By James Farias
Founder & CEO, Relief Strategies, LLC
Quick Summary
The One Big Beautiful Bill Act (OBBBA) passed the House by a single vote.
If passed by the Senate, it will:
- Eliminate subsidized loans and Direct PLUS loans
- Cap total borrowing at $200K
- Replace all repayment plans with just two options
- Make forgiveness taxable again
These changes would start rolling out in July 2025 and July 2026.
Borrowers should review their plans now and stay informed.
If you’re feeling overwhelmed by student loan news right now, you’re not alone.
In the months since President Trump returned to office, the student loan system has lurched back into motion, but not without serious turbulence. Millions of borrowers who’d been in default before the pandemic are now facing aggressive collections again. Tax refunds are being seized. Wages are being garnished. For many, credit scores have dropped by 100+ points overnight. And that’s just the beginning.
Meanwhile, misinformation is everywhere. Promises of forgiveness clash with lawsuits, delays, and administrative errors. Borrowers don’t know who to trust or what programs still apply. The Department of Education’s own systems have struggled to keep up.
Now, a new bill (the One Big Beautiful Bill Act, or OBBBA) has cleared the House and is heading to the Senate. And while it covers a wide range of government spending and tax changes, the student loan section alone could reshape how borrowing, repayment, and forgiveness work in America for the next generation.
Major Student Loan Changes Under the OBBBA
Where the Bill Stands Now
The One Big Beautiful Bill Act (OBBBA) passed the House of Representatives by a single vote (215 to 214) on May 22, 2025. It was one of the most closely watched and hotly debated pieces of legislation in recent memory, with several Republican lawmakers holding out until the final hours and one member voting “present.”
That razor-thin margin highlights how divided Congress is on the future of student lending. While the House version has cleared its first major hurdle, the bill now faces an uphill climb in the Senate, where a simple majority is needed under reconciliation rules. But even that won’t be easy. Moderate Republicans and deficit hawks have voiced concerns about specific provisions, particularly around Medicaid, defense spending, and the debt ceiling increase also embedded in the broader bill.
As it stands, the Senate is expected to take up the bill in late June or early July, with potential amendments likely. If the Senate passes a modified version, the legislation would need to return to the House for a second vote. That could jeopardize final passage if even one representative flips.
Bottom line: The bill has momentum, but nothing is guaranteed. Borrowers should stay informed and be prepared for rapid changes, especially if they plan to borrow, enter repayment, or apply for forgiveness in the next 12 to 24 months.
1. Elimination of Subsidized Loans
What’s changing:
- Subsidized federal loans for undergrads will end starting July 1, 2026.
- Graduate students lose access to Direct PLUS Loans.
Who’s impacted:
- If you’re starting school in 2026 or later, you’ll no longer qualify for subsidized loans, even if your financial need would have qualified you before.
- Graduate and professional students will have fewer borrowing options, with potentially higher interest costs.
What this means for you:
Expect higher lifetime loan costs and more interest accruing while in school, especially for low-income borrowers.
2. Lifetime Loan Limits Introduced
What’s changing:
- New cap: $200,000 total borrowing across all federal loan types.
- Schools can set their own lower borrowing limits by program.
Who’s impacted:
- Students in long or expensive programs (like medicine, law, or dual degrees) may hit the cap before completing their education.
What this means for you:
You may have to find private loans or stop out early if your program exceeds the new federal limits. Planning ahead becomes critical.
3. Repayment Plan Overhaul
What’s changing:
- All current repayment plans eliminated for loans disbursed after July 1, 2026.
- Replaced by only two choices:
- Standard Repayment Plan (fixed term based on balance)
- Repayment Assistance Plan (RAP), a streamlined income-based plan
Who’s impacted:
- Borrowers taking out new loans in or after the 2026–2027 school year
- Anyone depending on complex forgiveness routes like PAYE, SAVE, or IBR
What this means for you:
Fewer paths to forgiveness and less flexibility. If you were counting on a low monthly payment tied to income and family size, your only option will now be RAP.
4. Deferment and Forbearance Limits
What’s changing:
- Hardship and unemployment deferments eliminated starting July 1, 2025
- Tighter limits on the length and frequency of forbearance
- Medical and dental interns get up to 4 years of interest-free forbearance, then interest accrues
What this means for you:
In times of job loss, illness, or financial strain, you’ll have fewer safety nets. Planning your repayment strategy ahead of hardship becomes essential.
5. PSLF Tightens Eligibility
What’s changing:
- Internships and residencies don’t count toward PSLF unless you borrowed before June 30, 2025
- Payments made through RAP do count toward PSLF
What this means for you:
If you’re in a medical or dental field, you’ll likely need to rethink your public service strategy. Those years may no longer count toward forgiveness.
6. Institutional Risk-Sharing
What’s changing:
- Schools must pay a penalty based on the unpaid debt of their former students
- After 1 year of nonpayment: lose access to student loans
- After 2 years: banned from all federal aid for 10 years
What this means for you:
Colleges may restrict borrowing, raise admissions standards, or phase out high-debt programs to protect themselves. This could lead to fewer options for students who need financing the most.
7. Forgiveness Becomes Taxable Again
What’s changing:
- Starting in 2026, most forgiven student loan balances will be taxable as income
- The exception: forgiveness due to death or permanent disability remains tax-free
What this means for you:
If you receive forgiveness (e.g., after 20 years in an income-based plan), you may face a major tax bill in the year it happens.
Final Thoughts
The OBBBA student loan overhaul would mark the biggest structural change to federal borrowing in over a decade. For some, it promises simpler repayment and better alignment between colleges and taxpayer risk. But for millions of borrowers, especially those with financial need, it could mean less access, less flexibility, and more long-term cost.
And it’s not law yet. The bill still needs to clear the Senate, where its narrow passage in the House and the scope of its reforms will make it a tough sell without compromise.
If you’re a student, parent, or graduate trying to make sense of all this, one thing is clear: the landscape is shifting. Fast.
Keep watching. Keep asking questions. And if you’re feeling overwhelmed, you’re not alone.
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.
