House Budget Bill Passes: What It Means for Student Loans

A New Era of Federal Spending and Student Loan Changes

The House of Representatives has passed a groundbreaking budget bill that is set to reshape federal fiscal policy for the next decade. This bill is not just another routine budget resolution; it’s a seismic shift in how the government approaches spending, with a particular focus on student loan programs. At the heart of this bill is a mandate for drastic spending cuts, including a significant recalibration of federal student loan initiatives. The bill serves as the blueprint for President Donald Trump’s legislative agenda and sets top-line savings targets that House committees must meet. Reconciliation, a powerful legislative tool, has been used to lock in these targets, making them nearly impossible to alter once finalized.

Why This Budget Bill Matters This Year

This year’s budget bill is unusually critical because it’s being used as a vehicle for advancing a sweeping Republican agenda through the reconciliation process. Unlike previous years, where budgets often passed without much fanfare or even a vote, this bill carries significant weight. Reconciliation allows Republicans to bypass the usual Senate filibusters, turning the budget into a potent policy instrument. The new 10-year budget doesn’t specify exact spending cuts but provides broad instructions for House committees, requiring at least $1.5 trillion in cuts to mandatory spending over the next decade. A last-minute amendment upped this figure to $2 trillion, either through additional cuts or reductions in tax cuts.

Impacts on Student Loan Programs: A $330 Billion Target

The Education and Workforce Committee is under immense pressure to generate substantial savings, with a staggering $330 billion target in cuts over the next decade. Given that the committee currently oversees $722 billion in spending—much of which goes toward essential areas like child nutrition—meeting this target will likely require drastic changes to federal student loan programs. One of the most significant potential cuts is the elimination of the SAVE plan, a student loan repayment program introduced by the Biden administration. According to the House document, ending SAVE could save up to $127 billion over 10 years, with some estimates as high as $150 billion depending on the outcome of legal challenges.

Other Potential Reforms to Student Loan Programs

While the elimination of SAVE is a major component of the proposed cuts, the House budget bill also outlines several other student loan-related reforms. These include:

1. Reforming Public Service Loan Forgiveness (PSLF): The House proposal suggests limiting eligibility for this program, which currently allows certain public sector workers to have their loans forgiven after years of qualifying payments.
2. Repealing Biden Borrower Defense to Repayment Discharge Regulations: This would roll back a Biden administration rule that made it easier for borrowers to discharge loans due to a school’s misconduct, such as misrepresentation of student outcomes.
3. Reforming Pell Grants: This could involve capping grants at the median cost of attendance, reducing critical aid to students.
4. Sunsetting Grad and Parent PLUS Loans: The proposal includes eliminating these loans by 2028, which could significantly impact graduate students and parents who rely on these programs.

These reforms, if enacted, would fundamentally alter the student loan landscape, making it more challenging for borrowers to manage their debt.

What’s Next in the Legislative Process

The passage of the House budget bill is just the first step in a long and contentious process. The Senate will now need to adopt its own version of the budget, and there are already signs of divergence. Senate Republicans have passed a narrower budget outline focused on border enforcement and defense, with plans to tackle tax policy in a separate bill later this year. This sets the stage for a potentially heated debate between the House and Senate over the final shape of the budget.

The Upshot for Student Loan Borrowers

The implications of the House budget bill are profound, particularly for the millions of Americans who rely on federal student loan programs. If the proposed cuts are enacted, borrowers could face higher monthly payments, less generous forgiveness options, and fewer resources to manage their debt. While the idea of saving $150 billion over 10 years may seem appealing on paper, the reality is that programs like SAVE and Public Service Loan Forgiveness are deeply embedded in the federal student aid system. Eliminating or scaling back these programs could have far-reaching consequences, reshaping the entire student loan landscape in ways that are likely to be felt for years to come.

In this era of aggressive fiscal cuts, every dollar counts, and student loan borrowers may find themselves bearing the brunt of these changes. The coming years will be critical as lawmakers navigate the complexities of balancing fiscal responsibility with the need to support those who rely on these programs to pursue higher education.