House Committee Releases Student Success and Taxpayer Savings Plan

After a multi-hour markup session on April 29, 2025, we now have a better understanding of what education financing-related proposals may find their way into a final budget reconciliation bill for the federal government’s 2025 fiscal year. The House Education and Workforce Committee’s proposed Student Success and Taxpayer Savings Plan is projected to save over $350 billion over ten years, with the vast majority of the savings expected to result from an overhaul of federal student loan repayment options for both new and existing borrowers. Other programs that could face significant changes include Pell Grants and Graduate PLUS Loans.

Overhaul of Federal Student Loan Repayment Programs

Federal student loan borrowers currently have three types of fixed payment repayment plans and four types of income-driven repayment plans available to choose from, with one income-driven repayment plan, the SAVE plan, on hold pending further legal rulings. The bill advanced by the Committee would effectively rebuild the repayment options, sunsetting all currently available plans by July 1, 2026. After that date, all borrowers will need to choose between a standard repayment plan with fixed payments over a fixed period based on principal amount, or a single income-based ‘Repayment Assistance Plan.’

Under the current Extended Repayment Plan, a type of fixed payment repayment plan, those with more than $30,000 in outstanding Direct Loans are eligible to extend the payment period to 25 years, while under the proposed Standard Repayment Plan, only borrowers with over $100,000 will have such a long payback period. There will be no Graduated Repayment Plans, where payment amounts increase over time. Subsidized loans will no longer be available, so interest will begin to accrue in school for all loans.

The four income-driven repayment options currently available would all be eliminated, and careful attention is paid to limit the ability of the Education Department to offer ‘income-contingent’ repayment plans now or in the future. This is because there is no opportunity for a $0 payment amount in the new Repayment Assistance Plan, which would require every borrower to pay at least $10 per month toward their loan balance. Payment amounts scale with income, up to 10% of adjusted gross income (annually) for those making over $100,000 per year. 

Borrowers who are not in deferment or forbearance and make 360 qualifying monthly payments under the plan will have any outstanding balance forgiven. There are also some notable provisions that will protect borrowers who are making qualifying payments under the plan from seeing their balance continue to rise in spite of them. For example, an interest subsidy is included in the program so that if an on-time monthly payment is made as required, but it is insufficient to pay the total accrued interest for that month, that interest amount will not be charged to the borrower, who is also eligible for up to $50 in a principal subsidy.

It’s worth noting that Federal Direct PLUS Loans made on behalf of a dependent student (and consolidation loans that were used to repay them) from July 1, 2026 will be required to be on a Standard Repayment Plan. This bill would also restrict the Department of Education from making Federal Direct PLUS Loans to students themselves, ending the Grad PLUS program, and includes further limitations on aggregate federal loan amounts to prevent borrowers from taking on unsustainable debt loads. 

This bill would also require institutions to reimburse the federal government for a portion of losses resulting from non-payment of federal loans if the institution has underperforming loan cohorts. 

Pell Grant Eligibility Changes

Pell Grant eligibility will be reduced for students whose parents have significant foreign income which is not currently included in the AGI definition used to determine eligibility. Students with a high Student Aid Index or who are enrolled less than half time will also be ineligible for Pell Grants. The bill will create the ‘Workforce Pell Grant Program’ which will allow students to receive Pell Grants for shorter term job training programs. 

There is still significant uncertainty as to what provisions will make it into a final budget, but we are now starting to see a more focused shortlist of education-financing targets for cost savings.