GOP’s ‘big beautiful’ bill may change student loan bills

Republicans’ One Big Beautiful Bill Act could result in higher monthly payments for many federal student loan borrowers, a new analysis finds.

If the legislation is enacted as drafted, a student loan borrower earning roughly $80,000 a year (the median for a bachelors’ degree holder in 2024) would have a monthly payment of $467 under the GOP-proposed “Repayment Assistance Plan,” or RAP, according to recent findings by the Student Borrower Protection Center. That compares with a $187 monthly bill on the Biden administration’s now-blocked SAVE, or Saving On A Valuable Education plan.

No matter their income, borrowers face higher monthly payments under RAP compared to SAVE, the analysis found. For lower incomes, the difference may be just $10 per month; for higher earners, the new repayment plan can be as much as $605 per month pricier.

Depending on their income, some federal student loan borrowers also face higher payments on RAP than they would have on the U.S. Department of Education’s other income-driven repayment plans, including PAYE, or Pay As You Earn and IBR, or Income-Based Repayment.

However, some borrowers on PAYE or IBR plans would have a smaller bill under RAP. For example, a borrower with a roughly $60,000 annual income would pay $250 a month on RAP, and $304 on PAYE, the SBPC found.

The House advanced its version of the One Big Beautiful Bill Act in May. The Senate Committee on Health, Education, Labor and Pensions released its budget bill recommendations related to student loans on June 10. Senate lawmakers are preparing to debate the massive tax and spending package.

Under the Republican proposals, there would be just two repayment plan choices for borrowers who take out loans after July 1, 2026, compared with roughly a dozen options now.

After graduation, those student loan borrowers could either enroll in a standard repayment plan with fixed payments, or a single income-based repayment plan: RAP.

Under RAP, monthly payments would typically range from 1% to 10% of a borrower’s income; the more they earn, the bigger their required payment. There would be a minimum monthly payment of $10 for all borrowers.

The new plan would fail to provide many borrowers with an affordable monthly bill — the goal of Congress when it established income-driven repayment plans in the 1990s, Michele Zampini, senior director of college affordability at The Institute for College Access & Success, recently told CNBC.

“If Republicans’ proposed ‘Repayment Assistance Plan’ is the only thing standing between borrowers and default, we can expect many to suffer the nightmarish experience of default,” Zampini said.

Meanwhile, current income-driven repayment plans now conclude in loan forgiveness after 20 years or 25 years. But RAP wouldn’t lead to debt erasure until 30 years.

“This kind of financial drag could further delay major life milestones like homeownership, starting a family, or saving for retirement,” said Doug Boneparth, a certified financial planner and the founder and president of Bone Fide Wealth in New York. He is a member of CNBC’s Financial Advisor Council.

There’s also “an emotional toll” to carrying student debt for so long, said Cathy Curtis, the founder of Curtis Financial Planning in Oakland, California. She is also a member of CNBC’s Financial Advisor Council.

“It reinforces the feeling of being stuck — especially for those who’ve already struggled to access opportunity,” Curtis said.

Sen. Bill Cassidy, R-La., chair of the Senate Health, Education, Labor, and Pensions Committee, has said his party’s plans would lift the burden on taxpayers of subsidizing college graduates’ loan payments.

″[Former President Joe] Biden and Democrats unfairly attempted to shift student debt onto taxpayers that chose not to go to college,” Cassidy said in a statement on June 10.

He said his committee’s bill would save an estimated $300 billion out of the federal budget.