Winners And Losers In The New Student Loan Bill

• The Big Beautiful Bill proposes sweeping changes to student loans, Pell Grants, tax benefits, and education savings, affecting future borrowers, families, schools, and the economy.
• Most changes would apply to new loans issued after July 1, 2026, including the elimination of Parent PLUS loans, new borrowing caps, and a complex new repayment system.
• Winners include trade school students and some high earners using Trump/MAGA accounts, while many middle and low income families, and colleges with large endowments may face setbacks.

The “Big Beautiful Bill”, a sweeping education and tax proposal moving through Congress, could reshape how Americans pay for college, repay student loans, and save for the future.

While pitched as a major reform effort, the bill has winners and losers, with some groups likely to benefit and others likely to face higher costs or face new restrictions.

We analyze the bill’s effects by identifying winners and losers based on projected financial outcomes across short-term (next three to five years), medium-term (five to ten years), and long-term (beyond a decade) horizons. We focused primarily on financial impacts for individuals and secondarily on broader institutional and economic effects (which are harder to predict).

The bill’s biggest winners appear to be low-income students entering trade school and for individuals who benefit from the elimination of negative amortization on the new student loan Repayment Assistance Plan (RAP).

Meanwhile, middle and high income families paying for college could be facing capped access to loans and financial aid. Graduate students, especially those going into medicine or law, could find themselves unable to pay for school, potentially exacerbating the doctor shortage we’re facing.

Colleges could face new taxes, while the broader economy may experience mixed effects as higher education affordability changes.

Families Paying For College		Less federal loan access, higher upfront bills, limited subsidies
		Low earners have some benefit, others face higher long-term costs
		New Workforce Pell Grants open up more funding
		Endowment tax increases, PLUS loan cuts reduce revenue certainty
		Encourages repayment discipline, but potentially harms workforce and spending

Student Loan Borrowers

Winners: Borrowers earning under $80,000 with dependent children see lower monthly payments under the new Repayment Assistance Plan (RAP) than under the current Income-Based Repayment (IBR) plan. These borrowers could pay as little as $10 per month, with no risk of their balance growing due to unpaid interest. The $50 subsidy will also help lower income borrowers make progress on their loan balance.

Losers: Borrowers making over $90,000 per year will likely face higher payments under RAP than they would have under IBR.

Why: Most current borrowers would experience higher monthly payments and longer repayment. The bill repeals President Biden’s SAVE plan and other income-driven plans (ICR and PAYE), funneling borrowers into a amended IBR plan that increases payments for most.

Even for borrowers who are low income, many currently have $0 payments, and would be asked to make $10 per month payments under the new RAP plan. While $10 may not seem like much, it’s a change. But the lack of negative amortization and the principal subsidy are helpful for this subset of borrowers.

In the long run, the burden of student debt for borrowers is heavier under this bill. For many low-income borrowers, what would have been a 20 to 25 year path to forgiveness under existing IDR stretches to 30 years, meaning an extra decade of payments before any remaining balance is forgiven. It’s important to note that some on social media are calling the RAP plan the “TRAP”, since once you’re enrolled in RAP you cannot switch out (at least under the current proposal). 

Carrying debt for longer can delay life milestones (home purchases or retirement savings) and adds financial stress. Importantly, because RAP erases unpaid interest and even knocks off a small portion of principal for those with very low payments, some low-income borrowers will ultimately pay a bit less in total out-of-pocket than they would have under prior plans, but they trade that for 10 additional years in debt.

By 10 years out, virtually all borrowers who entered repayment before 2026 will have received forgiveness or paid off their loans (since the last cohort of pre-2026 undergraduates would hit 20 year forgiveness by mid-2040s). In contrast, those who borrowed after 2026 could still be repaying into the 2050s.

Fewer of these borrowers will ever see loan forgiveness at all: the combination of higher required payments for many and a 30-year term means a larger share will repay their loans in full before hitting the time limit.

The only clear “winners” among borrowers long-term are those with very high incomes and graduate debt – this group will pay off faster (avoiding some interest) due to the removal of the payment cap on IBR and the higher percentage they must pay, but these individuals were least in need of relief.

Overall, most borrowers are disadvantaged by larger cumulative repayment amounts and prolonged indebtedness, while the new benefit (preventing negative amortization) helps stability of balances but not the total dollars out of borrowers’ pockets.

RAP vs IBR: Income-Based Comparison

Here is a more specific breakdown of how RAP would compare with amended IBR. Remember, under RAP, your monthly payment will be based on your Adjusted Gross Income (AGI), with some calculations:

• AGI ≤ $10,000: $120 
• $10,001–$20,000: 1% of AGI
• $20,001–$30,000: 2% of AGI
• $30,001–$40,000: 3% of AGI
• $40,001–$50,000: 4% of AGI
• $50,001–$60,000: 5% of AGI
• $60,001–$70,000: 6% of AGI
• $70,001–$80,000: 7% of AGI
• $80,001–$90,000: 8% of AGI
• $90,001–$100,000: 9% of AGI
• AGI > $100,000: 10% of AGI

A single borrower with $25,000 in income and two dependent children would pay $10/month under RAP, compared to around $0/month under IBR.

The crossover point where IBR becomes cheaper occurs around $95,000 in annual income for a single borrower with no children. For married borrowers with two children, RAP is more affordable until the household income approaches $130,000.

While RAP’s tiered percentage approach benefits lower-income households more explicitly, the $10 minimum may be more than borrowers pay today ($0). And the 10% of AGI over $100,000 really hits high earners more than the current discretionary income calculation. 

As the bill progresses, the real winners and losers will become more visible. But if current provisions hold, the next generation of college students and borrowers will face a very different financial future.

Families Paying For College

Winners: Undergraduates may fare better paying for college under the new loan terms. Since the current undergraduate borrowing limits are restricted, the new caps may be higher for many borrowers. 

Losers: Families who rely on Parent PLUS Loans or need more than $50,000 in undergraduate loans may have fewer affordable options. Graduate students face a cap of $150,000 in total, which is lower than the average cost of many graduate programs (for example, medical school averages $200,000). 

Why: Middle- and low-income families see higher out-of-pocket costs almost immediately. The bill tightens Pell Grant eligibility, requiring 30 credits per year for full awards and excluding less-than-half-time students, which reduces or eliminates grants for over 4 million students, predominantly from families earning under $40,000 annually.

Many families will need to cover these lost grants or take on private student loans, as the bill also caps federal undergraduate loans at the median program cost (a complex formula not previously used) and imposes a rigid $50,000 total cap.

In the short run this means thousands of dollars more in costs per student (e.g. an undergraduate borrower could ~$2,873 in additional interest due to subsidized loan changes in their 4 years of college). Overall, families are disadvantaged in the near term, paying more for college as federal aid is curtailed.

With the proposed federal student loan caps (and Parent PLUS loans limited to $50k total per parent), many will turn to private lenders or choose different options for colleges. 

Half of all programs cost more than the median cap (hence median), meaning families in those programs must secure private financing or change schools. Even if schools lower costs, since the metric relies on the median – this 50% figure will always be true.

Some families without good credit will simply be priced out of college, a clear disadvantage. A small subset of families may benefit if colleges respond by curbing tuition growth (due to limited loan funding), but any such relief would likely lag years behind. Overall, most families will pay more or fewer kids will go to college in this medium term.

In the long run, the policy may slightly temper tuition inflation by removing the unlimited federal loan “fuel” for price hikes. This could eventually benefit future families through slower college cost growth. However, reduced investment in Pell Grants means the affordability gap persists or widens for low- and middle-income families. And there will likely be more private student loan borrowing all around.

Trade School Students

Winners: Workforce Pell Grants expand access to short-term, credentialed programs that were previously ineligible. Students pursuing targeted workforce programs now have financial support similar to degree-seekers.

Losers: If programs fail to meet federal eligibility standards or students attend schools with low success metrics, they may not qualify. These guardrails could limit school and program choice.

Why: Prospective trade and career training students see new financial aid opportunities. The bill opens Pell Grant eligibility to very short-term programs (workforce training programs below the usual length threshold). 

In the immediate term, this is a financial benefit for individuals who might pursue certificate programs or trade school: they can receive grant aid (free money) for programs that previously weren’t Pell-eligible.

For example, a student enrolling in a 8-week IT certificate could now use Pell funds instead of paying out-of-pocket or having to take student loans. However, there’s a caveat: many of these newly-eligible programs may be offered by for-profit colleges or private companies that may have historically have had poor outcomes, potentially leaving students with “worthless certificates” and low wages.

In the short run, though, the ability to access federal aid for career training is a positive financial opportunity for these individuals, especially if they choose reputable programs.

In the long run, the value of the credential obtained will determine if these individuals are better off. Ideally, expanding Pell to short programs could create a more skilled workforce in trades and technical fields, raising individuals’ earning power and yielding a good return on the grant investment.

Those who successfully launch careers from short-term training will have little to no student debt (since Pell covered much of their tuition) and a decade of earnings under their belt. However, if large numbers attend subpar programs, we may see many individuals with minimal wage growth and potentially unsecured personal loan debt (from financing living expenses or non-covered costs). 

Colleges And Universities

Winners: Public institutions and smaller private schools not subject to the new tiered endowment taxes avoid financial penalties. Schools with lower tuition costs may benefit from increased demand.

Losers: Elite institutions with large endowments and high international enrollment face taxes up to 21% on investment income. These schools could cut financial aid or defer infrastructure upgrades in response.

Why: Traditional colleges face a decline in federal student aid inflows, which may strain their finances. The reduction in Pell Grant availability (due to stricter credit/hour requirements and eligibility cuts) means less grant money for students to pay tuition, especially at community colleges where many enroll part-time .

Fewer subsidized loan dollars (thanks to changes to student loans and potentially lower loan limits) also translate to reduced tuition revenue in the near term.

Colleges serving large numbers of low-income and working students (community colleges, regional public universities) are disadvantaged immediately, as more students struggle to cobble together funds for enrollment.

On the other hand, certain institutions could see a short-term boost: for-profit career colleges and unaccredited training programs might gain enrollment now that their trade and vocational programs qualify for Pell grants. This could divert students (and tuition revenue) away from community colleges toward those private programs.

Overall, within a few years many nonprofit colleges may be financially worse off, contending with lower enrollments or greater tuition discounting to cover students’ aid gaps, whereas some for-profit and non-traditional providers see a temporary windfall from new Pell-funded enrollments.

In the medium term, colleges will adapt to the new funding landscape. Enrollment patterns may shift significantly. Expensive private universities and graduate programs could see fewer middle-class students, as federal loan caps limit what families can finance. These institutions might respond by increasing institutional scholarships or limiting tuition hikes, but some will likely enroll fewer students (and lose revenue) because many families can no longer borrow unlimited amounts or rely on Grad PLUS loans to cover high costs. 

We could see a situation where only wealthy students (who don’t need loans) attend high-cost colleges, forcing those colleges to downsize or seek other revenue. Meanwhile, public and lower-cost colleges might experience increased demand (students shifting to schools within the federal loan limits), which could stabilize or even slightly boost enrollment at those institutions. 

For-profit trade schools will likely peak in this period, many new entrants fueled by Pell grants, but if their student outcomes are poor (e.g. high dropouts or defaults), they may face regulatory pushback by the end of the decade. 

By 5 to 10 years out, the higher ed sector sees financial winners and losers: lower-cost and high-value colleges could benefit from students “trading down” to affordable options, while high-priced colleges and low-quality programs are financially squeezed. The net effect is a possible contraction of college access, with institutions overall enrolling less low-income students.

Over a decade or more, some colleges may close or consolidate due to sustained enrollment declines (especially small private colleges that traditionally relied on easy federal loan money to fund tuition). This has already been a trend that may grow in the coming years. The sector may become leaner, with only institutions that can justify their cost (through outcomes or generous aid) surviving. 

Research universities could suffer from reduced graduate enrollment if caps on Grad PLUS ($150 lifetime per the bill’s provisions) deter students from pursuing expensive professional degrees, which in turn can diminish research output and innovation (a negative for the economy).

The Broader Economy

Winners: Expanded workforce participation from students entering credential programs and reduced default risk from student loan repayment may boost some economic productivity, especially in needed areas. New child savings accounts could encourage long-term financial planning.

Losers: Restrictions on borrowing and financial aid for middle-income families may reduce educational attainment in the short and medium term. Loss of access to subsidized loans could increase short-term strain on family budgets. There could be a big downside to innovation and highly skilled workers due to caps on graduate school loans.

Why: The bill’s impact on the economy is mixed, with many signs pointing to negative. 

On one hand, it is part of a broader package that reduces federal spending on student aid and loan forgiveness, which decreases the federal deficit. For example, canceling the SAVE plan and capping grants will save the government billions. 

However, those savings correspond to higher costs for households, which can dampen economic activity. Millions of borrowers resuming or increasing student loan payments means billions less in consumer spending. One analysis found the proposal would extract about $41.5 billion in payments in the first year from borrowers who would otherwise pay less under current policy .

That reduction in disposable income is economically contractionary in the short run, potentially slowing growth slightly as people cut back on purchases to repay their loans.

There is no substantial offsetting stimulus in the bill (aside from potential tax cuts elsewhere), so net-net the short-term economy likely sees a slight negative impact due to reduced consumer spending and higher household debt loads. 

In the medium term, workforce and consumer behavior will begin to adapt to the policy changes. With fewer people attaining four-year degrees (and more opting for short-term credentials or no postsecondary education at all due to cost barriers), the labor force could tilt more toward lower-skill jobs.

This may lead to slightly lower growth than would occur with a more highly educated workforce, potentially dampening GDP growth over time. Household finances for many young adults will be strained: those who did borrow for college will be carrying debt for longer periods, which can delay things like homeownership.  

Overall, the medium-term economic impact skews negative: modestly lower human capital growth, higher household debt servicing, and thus less consumption. Any deficit reduction from the education side of the bill could be offset by the bill’s inclusion of tax credits, which primarily benefit higher-income groups.

Long term, the education financing changes could have significant societal and economic implications. A positive scenario is that college costs stabilize and more students pursue cost-effective education paths, leading to a workforce efficiently trained without excessive debt. 

In this scenario, the economy benefits from lower debt overhead on young workers and potentially less government spending on bailouts or forgiveness. 

However, the more likely outcome of these provisions is increased inequality and slower growth. By placing higher financial barriers to four-year degrees (and even higher barriers on graduate degrees), the policy may result in fewer low and middle income individuals attaining high-paying professional jobs, concentrating those opportunities to those who’s families were already well-off. 

This reduced socioeconomic mobility can have a long-term growth cost, as talent that might have led to innovations or filled high-skill jobs goes underdeveloped. Moreover, a large cohort of borrowers will still be paying off student loans well into middle age under the 30-year plan, which means a persistent drag on their consumer spending and wealth accumulation. 

Default rates on private student loans could rise in the long run, posing risks to financial markets or requiring intervention if they reach high levels. Remember, the federal student loan portfolio has consistently hovered around 7-10% delinquent or default, which may be too high for private markets.

From a fiscal perspective, the government’s liabilities might be lower (less loan forgiveness paid out), but if the trade-off is a less educated workforce, the tax base could grow more slowly.

I see the long-term effect on the U.S. economy as predominantly negative: the policy may marginally reduce public debt but at the cost of human capital growth and higher private debt burdens, which are crucial factors for sustainable long-term economic growth.

Final Thoughts

Families Paying For College	❌ Higher costs due to end of subsidized loans, loss of PLUS Loans	❌ Private loan growth, with caps on Parent PLUS and Grad School	❌ Higher long-term loan burden for middle-income families
	⚠️ Confusing plan rollout, PSLF still available	⚠️ Lower payments for some, higher payments for others	❌ Long repayment timeline for all, esp. high earners
	✅ Workforce Pell helps pay costs	✅ Less debt and filling gaps in workforce	✅ Better career ROI with no loan growth
	❌ Loss of PLUS = less tuition revenue	❌ Higher endowment tax affects aid offers	❌ Institutional risk increases with funding caps
	⚠️ Neutral, with offsetting gains from new trade labor, and losses from skilled labor	⚠️ Government savings may be offset by lower consumer spending	⚠️ Potential labor market distortions from restricted grad borrowing

Taken together, the bill shifts the financial burden of higher education more heavily onto students and families, especially those with moderate to high incomes.

Families paying for college will face stricter borrowing limits and fewer federal student loan options, while wealthier families may benefit from expanded tax-advantaged savings vehicles, like changes to qualified 529 plan expenses. 

Low-income borrowers may gain a little in the short term from the new Repayment Assistance Plan, which offers low monthly payments and avoids loan balance growth. However, the complexity of the plan and the removal of some deferments may create confusion and risk long-term hardship for some. 

Colleges, especially elite private institutions with large endowments, will see higher taxes and tighter scrutiny, likely passing costs to students.

The overall economic impact is mixed: while the bill encourages cost control and workforce alignment, it also risks reducing access to education and increasing reliance on private debt.

For families, it’s a tougher road. For the economy, the outcome is uncertain, but could be more negative than some expect.

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