New Student Loan Caps Closer to Reality. On June 10, Sen. Bill Cassidy (R-LA), Chair of the Senate Committee on Health, Education, Labor, and Pensions, released proposed changes to federal student loan programs that would limit the amount of money students can borrow from the federal government and establish new repayment terms. The new legislation is a response to similar provisions approved last month by the House of Representatives as part of H.R. 1, the One Big Beautiful Bill Act.
Echoing the House bill, Chairman Cassidy’s proposal would eliminate the federal GradPLUS loan program, which allows borrowers to take out the full cost of attendance at their selected school, and it would set annual and lifetime federal student loan caps on available federal direct loans. Instead of relying on a House-preferred formula for yearly limits, the Cassidy bill sets a maximum $50,000 for graduate professional degrees like law with a lifetime cap of $200,000; this is higher than the $150,000 limit in the House, but the Senate level would be reduced by amounts previously borrowed towards a graduate degree.
Like the House bill, Cassidy’s plan would replace the current seven repayment options (standard, ICR, IBR, PAYE, SAVE, graduated, and alternative) with two: a new standard repayment option and a 30-year income-driven Repayment Assistance Plan (RAP). Cassidy further proposes to repeal the authority under which prior Administrations created their own income-driven repayment options. Most of these changes would not take effect until July 2026; however, enrolled students relying on GradPLUS loans would be permitted to complete their course of study.
PSLF Mostly Untouched but Indirectly Affected. As in the House, the federal Public Service Loan Forgiveness program (PSLF) is left mostly untouched except to (1) exclude from qualifying employment time spent in medical and dental residency programs, and (2) the extent to which new caps on federal borrowing pushes borrowers in the private loan market, which is ineligible for PSLF or other federal benefits and protections. The ABA has played an integral role in the national PSLF Coalition to shield the program from cuts and other unwelcome changes.
What’s Next? Republican leaders are racing against a self-imposed deadline of July 4th to get a final budget reconciliation package to the President’s desk for signature. The ambitious agenda will require reconciling material differences between the House and Senate versions of H.R. 1, most of which are unrelated to higher education, with final passage by June 30. While there is no penalty for missing this timeline, they would need to complete budget reconciliation by the end of the current fiscal year on September 30th to avoid having to start over in the FY2026 cycle.
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