As 2025 approaches, many student loan borrowers could face higher monthly payments, thanks to potential changes in federal laws. The College Cost Reduction Act, introduced by Rep. Virginia Foxx, seeks to reshape the student loan landscape while reducing the national deficit by up to $280 billion over the next decade. However, this shift could significantly impact what students owe, sparking debate about who benefits and who gets left behind.
A major element of the proposed law involves scrapping President Biden‘s SAVE income-driven repayment plan. According to Jessica Thompson, Senior Vice President at The Institute for College Access & Success (TICAS), “The reality is, the College Cost Reduction Act would increase financial burdens and risks for students and borrowers.” She adds that the plan would likely lead to higher monthly payments and increased risks of delinquency and default.
One notable change would be requiring borrowers to repay loans on a standard 10-year plan, which could mean higher payments for many. Additionally, borrowing caps would limit undergraduates to $50,000 in loans and graduate students to $100,000.
Michael Ryan, founder of michaelryanmoney.com, warns that this could hurt those in costly professional programs like law or medicine. “High-income graduate borrowers might benefit from the capped payments,” Ryan explains, but for others, access to federal loans may become a barrier.
Pell Grant boosts come with strings attached for student loan borrowers
The proposal also doubles Pell Grant awards for juniors and seniors on track to graduate. While this is a positive for some students, financial literacy expert Alex Beene is skeptical. “At the end of the day, it’s difficult to see outside of additional Pell Grant assistance how this really saves incoming students on the price of an education,” he notes. Beene also points out that shifting financial responsibility to universities could lead to higher tuition costs.
Another concern is the elimination of PLUS loans for graduate students and parents. Michael Lux of Student Loan Sherpa highlights the ripple effect: “Fewer students who can attend school might push prices down, but it only helps those who can afford to pay out of pocket or qualify for private financing.”
Compounding the issue, interest rates for new federal student loans hit their highest levels since before the Great Recession in 2024, with undergraduates facing a 6.53% rate and graduate borrowers over 9%. These increases mean students entering repayment in 2025 could pay hundreds more annually. As federal rates are fixed, borrowers may have to choose between costly federal loans or riskier private loans that lack protections.
With Republicans controlling the House, the bill’s passage seems more likely, though significant revisions may be needed to gain bipartisan support.