The Senate HELP Committee released its initial response to the House Education Bill related to the Big Beautiful Bill. The future is clearer by comparing Congress’s financial aid and student loan repayment proposals. No matter how you look at it, the changes are coming, and they are significant.
What was surprising to me is that no alarm bells were set off when the House’s proposal was issued. There was no reaction from the colleges or the press based on the extent of the changes proposed. After reviewing the proposals, it puts college affordability before admission, since unlimited federal loan limits will become unavailable.
Based on both proposals, the federal government wants to limit its future exposure to student loan debt. According to a 2024 CBO review, they estimated that the student loan programs will lose $0.20 per dollar lent in 2024. Before 2022, these programs were profitable, but the increased use of Income-Driven Repayment (IDR) methods, various forgiveness programs, and the COVID extensions have changed that profitable outcome.
During this period, new programs were added to address the rising cost of college and the growing student loan issue. In addition, more jobs required advanced degrees, and parents needed to fill the funding gap, federal loans became an unlimited financing option for many borrowers. Based on these proposals, those days are gone, and families will need to find different financing alternatives.
New Loan Limits and Repayment Method Implementation Date
We are still in the early stages of finalizing these changes. Both branches of Congress have submitted their recommendations, and the Senate still needs to vote on its final draft. Since there are differences, these will need to be reconciled before they can become law. Many of these changes will not go into effect until 7/1/2026.
That may seem far away, but it will impact all current and college-bound families differently. You should begin planning now, depending on where you are in the process. This article will explain those options later. If proper planning is not done, funding for graduation may become unavailable or very expensive for many families.
Financial Aid and College Funding Comparison Chart for the Big Beautiful Bill
Below is a chart explaining the current college funding proposals from the House and Senate. It lets you see where we are and how significant the changes are going forward. Based on my review, families must project the funding shortfall by year and understand which loan structure will be best due to these new annual and lifetime limits.
Under the current process, the Federal PLUS loan programs allow students and parents to borrow up to the cost of attendance minus any financial aid. These are now capped both annually and over a borrower’s lifetime. Many families will be required to take private student loans that require a formal loan underwriting process.
This change will complicate an already overwhelming system if you look at the current federal and private student loan mix. Federal student loans account for 92% of the total debt outstanding. This mix will change due to new federal limits.
Student Loan Repayment And Forgiveness Comparison Chart for Big Beautiful Bill
Just as big as the funding changes are those related to the repayment and forgiveness rules. The repayment and forgiveness process has been a mess since COVID due to the COVID special rules and the Biden Administration’s goal for more loan forgiveness. Many borrowers are frustrated with the lack of clarity in the process.
Under the new rules, the timing of the borrower’s loans will become important since the loan structure will dictate their repayment options. As you can see from the chart below, we will have fewer options and, in many cases, less generosity. The new goal for families will be to increase transparency and provide better estimates of total debt. This way, students and parents can understand their monthly repayment exposure before starting college.
With the new federal loan limits, the federal government will reduce its exposure to forgiveness and default loan risk. There are a few differences between the House and Senate Proposals, but these will be resolved, resulting in fewer options for borrowers.
Planning for These New Financial Aid and Repayment Changes
With these changes, my biggest concern is that families will make college decisions without considering the new loan limits. If proper planning is not done, we will see more students who cannot graduate from college after 2 or 3 years due to funding shortfalls and their inability to get proper financing.
Due to the timing of this expected implementation, here are some planning tips to consider based on your situation. These are based on the proposed rules, which may change.
Spring 2026 College and Post-Grad Graduates
Since the new repayment programs start on 7/1/2026, new graduates may want to forfeit their payment grace period to make the older IDR methods available. Based on the current language, the legacy IDR methods will not be an option after 7/1/26. PayForEd advisors can help you make that comparison.
College and Post-Grad Graduates with graduation dates from 7/1/2026 to 7/1/2028
These students will benefit from the proposed 3-year runway of unlimited PLUS Loan limits. According to the House and Senate, this special exception is offered to students currently enrolled in college programs.
Since they have loans after 7/1/2026, they will only have access to the new repayment and forgiveness rules, even though some may have a mixture of older and newer loans. The students would be enrolled as first- and second-year students at this time. If graduation is delayed, these rules will not apply and may face the new federal loan limitations.
College and Post-Grad Graduates with graduation dates after 7/1/2028
This group of students is your 2025 entering college class. This group has significant uncertainty since it is unclear how the loan limits will impact their senior-year financing. These students and parents will benefit from the 3-year unlimited loan rule based on the current language. Those rules expire starting 7/1/2028. It is unclear what timeframes the new federal lifetime limits will include.
Included in this group are students from prior years who did not graduate within 4 years. They may face federal loan limit issues and be required to get alternative loans to complete their degree.
These borrowers may face the need to use alternative loans, such as a private student loan. Private student loans have a formal underwriting process like an auto loan or mortgage. The risk is that the accumulation of federal loans will be included in the underwriting review. It will impact an important underwriting factor called your debt-to-income ratio, which is a review item used in determining a borrower’s rate and may affect the approval of the loan. This ratio may be a problem, making the financing unattractive or unavailable.
Current High School Seniors and Younger
Based on the current implementation plan, this group will initially face the new federal loan limits during their entire college funding process. These new rules will change the college selection method significantly. Families will need to project the total amount of debt required for graduation.
This financing analysis will require the family to understand their cash flow and annual debt structure. A miscalculation could result in higher costs or, even worse, the inability to graduate from that school due to a lack of financing.
Under these new rules and current college costs, more students will have a mixture of federal student loans, parent federal loans, and private or alternative loans. Each of these will have different repayment rules and terms, adding to more complexity.
Comparing Congress’s Financial Aid and Student Loan Repayment Proposals Summary
As you can see, the changes in the college financial area are enormous and will significantly change the college admission process. In the past, affordability has been a growing concern, but admissions have, in most cases, been the priority. That may all change with these new federal loan limits and rules. Families must have a plan for each child to graduate, which was never required.
Based on the initial response from both the House and Senate, we know changes will occur. The federal government can no longer subsidize college education as it has in recent years. At PayForEd, we are updating and creating new strategies to help families navigate these changes. The advantage of our approach is that we understand the college funding and loan repayment strategies. We provide a holistic approach that is custom to your situation.
