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12 Student Loan FAQs — Will the Big Beautiful Bill Bankrupt You or Save You Money?

  • Writer: Kimi
    Kimi
  • 4 days ago
  • 3 min read
Will the Big Beautiful Bill Bankrupt You or Save You Money?
Will the Big Beautiful Bill Bankrupt You or Save You Money?

On 3 July 2025 the U.S. House of Representatives passed the so-called “Big Beautiful Bill” (formally the One Big Beautiful Bill Act, OBBBA) by a razor-thin margin of 218 to 214 votes. The Senate then approved the measure 51 to 50 (with the vice-president casting the tie-breaking vote) and sent it to President Trump, who is expected to sign it into law on 4 July 2025.


Billed as America’s largest middle-class tax cut and border-security package, the act also delivers the most sweeping overhaul of higher-education finance and student-loan policy in two decades. Below are 12 frequently asked questions that unpack the bill’s student-loan provisions and compare them with the Biden administration’s loan-forgiveness agenda.


1. What is the “Big Beautiful Bill”?

The One Big Beautiful Bill Act (OBBBA) is a massive budget-reconciliation package championed by the Trump administration. It bundles tax, spending and education measures into one “big, beautiful” piece of legislation. Besides extending the 2017 tax cuts and ramping up border-security funding, it introduces the first major conservative reform of federal student-loan policy in twenty years.


2. Has it already become law?

Yes. Both chambers have passed the act and the president is set to sign it on 4 July 2025, after which its provisions take legal effect. Because it moved through budget reconciliation, only simple majorities were required.


3. What student-loan reforms does the bill contain?

  • Scraps existing income-driven repayment (IDR) plans and replaces them with just two options: a 10-year standard plan and a new Repayment Assistance Plan (RAP).

    • RAP sets monthly payments between 1 % and 10 % of gross income, with a $10 minimum; each dependent child knocks $50 off the bill; remaining balances are forgiven after 30 years.

  • Caps how much students can borrow. Undergraduates may not borrow more than the program’s average cost of attendance; graduate PLUS loans lose their open-ended ceiling.

  • Eliminates in-school interest subsidies—interest now accrues while the borrower is enrolled.

  • Introduces “risk-sharing.” Colleges whose alumni struggle to repay loans must reimburse the government for part of the loss.

  • Bars executive-branch debt cancellation without explicit congressional approval.


4. Does the act cancel any existing loans?

No. It does not wipe out current balances; instead it overturns the Biden administration’s attempted one-time cancellations and the SAVE IDR plan. Only balances left after 30 years of on-time RAP payments will be discharged.


5. Is this good or bad for borrowers?

Supporters say it simplifies repayment and curbs tuition inflation, sparing taxpayers from subsidising high-income professionals. Critics argue it raises monthly bills, extends repayment to near-lifetime length and most harms low-income borrowers.


6. Who gains and who loses?

  • Winners: taxpayers and borrowers with steady incomes, who may benefit from the RAP’s $50 monthly government match.

  • Losers: low-income students, future grad-school borrowers (due to loan caps) and Parent PLUS borrowers facing higher costs. PSLF eligibility is also narrowed via executive action.


7. How does it differ from Biden’s loan-forgiveness policy?

Biden’s agenda emphasised large-scale debt relief and generous IDR (SAVE) with $0 payments for very low incomes and forgiveness in as little as 10 years. The Trump bill forbids unilateral forgiveness, sets a $10 minimum payment, lengthens forgiveness to 30 years, restores interest accrual and tightens PSLF.


8. What exactly was Biden trying to do?

He sought a one-off cancellation of up to $10 k ($20 k for Pell recipients) per borrower, extended the pandemic payment pause, created SAVE IDR and massively expanded PSLF—moves later blocked or rolled back.


9. What does the bill mean for taxpayers and the budget?

CBO estimates the education and loan measures will save about $349 billion over ten years, yet the act’s tax-cut extensions raise overall deficits by roughly $3.4 trillion.


10. Will it lower tuition?

Capping borrowing and making colleges liable for poor loan outcomes could pressure institutions to restrain prices, but critics doubt it will significantly curb costs and fear it may instead reduce access.


11. What happens to existing borrowers?

Current IDR users may stay on a transitional plan (15 % of discretionary income, 20–25 year forgiveness) or switch to RAP; borrowers must note key deadlines for consolidating Parent PLUS loans before 2026–2028 cut-offs. All pandemic-era payment pauses are already ended by executive order.


12. Where is policy headed next?

Future shifts depend on election outcomes, litigation over PSLF limits and public pressure. A Democratic resurgence could undo parts of the new framework, while Republican control may entrench it.

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