Student loan borrowers could see their payments surge after the “One Big Beautiful Bill Act” was approved in July, according to a new analysis from Protect Borrowers.
The bill makes significant cuts to safety net programs in order to fund $4 trillion in tax breaks for individuals and corporations. It also took around $300 billion from federal financial aid and student loan programs, reducing the amount that some Americans can borrow and making it more expensive for millions to repay their education debt.
Why It Matters
The student loan debt in America totals around $1.77 trillion, impacting millions of borrowers who often report that the loan repayments limit their ability to buy a home or start a family.
While former President Joe Biden ushered in student loan forgiveness programs, the Trump administration has pushed back against some of this policy, leading to a hike in payments for many borrowers.
What To Know
Key Changes in Repayment and Borrowing
The OBBBA overhauled federal student loan programs in several major ways:
Federal Borrowing Caps: Lifetime borrowing limits were set at $100,000 for graduate students, $200,000 for law/medical students, and $65,000 per student for parents. The Graduate PLUS program was eliminated for new participants. Students in programs exceeding these costs now need to seek private loans, which typically carry higher rates and fewer protections.
Repayment Plan Options Narrowed: For loans issued after July 1, 2026, only two repayment pathways are available: a revised “Standard Repayment Plan” (fixed monthly payments, 10-25 years) and the new “Repayment Assistance Plan” (RAP), with payments between 1 and 10 percent of income, requiring a $10 minimum. The RAP offers loan forgiveness only after 30 years and enforces stricter eligibility and hardship deferral rules compared to prior programs.
Loss of Income-Driven Repayment Protections: Former plans such as SAVE—enacted under former President Joe Biden—were phased out. Borrowers switching from IDR programs to new plans will generally see higher monthly payments.
Tax Changes for Loan Forgiveness: Debt forgiven under RAP and other new plans is now taxed as income, unless discharged due to death, disability, or Public Service Loan Forgiveness (PSLF). This could further increase the long-term cost of student debt for those who qualify for loan cancellation after decades of repayment.
Projected Impacts on Borrowers
The Student Borrower Protection Center reported that the typical borrower could see annual student loan payments rise by $2,929, with corresponding monthly jumps of hundreds of dollars.
Borrowers with some college but no degree face increases of $1,761 per year, according to the center, while families with a head holding a bachelor’s degree could pay $2,808 more annually.
The elimination of federal options for higher borrowing could also lead to more students taking riskier private loans without standard consumer protections, according to the center. This is expected to hit low-income, minority, and first-generation students hardest, with the center saying it could potentially reinforce existing educational and economic inequalities.
“The process for getting student loans and applying for forgiveness could get dramatically more difficult. Forgiveness will face harder caps, with a minimum of payments being made for 25 years for many borrowers before forgiveness will even be a possibility,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
“For new borrowers, Pell grants could be restricted in amount based on the income of the major the student is pursuing, which could trigger a shift in what fields some students go into when entering college. As with all legislative changes, we’ll have to see these alterations in action before seeing how beneficial or nonbeneficial they end up being.”
Legal and logistical confusion has arisen, especially for the roughly 7.7 million borrowers previously enrolled in the SAVE plan or other income-driven repayment plans, as ongoing lawsuits and Department of Education staffing cutbacks delay the rollout of alternatives.
Newsweek reached out to the Department of Education for comment via email.
What People Are Saying
Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: “The OBBBA makes a number of changes to federal student loans that will make it more difficult to borrow and more expensive to pay back. Grad Plus loans are being eliminated, Parent Plus and Graduate loans are more limited. Undergrad Subsidized loans are being eliminated, making the total cost of borrowing dramatically higher. On the repayment side, Income Driven Repayment is being replaced with the Repayment Assistance Plan, which really offers no assistance. In reality, it will require that loans are paid down more quickly, likely to put a financial strain on young professionals trying to buy a home, start a family, or start a small business.”
Michele Zampini, associate vice president of federal policy & advocacy at the Institute for College Access and Success, told Newsweek: “As living costs continue to rise and families struggle to keep up, making payments less affordable undermines the primary goal of income-based plans: to keep borrowers in good standing. However, it will likely do the opposite: push more borrowers than ever into the nightmarish world of loan default.”
What Happens Next
The lower federal support for higher education and corresponding restrictions on state budgets may increase public university tuition and shrink essential student services.
Experts warn that these developments risk lowering the quality of education and may trigger declines in enrollment—especially among underserved populations.
“Borrowers could have already paid down their debt more quickly under prior plans, while income-based plans exist as a safety net for when higher payments are not an option,” Zampini said. “In exchange, borrowers enrolled in income-based plans often do pay for longer and pay more interest over the life of their loan.”