• House Republicans introduce fundamental changes to the U.S. student loan system.
• The proposed plan cuts existing repayment options to two and imposes new borrowing limits.
• Eligibility changes for Pell Grants aim to restrict access for low-income students.

House Republicans have unveiled a comprehensive plan to reform the student loan system aimed at cutting federal spending by over $330 billion to help finance ongoing tax cuts proposed by the Trump administration. This initiative focuses on increasing accountability for both students and educational institutions, as outlined by Committee Chairman Tim Walberg (R-Mich) during a committee markup session. “Colleges have no reason to lower costs or ensure degrees align with employer needs, all while students and taxpayers pay the price,” Walberg said, emphasizing the need for "skin-in-the-game accountability" from schools, which includes making colleges financially liable for their students' unpaid loans, according to The Hill and Business Insider.

The proposed reforms include the elimination of several income-based repayment plans, bringing in a new structure that offers only two options: a standard repayment plan with fixed monthly payments and a "Repayment Assistance Plan" that's tied to borrowers' income. This change is noteworthy as it effectively removes the Biden administration's SAVE plan, a popular choice among borrowers, and could result in considerably higher costs for many graduates. The typical borrower under this scheme could see an increase in annual payments by nearly $3,000, raising concerns among advocacy groups like the Student Borrower Protection Center, according to CBS News and Forbes.

In parallel, the plan proposes new limitations on Pell Grants, which help support low-income students. The criteria for full-time status would be raised from 12 to 30 credit hours per year, and students attending less than half-time would no longer be eligible for these grants. These changes aim to prioritize funding for students enrolled in full-time studies while potentially restricting access for many lower-income individuals, as reported by NPR and Business Insider.

Further adjustments include strict borrowing limits: undergraduate students would be capped at $50,000 and graduate students at $100,000, with the latter losing access to the Grad PLUS loan program. Parents would also face stringent limits on the Parent PLUS loan program, having to reach their child’s borrowing cap before being permitted to cover any additional costs through these loans. This change aims to lessen the financial burden on families but has drawn criticism for potentially limiting educational access, as noted by NPR and CBS News.