Student Debt Shakeup: How the Senate’s ‘Big Beautiful Bill’ Changes the Game for Borrowers

By James Farias
Founder & CEO, Relief Strategies, LLC

Quick Summary

The Senate’s “Big Beautiful Bill,” recently signed into law, marks the most sweeping overhaul of federal student loan programs in decades. This article covers:

The major student loan changes in the new law
How repayment options, forgiveness, and borrowing limits are shifting
What current and future borrowers need to know about monthly payments and relief
The ramifications for debt relief strategies and settlement companies
Expert and industry reactions to the bill’s impact

If you have student loans or plan to borrow for college or graduate school, understanding these changes is essential for protecting your financial future.

Introduction

In July 2025, the Senate passed the “Big Beautiful Bill,” a massive tax and spending package that delivers on many of President Trump’s campaign promises. While the bill covers a wide range of fiscal and social policies, its overhaul of federal student loan programs stands out as one of its most consequential, and controversial, features. For millions of Americans with student debt, and the families planning for college, the new law fundamentally changes how loans are borrowed, repaid, and forgiven. 1, 2, 3

Key Provisions Affecting Student Loans

Fewer Repayment Options
The law slashes the number of federal student loan repayment plans from over a dozen to just two:

Standard Repayment Plan: Fixed monthly payments over 10 to 25 years, depending on loan size.
Repayment Assistance Plan (RAP): Payments set at 1% to 10% of discretionary income, but with a much longer 30-year timeline before any remaining debt is forgiven, up from the previous 20 or 25 years. 1, 2, 3, 4

Borrowers currently on plans like SAVE, PAYE, or ICR will have to switch to one of the new plans between July 2026 and July 2028. Those who do not make a choice will default into the Standard plan, which could mean higher monthly payments for many. 3, 5, 6

Stricter Borrowing Limits

Graduate Students: The Graduate PLUS loan program is eliminated. Graduate Stafford loans are capped at $20,500 per year, with a $100,000 lifetime maximum. Medical and law students face a $200,000 cap. 7, 2, 8, 5, 9
Parent PLUS Loans: Now capped at $65,000 per student (previously uncapped), and new Parent PLUS borrowers will lose access to income-driven repayment and forgiveness options unless they consolidate within a limited window. 2, 3, 5, 9
Undergraduates: No major changes to Stafford loan limits, but all loans for new borrowers will be unsubsidized, meaning interest accrues immediately. 7, 10

Forgiveness and Relief

Forgiveness Timeline Extended: Under RAP, borrowers must make payments for 30 years before qualifying for forgiveness, a significant increase from the previous 20-25 years. 2, 3
Public Service Loan Forgiveness (PSLF): Remains intact for now. Earlier drafts threatened to exclude some professions, but the final law preserves the program, though future regulatory changes may still pose risks. 3, 5
Deferment and Forbearance: Economic hardship and unemployment deferments are eliminated for new loans. Borrowers in default can now rehabilitate their loans twice, rather than just once. 2, 3

Pell Grants and Aid

Pell Grants are now only available to full-time students, excluding part-timers who often need the most support. However, eligibility is expanded to students in certain job-training programs. 8, 6

Impact on Current and Future Borrowers

For Existing Borrowers

Repayment Plan Transitions: Most will have to choose between RAP and Standard Repayment by 2028. Payments made under old plans will still count toward forgiveness, but many will see higher monthly bills, especially those previously on more generous income-driven plans. 1, 2, 3, 5
Parent PLUS Borrowers: Those with existing loans have a one-year window to consolidate and retain access to income-driven repayment and PSLF; otherwise, they risk losing these options. 3, 5
Interest Accrual: All new loans accrue interest immediately, increasing the total cost of borrowing. 7, 10

For Future Borrowers

Graduate and Professional Students: May be forced to turn to private loans with higher rates and fewer protections, or forgo advanced degrees altogether due to stricter federal caps. 2, 8, 3, 9
Undergraduates: Face fewer repayment options and stricter eligibility for Pell Grants, potentially making college less affordable for low-income students. 8, 6
Forgiveness Hurdles: The longer path to forgiveness under RAP may discourage some from pursuing public service or lower-paying careers. 2, 3

Effects on Debt Settlement and Relief Strategies

The bill’s changes will likely increase demand for debt relief services as more borrowers struggle with higher payments, fewer deferment options, and tougher forgiveness terms. Settlement companies may see:

More Inquiries: As monthly bills rise and hardship protections shrink, borrowers may seek settlement or negotiation help. 2, 3
Regulatory Changes: The elimination of certain federal relief programs could push more consumers toward private solutions, but also increase scrutiny of settlement practices. 3, 11
New Challenges: With fewer government safety nets, negotiating with private lenders (who are not bound by federal rules) may become more common and complex. 3

Expert and Industry Reactions

Cartoon ostrich Ollie Featherly with a quote about the Big Beautiful Bill and its impact on working families

“This reconciliation bill will be disastrous for millions of Americans by limiting access to higher education and worsening the student debt crisis for both federal and private loans.”
~Natalia Abrams, President, Student Debt Crisis Center 2

“While somewhat improved over its original version, [the bill] contains a mix of new taxes and spending cuts that will force even more difficult decisions on chief business officers and further strain revenue that helps make college affordable for students and families.”
~Kara Freeman, President, National Association of College and University Business Officers 8

“Never before has Congress passed a law that would take away benefits and relief from current student loan borrowers and college-bound families on such a massive scale.”
~Forbes analysis 3

Borrower advocates warn the changes will drive more students to riskier private loans and could worsen the student debt crisis, while some higher ed leaders commend the focus on fiscal discipline but worry about access and affordability. 2, 8, 3, 6

Final Thoughts

The “Big Beautiful Bill” is a seismic shift for student loan borrowers. While it aims to streamline repayment and limit federal spending, it does so by reducing options, tightening eligibility, and extending the burden of debt for millions. Borrowers, especially graduate students, parents, and those relying on income-driven repayment, face a more challenging landscape ahead.

If you are affected, now is the time to:

Review your current repayment plan and understand when you’ll need to transition
Consider consolidating Parent PLUS loans if you want to retain access to income-driven repayment or PSLF
Explore all available options, including private refinancing or professional debt relief services, if you anticipate hardship
Stay informed about ongoing regulatory changes that may further affect forgiveness and relief programs

Need help deciding if settlement is the right step for you, or what to do next?
Relief Strategies can walk you through your options and help you protect your future while addressing the stress today.

👉 Visit ReliefStrategies.com or contact us at (888) 870-7922 for a free consultation.

About the Author

James Farias is the CEO of Relief Strategies, LLC, a leading firm dedicated to helping individuals achieve financial freedom through effective debt relief solutions. With over 30 years of business leadership experience and a deep passion for empowering others, James has guided countless clients through the process of reducing debt and regaining control of their finances.

Recognizing how quickly debt can overwhelm even the most disciplined individuals, James focuses on strategies that lower monthly payments, relieve financial stress, and unlock new opportunities. His mission is to help people move beyond financial hardship and build a more secure future.

Connect with James on LinkedIn or visit Relief Strategies to learn more about how he and his team can assist you on your journey to financial wellness.

Sources:

CNBC: What the Senate Republican tax-and-spending bill means for your money 7
Axios: What to know about the Senate bill’s major changes to student loans 1
The Hill: Senate passes big changes to student loans in reconciliation bill 2
Inside Higher Ed: “Big, Beautiful Bill” Means Big Changes for Higher Ed 8
Forbes: Unprecedented Student Loan Overhaul In ‘Big Beautiful Bill’ Passes 3
Forbes: Revised Bill Gutting Student Loan Programs Passes Senate 5
ELFI: What Student Loan Borrowers Need to Know About the “Big Beautiful Bill” 6
Protect Borrowers: Republican Controlled Senate Advances “Big, Terrible Bill” 11
AOTA: Senate passes new version of the One Big Beautiful Bill Act 10
Duke Chronicle: Trump’s ‘big, beautiful bill’ just passed Congress. Duke has 3 big … 9
US News: What to Know About Student Loan Repayment and the ‘Big, Beautiful Bill’ 4