WASHINGTON, DC – A new proposal from Senate Republicans to overhaul the federal student loan system is drawing sharp criticism from consumer advocates, who warn the legislation could trigger a massive increase in loan defaults.

Key Facts

• The Proposal – The bill would create two repayment plans for new federal borrowers after July 1, 2026: a standard plan with terms up to 25 years and an income-based plan with a 30-year forgiveness timeline.
• The Warning – The president of The Institute for College Access & Success stated the plan would make debt ‘much harder to repay’ and could unleash an ‘avalanche of student loan defaults.’
• The Context – The proposal comes as more than 5.3 million Americans are already in default on their federal student loans, with millions more at immediate risk.

The legislation, introduced by the Senate Committee on Health, Education, Labor and Pensions, aims to simplify the loan system and reduce the financial burden on taxpayers, but critics argue it could create significant financial hardship for future students.

What Would Change Under the New GOP Plan?

Under the bill, the current array of repayment options would be consolidated into just two choices for individuals taking out federal student loans after July 1, 2026.

The first option is a standard repayment plan with fixed monthly payments. The length of repayment would be tied to the loan balance, extending from 10 years for smaller loans up to 25 years for those who owe more than $100,000.

The second choice is an income-based option called the “Repayment Assistance Plan” (RAP). Monthly payments would be set between 1% and 10% of a borrower’s income, with a required minimum payment of $10. A key change in this plan is the timeline for loan forgiveness. While current income-driven plans offer forgiveness after 20 or 25 years, the RAP plan would extend this period to 30 years. The plan does include a new benefit: a $50 monthly payment reduction for each dependent.

Why Experts Predict a Surge in Defaults

The proposed changes have prompted immediate concern from borrower advocates. Sameer Gadkaree, president of The Institute for College Access & Success, said the plan would “cause widespread harm to American families” by making student debt significantly more difficult to manage.

A central issue is the potential for higher lifetime costs and longer repayment periods. An analysis from the Student Borrower Protection Center found that a typical college graduate could pay an additional $2,929 per year under the proposed RAP plan compared to the Biden administration’s now-blocked SAVE plan. Experts like higher education analyst Mark Kantrowitz have noted that many low-income borrowers would likely remain in repayment for the full 30-year term under the RAP. The combination of longer terms and potentially higher payments has led to predictions of a sharp rise in delinquencies and defaults.

A Look at the Current State of Student Loan Debt

The debate over this legislation unfolds against the backdrop of an existing student debt crisis. More than 42 million Americans collectively owe over $1.6 trillion in federal student loans.

As of spring 2025, over 5.3 million borrowers were in default, a status reached after 270 days of missed payments. Defaulting carries severe consequences, including damage to credit scores, wage garnishment, and the seizure of tax refunds. According to the Department of Education, the total number of borrowers in default could swell to around 10 million this summer as pandemic-era protections and on-ramps expire, putting a significant portion of borrowers in a precarious financial position.

What is the Stated Goal of the Legislation?

Proponents of the bill, including Senator Bill Cassidy (R-La.), the chair of the Senate education committee, argue the legislation is a matter of fairness to all taxpayers. In a statement, Sen. Cassidy said the plan would stop requiring taxpayers who did not attend college to subsidize the loan payments of those with degrees.

According to its supporters, the proposal is designed to protect taxpayers from the costs associated with widespread loan forgiveness programs. Sen. Cassidy claims the legislation would save taxpayers at least $300 billion. The bill is being advanced through the budget reconciliation process, which requires only a simple majority for passage in the Senate.