Max Bocken

Associate Editor

Loyola University Chicago School of Law, JD 2027

On July 4, 2025, President Donald Trump signed into law The One Big Beautiful Bill Act (OBBBA), or what legislators and the public have deemed as the “Big Beautiful Bill.” OBBBA is a budget reconciliation bill; a bill which utilizes a special process for approval. Instead of the 60 vote supermajority usually required for a bill to pass through the Senate, this process allows for the bill to pass with a simple majority. While the process makes it significantly easier for legislation to pass through Congress, it can only be used for policies that would affect the spending and revenue of the federal government. After months of deliberation, this process allowed OBBBA to pass through the Senate with a 51-50 vote. Days later the bill passed through the House of Representatives, and the following day was signed into law by President Trump. While the president has paraded the spending and revenue bill as “arguably the most significant piece of Legislation that will ever be signed,” some have proposed that its true effects will financially harm Americans and further limit people’s ability to transcend economic classes through higher education.

Changes made to student loan options

OBBBA includes new taxing and spending policies relating to many different issues, from AI regulation funding to car loan interest deductions. However, OBBBA made one of its most significant changes to the student loan assistance offered by the federal government. Under the bill, the new borrowing limits for the various federal student loan options after July 1, 2026 are as follows:

• Unsubsidized Student Loans (loans available to undergraduate and graduate students) $20,500 annually/$100,000 lifetime.
• Parent PLUS Loan (loans parents may take out on behalf of their child enrolled in an undergraduate program) $20,000 annually/$65,000 lifetime.
• Borrowing limits for professional degrees, such as a Juris Doctor (JDs) and Medicinae Doctor (MDs), $50,000 annually/$200,000 lifetime.
• Total lifetime federal student loan borrowing limit of $257,500 (not including Parent PLUS Loans).
• Grad PLUS Loans (a loan which covered the total cost of attendance for graduate students) will no longer available.

While the bill cut many federal funding options available to undergraduate and graduate students, it conversely increased funding in other areas of lending, such as by expanding access to Federal Pell Grants. Previously, only prospective students from low-income families looking to obtain a two or four year undergraduate degree could be awarded Federal Pell Grants. Now, individuals from low-income backgrounds looking to enroll in short term workforce training programs and trade schools are eligible as well. Since these are grants, not loans, the students who receive them will not be required to repay them at a future date.

By July 1, 2028, there will only be three types of repayment plans available for federal student loan borrowers: a Standard Repayment Plan, an Income-Based Repayment Plan, and a newly created Repayment Assistance Plan.

The Standard Repayment Plan offers a borrower a fixed monthly payment not based on the individual’s income and will span over the course of 10 to 25 years, depending on the size of the outstanding loan balance.

The Income-Based Repayment Plan allows a borrower to pay an annual percentage of their after tax income spaced equally over the course of twelve months. There are two versions of the plan currently in place which differ in the after tax income you are required to pay annually and the length time required before your loan may be forgiven.

The Repayment Assistance Plan is a newly created income-driven repayment plan under the OBBBA and offers terms that are almost identical to those provided under the Income-Based Repayment Plan. However, the Repayment Assistance Plan offers a few pivotal differences. These differences include higher monthly payments, a minimum monthly payment amount, less favorable payment exclusions for individuals with dependents or who are making little to no income, and a longer repayment term before a borrower may qualify for student loan forgiveness (30 years).

OBBBA also eliminated unemployment deferment and economic hardship deferment options for all prospective students looking to take out federal student loans on or after July 1, 2027. Both deferment options allow a borrower to pause their student loan payments and, depending on the loan, the loans corresponding accruing interest during periods of financial difficulty. However, borrowers who take out student loans before July 1, 2027, will still have to access both deferment options. Borrowers which attempt to enter into either deferment option may receive up to a total of three years of deferment.

How the Big Beautiful Bill will impact students

Through the student loan policy set forth in OBBBA, the United States government has disincentivized individuals from pursuing graduate, professional, and undergraduate degrees from prestigious or out of state institutions and conversely incentivized them to pursue trade schools, work specific training programs, and more local two and four year state colleges. The average total cost to attend one academic year of a four year college in the United States is $38,270, totaling up to $153,080 after four years. With the now maximum federal student loan allowanceof $257,500 and the exorbitant price of undergraduate schooling, students will either need to look for alternative funding options or forgo attendance at these institutions and advanced programs all together. For those who still wish to pursue an expensive undergraduate degree or a professional degree, and who receive little to no scholarship from an institution, you may still be able to finance your education with less lucrative loans from a private lender. However, loans from private lenders often carry with them higher interest rates, accrue interest while the student is in school, may require an individual to make payments while they are still in school, offer no deferment or forbearance option, and typically require an individual attempting to acquire the loan to have an established credit history.

To couple with the difficulty of acquiring student loans is the growing risk associated with taking them out. While it appears that the United States government is attempting to push prospective students into pursuing essential practical career paths, which will allow them the greatest opportunity to repay their debt, it has substantially increased the risk associated with attending higher education. Students now run a greater risk of default on their student loans, and as a result, economic harm for years to come. A default on your student loans can lead to a damaged credit score, often affecting your ability to pursue large purchases such as a home, and in some cases bankruptcy which can lead to remedies such as the garnishment of your wages until the loan is repaid in full.

OBBBA has significantly reshaped the federal student loan landscape, and either incentivized the pursuance of essential practical career paths through trade school, work specific programs, or two or four year institutions, or has led future student loan borrowers pursuing higher education at a heightened risk and may be even disproportionate likelihood of economic ruin. Only time will tell.