2Deep Dive into The Senate Education Proposals

Key Student Loan Changes Would Dramatically Reshape the Student Loan Landscape

If you’ve been following our newsletters, you know we’ve been tracking these student loan proposals as they work their way through Congress. After digging deeper into the Senate’s version of the “One Big, Beautiful Bill,” it’s clear there are some major differences from what the House proposed—and based on how things are shaping up, the Senate version looks more likely to stick.

So, we’ve put together a detailed breakdown of the Senate’s proposal below.

A quick caveat: nothing in this bill has been signed into law (yet). Negotiations are still ongoing, and we expect more changes before anything is finalized. We’ll continue updating this blog as the details evolve.

1. Loan Types and Availability

Elimination of Graduate PLUS Loans

• Graduate and professional students will no longer be eligible for Federal Direct Graduate PLUS Loans.
• These loans are eliminated for any period of instruction starting on or after July 1, 2026.
• Students currently enrolled in a program of study will have continued access to Grad+ until the completion of the program.
• 🟥 Comparison: Currently, grad and professional students can borrow any amount up to the cost of attendance (COA), and there is no aggregate loan limit.
• 🟦 Insight: This essentially removes all borrowing above the Stafford limit, unless a private loan is secured. Students with access to institutional aid may not be impacted, but most students will see a reduction in aid eligibility.

Continued Access to Federal Direct Unsubsidized Loans

• Graduate and professional students can still receive unsubsidized Stafford loans, but with stricter caps, subject to new annual and aggregate caps (see below).
• Subsidized Stafford loans remain available for undergraduates.

Parent PLUS Loans Remain Available

• Parents of dependent undergraduate students can continue to borrow, but with lower annual and lifetime limits.
  • 🟥 Comparison: Currently, Parent PLUS is not subject to annual or lifetime caps and can be borrowed up to the cost of attendance.
  • 🟦 Insight: This change could have a notable impact on families at private undergraduate schools, particularly those who rely on Parent PLUS to fill larger gaps in aid.

2. Loan Limits

New Annual Limits

• Undergraduate students: No change; existing limits remain based on year and dependency status.
• Graduate students (non-professional programs): $20,500 annually.
• Professional students (e.g., MD, JD, DVM): $50,000 annually.
  • 🟥 Comparison: Currently, students in both categories can borrow up to the cost of attendance (COA) using a combination of unsubsidized Stafford and Grad PLUS loans.
• Parent PLUS borrowers: $20,000 annually per dependent student.
  • 🟥 Comparison: Current Parent Plus allows any amount up to the program’s COA.

New Aggregate Limits

• Graduate students: $100,000 (plus undergrad)
• Professional students: $200,000 (plus undergrad)
  • 🟥 Comparison: Currently, there is no Stafford or Grad PLUS loan limit for graduate students, only the COA Professional students: $200,000 (plus undergrad)
• Parent PLUS: $65,000 per student
  • 🟥 Comparison: This is a significant shift from an unlimited Parent PLUS model.
• Combined lifetime borrowing cap (all borrowers): $257,500
• Prior borrowing does count against the new cap for future loans.
  • 🟦 Insight: The combination of new annual and aggregate caps is a dramatic shift in how federal loans function. Students planning to attend programs above these limits will need to utilize private funding to fill the gap.

Additional Notes

• Schools may set lower loan limits by program, if applied uniformly.
• Limits are prorated for less-than-full-time enrollment.

3. Repayment Options

There are currently 7+ repayment plans available to Federal borrowers. Both the Senate and House propose condensing these options down to just two plans, at least for new borrowers.

Repayment Assistance Plan (RAP)

• Who It Applies To
  • Borrowers who take out loans on or after July 1, 2026.
• How Payments Are Calculated
  • Based on a tiered percentage of adjusted gross income (AGI).  
  • Income under $10,000 = $120 (annual)
  • $10,001–$20,000 = 1% of AGI
  • $20,001–$30,000 = 2% of AGI
  • … and increases by 1% per $10,000 income, capping at 10% for income over $100,000.
• The annual payment calculation is then divided by 12 to derive the monthly payment.
• • Subtract $50 for each dependent child from the monthly amount.
  • Minimum monthly payment is $10.
• Additional Benefits
  • Interest subsidies: If your payment doesn’t fully cover interest, unpaid interest is waived.
  • Principal match: If your payment applies less than $50 to principal, the government covers the shortfall (up to $50/month).
• Switching Plans
  • Borrowers can switch between RAP and the standard plan at any time.
  🟦 Insight: While the proposed text is not clear, it appears that those who switch from RAP to Standard would start fresh with a 10, 15, or 25 year term. Conversely, switching from Standard to RAP would start a 30 year term.
• Impacts on Current Borrowers
  • The proposal states that current borrowers in SAVE/PAYE/ICR would be forced into older IBR or RAP, losing access to their existing plans.
  🟦 Insight: 6/26/25 – The Senate Parliamentarian ruled this new mandate was not allowed. So, stay tuned!

Standard Repayment Plan

• Applies to loans disbursed on or after July 1, 2026
• Under $25,000 = 10 years
• $25,000–$49,999 = 15 years
• $50,000–$99,999 = 20 years
• $100,000+ = 25 years
  • This plan is the default if no repayment plan is selected.

4. Public Service Loan Forgiveness (PSLF)

• The core requirements for PSLF have not changed.
• All Income-based payments, including RAP, will still count towards PSLF.
• Switching between plans will not reset your PSLF “clock” or count.
•  🟦 Insight: In addition to IBR payments, current rules state that any payment that is equivalent to a 10 year payment or higher will also count towards PSLF, regardless of the payment plan. It is unclear whether this rule would still be in effect.
• The current proposal states that medical and dental internships and residencies will not count toward PSLF for borrowers who have not taken out graduate loans before July 1, 2026.
  • 🟦 Insight: 7/1/2026 – The Senate Parliamentarian flagged this new mandate and stated it was not allowed under the budget process. This is a critical issue for physicians and dentists, so stay tuned!

5. Deferment and Forbearance

Deferments Eliminated for New Loans

• No more deferments for economic hardship or unemployment on loans made after July 1, 2026.

Forbearance Limited

• Borrowers may use no more than 9 months of forbearance in any 24-month period.
  • 🟥 Comparison: Currently regs allow 36 months total.

6. Loan Rehabilitation

• Defaulted borrowers may now rehabilitate a loan twice
  • 🟥 Comparison: Previous rules allowed only one instance
• Minimum required monthly payment for new loans in rehab: $10.
  • 🟥 Comparison: Current policy allows for $0 rehab payment for low-income borrowers

7. Program Accountability

Earnings-Based Eligibility for Federal Aid

• Programs (undergraduate or graduate) lose eligibility if their graduates consistently earn less than benchmark earnings (based on high school or bachelor’s-only workers).
• Determined using 2 out of 3 years of earnings data.
• Institutions must notify students if a program is at risk.
• There’s a formal appeals process.

8. Pell Grant Changes

Workforce Pell Grants

• New grants for short-term programs (150–600 clock hours) that lead to a credential or direct employment.
• Program eligibility requires completion and job placement rates above 70%.

Other Pell Updates

• Students with non-federal aid that covers the full cost of attendance are ineligible for Pell.
• Students with a Student Aid Index (SAI) more than twice the max Pell Grant are also ineligible.
• Foreign income now included in AGI calculations starting in 2026.

9. Regulatory Rollbacks

Borrower Defense + Closed School Discharge

• The proposal reverses Biden-era regulations and reinstates previous rules from 2019–2020.
  • 🟦 Insight: The Biden-era rules created blanket policies which made it very easy for borrowers to have their loans discharged simply by being a student at a school that was shut down, was found guilty of misconduct, or was way overcharging for degrees which were basically worthless.
  • 🟥 Comparison: The old rules the Senate wants to put back into place still provide the ability to discharge loans in these cases, but require students to clearly state their case and have a DOE employee make a judgement on the case.

Limitation on Authority of Department of Education Secretary

• The Department of Education is restricted from issuing new economically significant regulations that increase subsidy costs.
• 🟦 Insight: 6/26/25 – The parliamentarian also flagged this provision as being outside the scope of something which could be passed via the budget process.