House and the Senate (effectively bypassing the Senate filibuster). 

But the spending reductions, if they ultimately become law, could impact many federal student loan forgiveness and repayment programs that millions of borrowers rely on. The House budget framework specifically calls for $330 billion in cuts to education-related programs. 

$330 billion in cuts would target student loan forgiveness and income-driven repayment plans

The House budget framework calls for $330 billion in spending reductions for education-related programs. At this stage in the process, no specific cuts are outlined in the legislation. The next step is for the House Education and Workforce Committee to identify specific programs that would be targeted for reduction or repeal in the reconciliation bill.

However, a House Budget Committee memo released earlier this year provides a preview of what Republican lawmakers may consider in the coming weeks as they begin drafting legislation for the reconciliation bill. This includes the following:

• Repeal of the SAVE plan, a Biden-era income-driven repayment program that offers lower monthly payments, an interest subsidy intended to halt runaway balance growth associated with interest accrual, and, in some cases, faster student loan forgiveness.
• Repeal of the three other income-driven repayment plans — Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), and Pay As You Earn (PAYE). The GOP proposal calls for a new income-driven plan to replace these older programs. However, unlike traditional income-driven plans, this new program would eliminate student loan forgiveness after a fixed period of time (20 or 25 years). Instead, under the proposal, borrowers would only qualify for loan forgiveness once they have paid the equivalent total amount that they would have paid under a 10-year Standard plan — a nearly impossible task for many lower- and middle-income borrowers, particularly those with graduate school debt.
• Make changes to eligibility for Public Service Loan Forgiveness, or PSLF. While the House Budget Committee has not publicly provided much in the way of specifics, observers anticipate there could be limitations based on a borrower’s income or the size of their balance.
• Curtail the Department of Education’s ability to draft regulations expanding student loan relief.
• Rescind Biden-era rules governing several student loan forgiveness and discharge programs, including Borrower Defense to Repayment and Closed School Discharges, which expanded eligibility and made it easier for borrowers to qualify for relief.
• Sunset the Graduate PLUS and Parent PLUS programs.
• Eliminate the student loan interest tax deduction.
• Tax scholarship and fellowship income. 

Some student loan borrowers could be grandfathered into these changes. But it’s too soon to know if that will happen. Advocacy groups warn that if Republican lawmakers move forward with these reforms, the impacts may be devastating. 

“Given the potential funding reallocations Congress could make as part of the ongoing budget reconciliation process, a broad coalition of student and borrower advocates, professional associations and unions, and civil rights organizations urge you to avoid curtailing much-needed investments in students, postsecondary institutions, and the future of our local, state, and national economies to cover the costs of tax cuts for the wealthiest Americans and other unrelated policy objectives that do not expand access to or success in higher education,” a coalition of more than 50 organizations said in a letter to Speaker Johnson last week.  

The proposed reforms, the coalition warned, would “Stall economic opportunity and raise costs by making student loans more expensive by removing existing Income-Driven Repayment plans, increasing borrowers’ monthly payments, and removing the opportunity for loan cancellation after years of repayment, or limiting access to work-based loan relief; such changes will force millions of American families into decades of repayment and delay homeownership, wealth-building, and financial stability.”

Proposed overhaul of federal student loan forgiveness and repayment would happen as system is already strained

Making massive changes to the federal student loan system would be significant under any circumstances. But implementing those reforms now, while the system is currently experiencing turmoil, could be catastrophic for borrowers.

Currently, the SAVE plan remains blocked due to a court order issued by a federal appeals court following a legal challenge brought by a coalition of Republican-led states. As a result, millions of borrowers remain stuck in a forbearance. The Department of Education has also suspended access to other income-driven plans, including ICR, IBR, and PAYE; the department indicated last week that processing should resume next month, but widespread delays are anticipated. Meanwhile, President Trump issued an executive order in March threatening to impose limitations on student loan forgiveness through the PSLF program. The Department of Education is now poised to rewrite the rules governing PSLF and the ICR and PAYE plans as negotiated rulemaking commences.

These actions come as nearly half of the Department of Education’s staff has resigned or been fired. President Trump has threatened to move the entire federal student loan system to a different federal agency.

“It’s part of the continued, reckless diminishment of the Department of Education, built on firing workers fast — coupled with an unrealistic hope that the Administration can figure out a plan afterwards,” said Sameer Gadkaree, President of The Institute for College Access & Success, in a statement last month. “It opens the door to an unprecedented wave of disorder and confusion for students, borrowers, and schools, while ignoring real opportunities for reform.”

What comes next for potential cuts to student Loan forgiveness and repayment

Now that the House has passed its budget resolution, individual legislative committees must draft legislation implementing the spending reduction targets. That legislation would then be rolled into the broader reconciliation bill. The House Education and Workforce Committee is tasked with creating this legislative language and firming up the specific student loan forgiveness and repayment programs to be cut to reach the $330 billion target. 

“By clearing this critical hurdle, House committees can now work in tandem with Senate committees to swiftly prepare their respective parts of the reconciliation bill, keeping us on track for markups during the next work period,” said Speaker Johnson. “We will not waver in our commitment to delivering a bill that reduces spending, secures the border, keeps taxes low for families and job creators, restores American energy dominance, reestablishes peace through strength, and makes government work better for all Americans.

Borrowers who are concerned about the future of student loan forgiveness programs and affordable repayment plans should know more in the coming weeks.