While supporters frame the changes as a shift toward fiscal responsibility that moves student loan burdens away from taxpayers and onto borrowers, some education advocates say the bill undermines access and affordability. They argue that sweeping changes cap federal lending and could threaten the incentive for private tuition assistance.
"The Biden-Harris administration spent billions on reckless student loan repayment pauses, forcing Americans who never set foot on a college campus to cover the costs of elite Ivy League degrees," Education and Workforce Committee Chairman Tim Walberg, R-MI, said in a public statement.
STUDENT LOANS: FEWER OPTIONS, STRICTER LIMITS
At the heart of the education portion of the bill is a major overhaul of federal student lending. Beginning July 1, 2026, undergraduate students will no longer be eligible for subsidized student loans, which do not accrue interest while the borrower is in school.
Graduate and professional students will lose access to the Direct PLUS loan program, which previously allowed students to borrow up to the full cost of attendance. Instead, annual and lifetime caps will apply, with a new universal ceiling of $257,000 in federal loans per borrower. According to the Education Data Initiative, the average lifetime educational debt of medical students is $264,519, a number that has steadily risen over the last 40 years.
Loan repayment options have also been cut down. Borrowers with loans dispersed after July 1, 2026, will have two choices, as opposed to the current seven. The options are a standard plan with fixed payments over 10 to 25 years, or an income-based plan called the Repayment Assistance Plan (RAP). Gone are deferments for unemployment and economic hardship, and forgiveness under RAP requires 360 qualifying payments, many more than previous income-driven plans.
Sarah Abernathy, executive director of the nonprofit Committee for Education Funding, said these changes could lead more students and parents to turn to the private loan market, where interest rates are typically higher and borrower protections are fewer.
“If people are determined to go higher education and they can’t afford to pay for it all themselves, the choices are to find an option that is cheaper or to find a way to borrow to pay for it,” she said. “They will have to go find private loans, which are generally more expensive, or they won't go to college.”
Melissa Tooley, director of educator quality at the liberal think tank New America, said the changes could impact borrowers’ ability to repay.
“Changes to student loan repayment plans will make it harder for new teachers in many states to be able to afford their monthly payments,” she said in an email. “This could result in fewer individuals entering and remaining in the teaching profession, at a time when many school districts are struggling to fill teacher vacancies with qualified candidates.”
PELL GRANTS: EXPANDED USE, CONCERN FOR GUARDRAILS
Where student loans are primarily cut, Pell Grants will see an expansion to include “workforce Pell” recipients — students enrolled in short-term training programs lasting as few as eight weeks. The programs do not need to be for credit, but students can receive credit for them if they enroll in credit-bearing ones. The short-term Pell provision aims to promote alternative education pathways to meet labor market needs.
Wesley Whistle, higher education project director at New America, said further oversight of these programs is necessary.
“Short-term Pell is a well-intentioned idea that’s often sold as a quick fix for workforce needs,” he said in an email to Government Technology. “But without strong guardrails, it risks turning into a taxpayer-funded giveaway for low-quality programs that overpromise and underdeliver.”
The promise of credit after the fact without clear agreements on how to earn it could lead to confusion for students, for example. Additionally, programs that do not improve prospects for students should be excluded from Pell eligibility, he said. In 2022, more than 2,000 programs left their graduates earning less than the average high school student.
“Those Pell students should be protected from programs that fail to leave them better off than had they not attended,” Whistle wrote in an email.
Simultaneously, the bill tightens full-time eligibility by counting foreign income and introducing a cap that disqualifies students whose Student Aid Index — a number that determines their eligibility for financial aid, derived from their Free Application for Federal Student Aid (FAFSA) — is more than twice the maximum Pell award.
PRIVATE VOUCHERS: TAX BREAK OR CHOICE?
Though the bill mostly avoids K-12 education funding policy, it includes a private school voucher provision offering parents up to $1,700 per year to offset the cost of private education, part of a push for school choice.
However, Abernathy said, the amount does little to offset the overall cost of private school, which averages $12,790 nationally.
“It is unlikely that a $1,700 discount will make a difference in families’ ability to access private schools if they are not enrolled or already financially able to do so,” Zahava Stadler, project director at New America’s Education Funding Equity Initiative, said in an email to Government Technology.
Additionally, in a move that could portend what's to come, private schools in Iowa recently raised tuition following the passage of a voucher program in that state.
