Republican lawmakers want to overhaul student loans. Here’s what to know.

The Republican lawmakers recently introduced a proposal to revamp the student loan system in the United States, which includes the elimination of the popular Saving on a Valuable Education (SAVE) repayment plan. This plan, introduced in 2023 by the Biden administration, has helped more than 8 million borrowers manage their loan payments based on their income.

According to the House Committee on Education and the Workforce, the proposed changes could save over $330 billion. The aim of this proposal is to address the rising costs of college education and streamline the repayment process for student borrowers. However, critics argue that the new plan could result in higher costs for borrowers, with some estimates suggesting an increase of almost $3,000 per year for the typical borrower with a bachelor’s degree.

One of the major changes in the Republican proposal is the replacement of existing income-driven repayment plans with a single “repayment assistance plan.” This new plan would calculate monthly payments based on a borrower’s adjusted gross income, ranging from 1% to 10% of that amount. Borrowers would be required to repay their loans for a maximum of 30 years, compared to the 10-year forgiveness period under the SAVE plan.

Additionally, the GOP plan would introduce a “standard repayment plan” that allows borrowers to repay their loans with a fixed monthly payment over 10 to 25 years, depending on the amount borrowed. The proposal also includes changes to the Pell grant program, such as new eligibility criteria and asset limits for low-income families.

Furthermore, the Republican plan would eliminate Grad PLUS loans for graduate and professional students, as well as subsidized loans for undergraduates. Undergrad students would be required to take out their maximum loan amount before their parents could apply for a Parent PLUS loan. The total amount for Parent PLUS loans would be capped at $50,000 under the new proposal.

As the Republican proposal progresses through the legislative process, it may undergo modifications based on feedback and negotiations. These changes could have significant implications for student borrowers and their families, as well as the overall landscape of higher education financing in the country. It is essential for stakeholders to closely monitor the developments and understand how these changes could impact their financial obligations and future educational pursuits.