How the One Big Beautiful Bill Affects Student Borrowers

On July 4th, 2025, Trump’s massive bill, the “One Big Beautiful Bill Act” (OBBBA), became law, sparking huge changes for student loan borrowers.

Here are the four major ways student borrowers are affected and what you can do about it.

How the Big Beautiful Bill Affects Student Borrowers

1. Reduced repayment options for all federal borrowers

One of the biggest changes is the narrowing of repayment plan options.

The bill eliminated several popular income-driven repayment plans: Saving on A Valuable Education (SAVE), Income Contingent Repayment (ICR), and Pay As You Earn (PAYE).

Borrowers currently on these plans have until July 1st, 2028, to change to one of two options: a standard repayment plan or the Repayment Assistance Plan (RAP). Beginning July 1st, 2026, new borrowers will only be given these two options:

• The new standard plan uses the amount borrowed to determine monthly payments and the length of the repayment term.
• RAP uses income to determine monthly payments, with all borrowers needing to make 360 on-time payments (30 years) before receiving forgiveness. Borrowers on the plan will pay 1-10% of their income in monthly payments depending on their income bracket, with a minimum monthly payment of $10.

Many experts warn that the limited remaining repayment options will raise monthly payments for most borrowers.

2. Reduced access to deferment and forbearance for future borrowers

Another major change for borrowers is access to deferment and forbearance for loans taken out on or after July 1st, 2027.

The bill eliminated deferment due to unemployment or economic hardship. This means those with limited incomes will still be required to make their monthly payments, even if unemployed.

This could be especially difficult for struggling borrowers since the allowance for forbearance has been shortened: borrowers will only be allowed 9 months of forbearance (previously 12 months) in a 24-month period.

Combined, future borrowers will have vastly reduced access to financial safety nets, forcing them into delinquency or default if they cannot afford to keep up with their payments.

3. Reduced federal loan options for graduate students, professional students, and parents

The bill also eliminated new Grad PLUS loans and greatly limits the amount graduate students and professional students can borrow starting on July 1st, 2026:

• Graduate student borrowing is capped at $100k.
• Law and medical student borrowing is capped at $200k.

With the cost of graduate programs often far exceeding these limits, many graduate and professional students will no longer be able to afford their education.

Parent PLUS loans also have a cap: $65k per student. In addition to this limit, Parent PLUS loans will not be eligible for income-based repayment plans or loan forgiveness starting on July 1st, 2026.

4. Permanent tax break for employer-sponsored contributions

Perhaps the one bright side for borrowers is the extension of tax incentives for employer-sponsored student loan repayment contributions (previously set to expire at the end of 2025).

The tax break is now permanent, a huge win for employers and student borrowers alike. Employers can pay up to $5,250 toward employee student loans, which could improve borrowers’ abilities to afford their new increased student loan payments.

The $5,250 limit per employee will be adjusted for inflation annually starting in 2027.

What You Can Do

Many experts agree: federal student borrowers will suffer under the reduced loan options, limited repayment plans, ineligibility for deferment, and shortened forbearance.

• Limited repayment options lead to higher monthly payments, worsening the financial situations of millions of borrowers and their families.
• Weakened deferment and forbearance mean borrowers will still have to make payments during times of hardship and unemployment.
• Capped borrowing for graduate students, professional students, and parents restricts access to education, especially for desperately needed fields like teaching, medicine, and law.

Though the Big Beautiful Bill has negative outcomes for many, student borrowers and those around them are not powerless. How you respond matters. Here’s what you can do in light of these changes:

If you’re a student borrower… Make sure you know which changes impact you and when they go into effect. Depending on your circumstances and ability to make payments, you may want to consider refinancing, crowdfunding, or talking to your employer about repayment assistance.

If you’re an employer… Consider starting or expanding your student loan assistance benefit. This is one crucial way you can support your staff and future employees as they’re impacted by the bill’s changes (plus, your contributions are tax-free).

If you know a student borrower… Ask if they’re crowdfunding their student loans and chip in if you can. Every bit counts when it comes to paying off student debt and making a contribution can take a big weight off their shoulders.

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Learn how Paidly can help you start employer student loan assistance benefits or crowdfund student loans.

To read the One Big Beautiful Bill Act yourself, visit www.congress.gov/bill/119th-congress/house-bill/1/.