House Ed and Workforce Cmte Republicans just released a key mark up plan. Their mission is to redesign the country’s student loan and financial aid system from the ground up. On Tuesday, the actual proposal was released. It would put new caps on how much students can borrow and narrow borrowers’ options for repayment which has alarmed college leaders and advocates over its possible effects on college access and affordability.
Under the proposed plan, undergraduate students will face a borrowing cap of $50,000 for federal student loans starting July 1, 2026. And graduate students would finally be permitted to borrow up to $100,000. These actions follow months of debate over the rising cost of a college education. Today’s graduates are feeling the burden of increasing student debt more than any other time in history.
The federal Pell Grant program, established in 1965, remains one of the largest sources of financial aid available to college students. In FY 2020, over 6 million undergrad students benefitted from Pell Grants, which can do wonders for lower-income individuals to afford college tuition and other expenses. The maximum Pell Grant award is currently $7,395 for the 2025-26 award year. The new plan cuts aid by restricting borrowers’ access to credit.
The plan calls for an end to unemployment deferment for federal student loan borrowers. It proposes to remove economic hardship deferment as well for borrowers who incur debt after July 2025. This action has sent shockwaves through the higher ed community and among advocates for student borrowers.
Tim Walberg, Chairman of the House Education and Workforce Committee, defended the overhaul, stating, “For decades Congress has responded to the student loan crisis by throwing more and more taxpayer dollars at the problem — never addressing the root causes of skyrocketing college costs.”
Sameer Gadkaree, president and CEO of The Institute for College Access & Success called the proposal a “risky gambit.” He emphasized that it “would severely restrict college access by slashing financial aid programs, eliminating basic consumer protections and making it harder to repay student loan debt.”
Mark Kantrowitz, a longtime financial aid expert, took to the blog FinAid.org to warn about what the new borrowing limits could mean. He warned that these restrictions “will shift some borrowing to private student loans,” which typically offer fewer protections for borrowers compared to federal options.
As of September 2024, more than 12 million people were signed up for income-driven repayment (IDR) plans. These plans ensure income-driven payments are affordable each month by capping payments at a percentage of a borrower’s discretionary income. Narrowing the range of available repayment options may leave many borrowers without affordable options.
The changes that were proposed have led to a passionate discussion over the direction of student financial aid in America. Now, people are starting to look carefully at the long-term impacts on college affordability.
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