The Trump administration’s “Big Beautiful Bill,” if enacted, will make significant changes to the federal student loan process with serious financial impacts on borrowers, according to Financial Counseling Association of America President Martin Lynch, who serves as compliance manager and director of education for Cambridge Credit Counseling, a CEA Member Benefits partner.
“While the House version of the bill was problematic, the Senate version is even worse,” he says, “leaving little hope for something better to emerge from the reconciliation process.”
Lynch urges borrowers to take action now to protect themselves. While more information is coming out regularly, here’s what he predicts about forthcoming changes, how they will affect borrowers, and what you should do next.
Parent PLUS loans
If you have a Parent PLUS loan, a consolidation loan that includes a Parent PLUS loan, or even if you’ve already used the double consolidation loophole for your Parent PLUS loans, Cambridge Credit Counseling strongly urges you to consider applying for the Income Contingent Repayment plan (“ICR”) immediately. You must be in repayment on the ICR plan the day before the budget bill is signed to remain eligible for any future IDR plans.
While previous guidance suggested moving to any of the income-driven plans, the latest word suggests only Parent PLUS loan holders in the ICR plan will be allowed to access the revised version of the IBR plan whenever that option is introduced.
If you’re not enrolled in the ICR plan on the day before enactment and you have Parent PLUS loans as described above, you will potentially lose access to all income-driven plans, meaning your payments could skyrocket and Public Student Loan Forgiveness won’t be an option.
If you have one or more unconsolidated Parent PLUS loans, submit a consolidation application immediately, selecting “ICR” as your repayment plan. This link will take you to the consolidation application: studentaid.gov/loan-consolidation/.
OR:
If you’ve already consolidated one or more Parent PLUS loans (or even if you’ve already used the double-consolidation loophole), or even if you’ve begun a consolidation that hasn’t been processed yet, you can apply to change from your current income-driven plan (IDR) to the ICR plan immediately, before the bill passes, at studentaid.gov/app/ibrInstructions.action.
What about SAVE and other repayment plans?
“The SAVE (Saving on a Valuable Education) repayment plan will be killed under the ‘Big, Beautiful Bill,’” says Lynch, adding, “It looks like ICR, PAYE (Pay As You Earn), and the newer version of the IBR (Income-Based Repayment) plans will also be terminated.”
“If you’re currently in SAVE, it’s time to get out. Apply for IBR now.” If your plan is terminated and you want to remain in an income-driven plan, the older version of IBR will be available, but you should apply as soon as possible.
Payments made though any income-driven plan toward Public Service Loan Forgiveness will still count, though you may need to change your repayment plan to the old version of IBR.
If you don’t know what repayment plan you’re enrolled in, contact your loan servicer. Their information is on your monthly statements.
What about the administration’s new plan?
Lynch characterizes the administration’s new plan, RAP, or the Repayment Assistance Plan, as “a disaster.”
He explains: “It only purports to consider income and family size. It lumps borrower wages together in $10k increments, and it credits only $50 per dependent.” RAP would also require the income of both spouses to be considered as available toward repayment, no matter how taxes are filed. This means married couples may no longer be able to maintain affordable payments.
“We don’t know if or when the so-called Big, Beautiful Bill will pass,” says Lynch, “but if it does, it will likely happen before the summer is over.”
For that reason, and because more information trickles out every week, Cambridge Credit Counseling plans to host free webinars to update CEA members on where things stand. Watch your inbox for dates and other announcements from CEA.
In the meantime, if you have questions, Cambridge Credit Counseling offers CEA members free counseling sessions regarding your student loans. Contact them today at 888-491-6779 or visit cambridge-credit.org/cea/.
