The Aftermath of the Big Beautiful Bill · Part 4 of 5 · October 6, 2026, 7:00 AM CDT
Key Facts
- The Congressional Budget Office estimates the law’s higher-education provisions save about $284 billion over ten years. Repayment-plan changes account for $270.5 billion of that.[1]
- Since July 1, 2026, new graduate and professional borrowers cannot take Grad PLUS loans. Professional students are capped at $50,000 a year and graduate students at $20,500.[1]
- New borrowers get only two repayment plans: a fixed-payment plan and the new income-based Repayment Assistance Plan.[1]
- A peer-reviewed experiment found most borrowers end up in a plan with no default protection when it is the default option.[3]
The student-aid changes already happened. The Big Beautiful Bill’s biggest education savings took effect three months ago, and the next deadline is mid-2028.
Parts 1 through 3 covered Medicaid, SNAP, the marketplace, Medicare and rural health. This part covers student loans, Pell Grants and school accountability.
1. Where the savings come from
CBO’s estimate for the law’s changes to the Higher Education Act totals about $284 billion in net savings over ten years. The Congressional Research Service explains that most of it comes from the Direct Loan program, and that repayment plans account for the bulk.[1]
2. Loans: Grad PLUS ends and caps arrive
Before July 1, 2026, a graduate student could borrow up to the full cost of attendance through Grad PLUS. That loan type no longer exists for new borrowers.[1]
- Graduate students may borrow $20,500 a year and $100,000 in total.
- Professional students, such as law and medical students, may borrow $50,000 a year and $200,000 in total.
- Lifetime cap. Graduate and professional borrowers face a $257,500 lifetime limit across loan types.
- Parents. Parent PLUS loans are capped at $20,000 a year and $65,000 per dependent undergraduate.
- Who is covered. The changes apply to borrowers who were not already enrolled and borrowing as of June 30, 2026.[1]
3. Repayment: a smaller menu
Borrowers of new loans since July 1, 2026 can use only a fixed-payment plan or the new Repayment Assistance Plan, or RAP. Existing borrowers keep their current plans through June 30, 2028. After that, only the two current income-based plans and RAP remain.[1]
RAP bases payments on adjusted gross income, from 1% to 10%, with a $10 minimum and $50 off per dependent. The repayment period is 30 years.[1]
The CRS comparison shows who comes out ahead, for a single borrower with no dependents. At $20,000 of income, RAP asks $17 a month where the older plans ask $0. At $50,000 it asks $167 against $221 under the newer income-based plans. At $80,000 the two are about equal, at $467 and $471. At $110,000 RAP asks $917 against $721.[1]
Other terms also change. Economic-hardship and unemployment deferments end for loans made on or after July 1, 2027, and borrowers can rehabilitate a defaulted loan twice.[1]
4. Pell Grants and accountability
The law adds $10.5 billion in mandatory Pell funding to close a projected shortfall. It also creates Workforce Pell Grants for programs of 150 to 599 hours over 8 to 14 weeks, starting July 1, 2026.[1]
It also adds an earnings test. A program of study can lose access to Direct Loans if, in two of three years, its graduates’ median earnings fall below those of a comparison group. Schools must warn students after the first failing year.[1]
5. What the peer-reviewed research shows
A 2020 experiment in the Journal of Public Economics tested why so few borrowers choose income-driven plans. The authors found that “the majority choose, or are defaulted into, a plan that offers no protection against default.” They concluded that the default option drives it, which suggests “an easy policy lever.”[3] The design of the repayment menu matters as much as the menu itself.
A Brookings Papers analysis of loan defaults found that most of the rise came from borrowers at for-profit schools, two-year institutions and certain nonselective schools. It found default rates stayed low among graduate borrowers and borrowers at most four-year public and nonprofit colleges.[4] That finding supports accountability for low-earning programs. It also suggests graduate borrowers were not the main source of default.
A 2012 article in the Journal of Economic Perspectives described college as “a lottery with significant probabilities of both larger positive, and smaller or even negative, returns.” The authors asked whether students borrow too much or not enough.[5] The question is still open, and each side of the current debate answers it differently.
A research synthesis in the Journal of Student Financial Aid found the evidence on student debt “surprisingly mixed because of poor data quality, research design challenges, and the growing heterogeneity of borrowers.”[2] We did not find a peer-reviewed study of the enacted loan caps themselves.
6. What each side says
Supporters. House Education Committee Chairman Tim Walberg, a Michigan Republican, said that “the current system is effectively broken and littered with incentives that push tuition prices upward.”[6]
Critics. Rep. Bobby Scott of Virginia, the committee’s ranking Democrat, said the plan “would increase costs for colleges and students, limit students’ access to quality programs…” Kristen Earle of the Association of American Medical Colleges said the caps “will intensify challenges for medical students to finance their education” and create “an additional financial barrier to attending medical school.”[6][7]
Both sides may be partly right. The research supports Walberg that schools can raise prices when loans are easy, and it shows the default option shapes who repays. It does not yet show whether the new limits will lower tuition or only push students toward private loans. Here the AAMC warned about “the complexities of private loans.”
Watch: the changes explained
Video: CBS News — “Breaking down key changes to the federal student loan repayment plans.”
Video: Scripps News — “Big student loan changes hit July 1, but most borrowers say they’re not ready.”
What is not yet known
- Whether the caps push students to private lenders, and on what terms.
- How the earnings test will treat programs that serve low-income or rural communities.
- How many borrowers will move to RAP when existing plans close in 2028, and whether that raises or lowers their payments.
What You Can Do Right Now
- Know which rules apply to you. Borrowers already enrolled and borrowing on June 30, 2026 are treated differently from new borrowers.
- Check your repayment plan before June 30, 2028. If you are in a plan that closes, find out which plan you will move to.
- Compare plans on your own numbers. The CRS table shows RAP is cheaper for some incomes and costlier for others. Use your servicer’s calculator.
- Do not accept the default plan without checking it. The research above shows defaults steer people into plans with no default protection.
- Before borrowing, add up the gap. If your program costs more than the new caps allow, plan for it before enrolling.
- Look at a program’s earnings record. Under the earnings test, weak graduate earnings can cost a program its loan eligibility.
- If you may default, know that you can now rehabilitate a defaulted loan twice, effective July 1, 2027.
- Apply for Pell early. If you are in a short job-training program of 8 to 14 weeks, ask whether it qualifies for Workforce Pell.
- Tell your representatives what you see. The law’s effects on tuition and access are measurable, and lawmakers will revisit them.
How to Verify This Yourself
- Open CRS report R48727 and read Tables 1 through 4.
- Read the abstracts of the three journal articles at the links below.
- Check the quotes against the OPB and NBC News articles.
- Confirm the repayment-plan dates and the earnings-test rules in the CRS report’s text, not only in its tables.
References
- Congressional Research Service, “Amendments to the Higher Education Act Made by P.L. 119-21, the FY2025 Budget Reconciliation Law,” R48727, updated January 8, 2026. Primary (nonpartisan congressional analysis; reports CBO estimates). congress.gov
- Hillman N. “Borrowing and Repaying Student Loans.” Journal of Student Financial Aid, 2015. Secondary (research synthesis noting the evidence on student debt is “surprisingly mixed”). doi.org
- Cox JC, Kreisman D, Dynarski S. “Designed to fail: Effects of the default option and information complexity on student loan repayment.” Journal of Public Economics, 2020. Primary (peer-reviewed experiment; we read the working-paper abstract of the same study). doi.org
- Looney A, Yannelis C. “A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults.” Brookings Papers on Economic Activity, 2015. Primary (peer-reviewed). doi.org
- Avery C, Turner S. “Student Loans: Do College Students Borrow Too Much—Or Not Enough?” Journal of Economic Perspectives, 2012. Primary (peer-reviewed). doi.org
- OPB, “Republicans plan to overhaul the federal student loan system. Here’s what to know,” April 30, 2025. Secondary (news report quoting Rep. Walberg and Rep. Scott about the House committee’s plan, before the final law). opb.org
- NBC News, “Medical students fret over student loan cap in Big Beautiful Bill,” July 8, 2025. Secondary (news report quoting the AAMC and students). nbcnews.com
Investigative methodology: provisions and CBO figures were read from the CRS report. Study findings were read from published abstracts. Quotation marks mark exact wording from the pages we read, and claims by officials are attributed to them.
Kemetic Minds Editorial Desk
Verified NewsroomPrimary-sourced investigative intelligence on civil rights, voting rights, federal policy, and consumer protection. Sourced from primary legal filings, government statistics, and direct field reporting.