Student Success and Taxpayer Savings Plan: Reforming Higher Education or Restricting Access?
The Student Success and Taxpayer Savings Plan, a comprehensive proposal to reform higher education, has sparked intense debate. Lawmakers and advocates on both sides disagree on whether it will address the student debt crisis and hold colleges accountable or make college inaccessible for many. This article examines the key provisions of the plan, its potential impact on students and institutions, and the political landscape surrounding its passage.
Overview of the Plan
The 103-page bill, is a key component of House Republicans' strategy for reconciliation, a legislative procedure intended to fund priorities such as tax cuts and immigration enforcement. The House aims to cut $1.5 trillion, while the Senate aims for $4 billion. The House Committee on Education and the Workforce has been directed to cut $330 billion, while the Senate Health, Education, Labor and Pensions Committee has been instructed to cut $1 billion. Both chambers must agree on the specifics to enact the plan into law.
The legislation's proposals generally focus on increasing accountability measures, consolidating income-driven repayment plans, and reducing other loan options.
Key Provisions and Potential Impacts
Loan Program Changes
- Elimination of Subsidized Loans: Starting July 1, 2026, subsidized loans for future borrowers would be eliminated. These need-based loans do not accrue interest while the borrower is in college and offer a six-month grace period after graduation. All borrowers, regardless of income, would only be able to take out unsubsidized loans, which lack these benefits.
- Graduate Student Loans: The plan scrutinizes graduate student debt, which accounts for nearly half of the $1.7 trillion student loan portfolio. Lawmakers argue that not all graduate programs yield sufficient returns and that the Grad PLUS program has inflated college costs. The Grad PLUS program allows students to borrow up to the cost of attendance, while Parent PLUS loans allow parents to finance their dependents' education. These loans are currently uncapped and have higher interest rates than standard direct loans.
- Loan Borrowing Limits: The plan sets loan borrowing limits to $50,000 for undergraduate students, $100,000 for graduate students, and $150,000 for students in graduate professional programs. Critics argue that these thresholds will restrict students’ ability to pursue studies at the institution of their choice.
- Pell Grant Eligibility Changes: The legislation would alter Pell Grant eligibility requirements, potentially reducing or eliminating funding for about two-thirds of current Pell Grant recipients. The bill proposes changing the definition of "full time" enrollment from 24 to 30 credits per year (or 12 to 15 credits per semester) and eliminating Pell Grants for students enrolled less than half time. Only an estimated 36 percent of undergraduate Pell Grant recipients attempt 30 or more credits in one academic year. As a result, a significant portion of Pell Grant recipients would have their award amount prorated or lose their Pell Grants entirely. The legislation also allocates more funding to the program to cover an expected shortfall and opens the grant to short-term programs while cutting off access for students enrolled in fewer than six credit hours, with exemptions for students in workforce programs.
Income-Driven Repayment Plan Consolidation
The proposed plan would consolidate four existing income-driven repayment plans into one. Borrowers would have their interest waived if their monthly payment is insufficient to cover what's owed and the accrued interest. Remaining balances would be forgiven after 30 years of qualifying payments.
The House reconciliation bill allows current borrowers to retain access to their existing fixed payment plans but eliminates all income-driven plans created under the income-contingent authority (the Income Contingent Repayment (ICR) plan, Pay As You Earn (PAYE) plan, and the SAVE plan). It then amends income-based repayment to create a single IBR plan. The Department of Education is directed to place borrowers currently enrolled in any income-driven plan into Amended IBR within nine months of the passage of the bill, meaning that, at least temporarily, Amended IBR will be the sole income-driven option for current borrowers. Amended IBR would raise monthly payments for many borrowers currently in an income-driven plan by 50% or more. Amended IBR sets the percentage of discretionary income that borrowers owe to 15%, which is at least 50% higher than the 5-10% currently charged in a number of current plans. It also sets the number of years of payments required before forgiveness to 20 for those with undergraduate loans and 25 for those with at least one loan from a graduate program, which adds 5 years of required payments for many borrowers (and more for some borrowers enrolled in SAVE). Finally, Amended IBR eliminates the Standard plan payment cap-a provision that limits monthly payments on several current plans to what borrowers would owe on the Standard plan. This means that, for those at the higher ends of the income distribution, payments might grow by more than 50%.
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Borrowers with loans made or consolidated on or after July 1, 2026 will only have access to two repayment options, both newly-established under the Student Success and Taxpayer Savings Plan. The first plan is a tiered, standard plan with fixed payments. On the Tiered Standard plan, borrowers make fixed payments over 10-25 years, depending on their total outstanding principal balance.
The second option available to future borrowers is an income-driven repayment plan called the Repayment Assistance Plan. There are a number of elements in this plan that are different from or do not exist in the currently available suite of income-driven plans, and many of them result in higher payments for the lowest-income borrowers. RAP would forgive remaining balances after 30 years of payments for all borrowers-5-10 years longer than existing income-driven plans (and even longer for some lower-balance borrowers enrolled in SAVE). Borrowers would pay a percentage of their adjusted gross income based on the level of that income. RAP has a minimum monthly payment of $10 for all borrowers, which would be a major shift in how income-driven plans work, and there are a host of dynamics that policymakers should consider.
Institutional Accountability Measures
The proposed measures to hold colleges accountable are among the most potentially disruptive changes. The House plan would require colleges to pay the government a portion of students’ unpaid loans.
The House Republicans’ language is almost identical to text introduced last summer in the College Cost Reduction Act (CCRA), a comprehensive higher education bill that included a complex risk-sharing framework for higher education. The proposal requires colleges to pay a percentage of unpaid debt, referred to as a non-repayment balance, that factors in graduates’ earnings relative to the price they pay for college. Using an earnings-to-price ratio for completers and a non-completion rate for non-completers, the bill establishes a percentage of the non-repayment balance that an institution is required to repay.
One key element of the policy that hasn’t received enough scrutiny is the duration for which institutions would be required to make risk-sharing payments for each cohort of students. Under the bill, institutions would owe a payment every year until there is no longer a non-repayment balance for that cohort. Under the bill, the income-driven repayment plan available for new borrowers would extend the window to pay back their loans up to 30 years. That means institutions could be making risk-sharing payments for borrowers decades after they’ve graduated.
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The bill would recalculate the non-repayment balance of loans annually, as loan payments change year to year. But it would not recalculate the earnings-to-price ratio each year, which is used to determine the percentage of the non-repayment balance that institutions would be required to pay. That metric remains static based on data one year after leaving college.
Under the House Republicans’ risk-sharing bill, colleges can continue to operate low-quality, high-debt programs year after year-even if those programs consistently fail students. So long as the institution is willing to pay a penalty, it can keep enrolling new students. In a bizarre twist, the policy could actually reward schools with the worst outcomes. Under the bill, institutions would owe payments as a portion of the unpaid loans-but the bill’s calculation excludes loans that are in default.
If a low-quality program opts out of federal student loans to avoid risk-sharing payments, it could still remain eligible for federal Pell Grants, which benefit low- and moderate-income students. Pell recipients could still enroll in these low-performing programs that lead to subpar earnings - but with no real accountability.
Political Landscape and Challenges
The House Committee on Education and the Workforce has already marked up the legislation. However, significant political hurdles remain. As one lobbyist noted, "There's still a lot of political gamesmanship going on," and both chambers have a long way to go before reaching a compromise and passing identical bills.
The Senate HELP Committee has not yet released its plan. While the House favors risk-sharing, the Senate is expected to support a measure that judges programs by their students’ employment rates and income levels after graduation, based on legislation introduced by Sen. Bill Cassidy.
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Arguments For and Against the Plan
Supporters of the plan argue that it is necessary to address the student debt crisis and hold colleges accountable for student outcomes. They believe that colleges have benefited from taxpayer dollars without sufficient accountability and that the proposed changes will incentivize institutions to improve program quality and student success. Secretary Scott Bessent stated that Trump Accounts collapse the distinction between earners and owners by making everyone an owner-all while keeping ownership private.
Opponents, including student advocates and higher education lobbyists, fear that the plan will restrict college access, particularly for low-income and underrepresented students. They argue that eliminating subsidized loans, capping loans, and changing Pell Grant eligibility requirements will make it more difficult for students to afford college. They also raise concerns about the complexity and potential unintended consequences of the risk-sharing proposal.
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