Student Loan Borrowers Could Face Lifetime Of Debt Under GOP Plan To Gut Loan Forgiveness

House Republicans Pass Budget Resolution to Advance Tax Cuts and Spending Reductions

On Tuesday, House Republicans successfully passed a budget resolution that lays the groundwork for significant tax cuts, which lawmakers aim to offset by slashing federal spending. This move marks a crucial step forward for GOP lawmakers as they push to advance a massive reconciliation bill through narrow party-line votes in both the House and Senate. The budget resolution allows lawmakers to begin drafting legislation that could cut up to $330 billion in education-related spending, including federal student loan forgiveness and repayment programs. Republican lawmakers argue that this plan addresses wasteful government spending while providing relief to working families, students, and small businesses. Education and Workforce Committee Chairman Tim Walberg (R-Mich.) emphasized that this is just the first step and urged the Senate to adopt the House budget to implement President Trump and the American taxpayer’s agenda.

Republican Lawmakers Propose Major Cuts to Student Loan Forgiveness and Repayment Programs

The House Budget Committee blueprint outlines several proposals to narrow, cut, or reduce federal student loan programs. Key changes include repealing Biden-era regulations for the Borrower Defense to Repayment program and Closed School Discharges, which allow borrowers to request forgiveness due to school misconduct or closure. Additionally, Republicans aim to prohibit the Department of Education from enacting new student loan forgiveness programs, sunset the federal Direct Parent PLUS and Direct Graduate PLUS programs, and eliminate student loan interest subsidies for borrowers while enrolled in school. Other changes include ending the student loan interest tax deduction, imposing new taxes on scholarships and fellowship income, and making unspecified changes to eligibility for the Public Service Loan Forgiveness (PSLF) program. Perhaps most notably, Republicans propose eliminating the nonprofit status of hospitals and healthcare facilities, which could block student loan forgiveness for millions of borrowers under the PSLF program.

Repealing Student Loan Forgiveness and IDR Plans Could Lead toHigher Payments and a Lifetime of Debt

One of the most significant proposals is the repeal of all existing income-driven repayment (IDR) plans, which provide affordable monthly payments to borrowers based on their income and family size, with eventual forgiveness after 20 or 25 years. Under the proposed changes, these plans would be replaced with a new IDR option that could lead to higher monthly payments for many borrowers. Unlike current IDR plans, which offer forgiveness after a set number of years, the new plan would require borrowers to pay the total amount they would have paid under a 10-year Standard plan before qualifying for forgiveness. This change could trap low-income borrowers in lifelong repayment terms, as they may never meet the total payment requirement. Advocacy groups, such as the Center for American Progress and the Institute for College Access and Success, warn that this could result in a lifetime of debt for many borrowers, particularly those with incomes below 150% of the federal poverty level.

What’s Next for Student Loan Forgiveness Proposals

The passage of the House budget resolution comes amid a tumultuous week for student loan borrowers. Last week, the 8th Circuit Court of Appeals extended an injunction blocking the SAVE plan and other income-driven repayment plans, as a legal challenge brought by Republican-led states continues. In response, the Department of Education removed online applications for all IDR plans, even though one plan—the Income-Based Repayment (IBR) plan—was not covered by the injunction. It remains unclear whether loan servicers are currently processing any IDR applications. Moving forward, Republican lawmakers will press ahead with the reconciliation bill, with the next step being the drafting of more specific legislation that identifies cuts to forgiveness and repayment programs. Borrowers may learn more in the coming weeks about which programs are most at risk.

Advocacy Groups Sound the Alarm on the Impact of Proposed Changes

Advocacy groups and borrower advocates have expressed strong concerns about the potential consequences of these proposed changes. They argue that gutting federal student loan forgiveness and repayment programs could lead to increased costs for millions of Americans, pushing many into default or a lifetime of indebtedness. For example, borrowers in public service fields, such as teaching, could face higher monthly payments under the proposed changes. Additionally, the elimination of interest subsidies and the new repayment requirements could disproportionately harm low-income borrowers, causing their balances to balloon over time. These advocates emphasize that the proposed changes would undermine efforts to make higher education affordable and could have long-term consequences for borrowers’ financial stability.

Conclusion: A Shifting Landscape for Student Loan Borrowers

The passage of the House budget resolution marks a significant shift in the landscape for student loan borrowers, with major cuts to forgiveness and repayment programs potentially on the horizon. While Republican lawmakers argue that these changes are necessary to address wasteful spending and implement the Trump administration’s agenda, advocates warn that the proposals could lead to devastating consequences for millions of borrowers. As the reconciliation bill moves forward and lawmakers draft more specific legislation, borrowers will need to stay closely informed about the potential changes and how they may be impacted. For now, the future of federal student loan forgiveness and repayment programs remains uncertain, leaving borrowers in a state of limbo as they navigate the complexities of managing their debt.