The Big Beautiful Bill: How It Impacts Students and Student Loans in the U.S.

The “Big Beautiful Bill,” officially known as the One Big Beautiful Bill Act, has emerged as a significant legislative proposal under the Trump administration, aiming to overhaul various sectors, including higher education and student loan systems. As of July 1, 2025, this bill has passed the Senate with a narrow 51-50 vote, with Vice President JD Vance casting the tie-breaking vote. For students, parents, and borrowers across the United States, including the Indian-American community served by NRI Globe, understanding the implications of this bill is crucial. This comprehensive guide explores how the Big Beautiful Bill affects students and student loans, its potential long-term consequences, and what borrowers can do to navigate the changing landscape.

What Is the Big Beautiful Bill?

The Big Beautiful Bill is a sweeping legislative package designed to address multiple policy areas, including taxes, healthcare, immigration, energy, and education. Its higher education provisions focus on reshaping federal student loan programs, Pell Grants, and other financial aid mechanisms. The bill aims to reduce federal spending and government liability, aligning with a broader agenda of fiscal responsibility and market-driven solutions. However, its proposed changes to student loans and financial aid have sparked significant debate, with critics arguing that it may disproportionately affect low- and middle-income students, including those from minority communities.

The bill passed the House in May 2025 and, after revisions, gained Senate approval on July 1, 2025. While some provisions were struck down by the Senate Parliamentarian for violating the Byrd Rule, the remaining changes are poised to transform how students finance their education and repay loans starting in 2026.

Key Changes to Student Loans Under the Big Beautiful Bill

The Big Beautiful Bill introduces several transformative changes to the federal student loan system, affecting both new and current borrowers. Below, we outline the most significant alterations:

1. Simplified Repayment Plans for New Borrowers

Starting July 1, 2026, new federal student loan borrowers will have only two repayment options, a drastic reduction from the current eight plans, such as SAVE, PAYE, IBR, and ICR:

• Standard Plan: A fixed-term repayment plan lasting 10 to 25 years, depending on the loan balance.
• Repayment Assistance Plan (RAP): A new income-based plan requiring borrowers to pay 1% to 10% of their discretionary income, with a minimum monthly payment of $10. Loan forgiveness under RAP is available only after 30 years of payments, significantly longer than the 20- or 25-year forgiveness periods in existing plans.

This simplification aims to streamline the repayment process but eliminates flexible options like the SAVE plan, which offered low or $0 payments for struggling borrowers. Critics, including Michele Zampini from The Institute for College Access & Success, argue that RAP fails to provide affordable monthly payments, potentially increasing financial strain for low-income borrowers.

2. Protection for Current Borrowers

Current borrowers enrolled in existing income-driven repayment (IDR) plans like SAVE, PAYE, IBR, or ICR received a reprieve due to the Senate Parliamentarian’s ruling. Provisions that would have forced current borrowers into the new RAP were deemed non-compliant with the Byrd Rule, requiring 60 Senate votes to pass—a threshold unlikely to be met. As a result, current borrowers can remain in their existing IDR plans, retaining benefits like income-based payment caps and forgiveness after 20 or 25 years. Borrowers with loans issued on or after July 1, 2014, transitioning to RAP can also count prior qualifying payments toward forgiveness.

3. Elimination of Public Service Loan Forgiveness (PSLF) for New Borrowers

The bill revokes the Public Service Loan Forgiveness (PSLF) program for new borrowers starting in 2026. PSLF currently allows borrowers working in public service roles, such as teachers, nurses, and government employees, to have their loans forgiven after 10 years of qualifying payments. This change could deter students from pursuing careers in public service, as the financial incentive of loan forgiveness will no longer exist. For Indian-American students considering careers in healthcare or education—fields popular among the community—this loss could significantly impact career planning.

4. Caps on Federal Student Loans

The Big Beautiful Bill imposes new borrowing limits, particularly affecting graduate students and parents:

• Graduate Student Loans: The bill eliminates Grad PLUS loans and sets a lifetime cap of $150,000 (House version) or $200,000 (Senate version) for graduate and professional school loans. These caps are not indexed to inflation, meaning their real value will decrease over time.
• Parent PLUS Loans: New caps restrict borrowing, and income-driven repayment options like Income Contingent Repayment are eliminated, pushing parents toward private loans with potentially higher interest rates and stricter terms.

These restrictions could make graduate education, such as medical or law school, less accessible for students from moderate-income families, including many in the Indian-American community who prioritize advanced degrees.

5. Elimination of Subsidized Loans and Deferment Options

The bill eliminates subsidized federal loans, which do not accrue interest while students are in school or during grace periods. This change means borrowing will become more expensive, as interest will accrue immediately. Additionally, economic hardship and unemployment deferments are discontinued, leaving only limited forbearance options capped at nine months every 24 months. These changes could exacerbate financial challenges for students facing job loss or economic difficulties.

6. Increased Reliance on Private Loans

With reduced federal loan options and stricter terms, the bill encourages private sector partnerships to manage student loans. Private loans often have higher interest rates, fewer protections, and no forgiveness options, potentially increasing the debt burden for borrowers. For parents, the loss of Parent PLUS loan benefits, such as minimal credit qualifications, further tilts the scales toward private loans, which may be harder to secure for families with limited credit history.

Impact on Pell Grants

Pell Grants, a critical lifeline for low- and middle-income students, also face changes under the Big Beautiful Bill:

• Tighter Eligibility Requirements: The House version proposed limiting Pell Grants to full-time students taking at least 15 credit hours per semester, up from 12. This could disproportionately affect community college students, many of whom attend part-time while working or caring for families. In North Carolina alone, over 203,000 students could be impacted, with community colleges facing significant challenges.
• Senate Revisions: The Senate softened these restrictions, restoring eligibility for part-time students and expanding Pell Grants to short-term job training programs (Workforce Pell). However, the maximum Pell Grant award may still be reduced by approximately $1,500, affecting students’ ability to cover tuition and living expenses.

For Indian-American students relying on Pell Grants to attend college, these changes could limit access to higher education, particularly for those balancing work and studies.

Broader Implications for Students and Families

The Big Beautiful Bill’s education reforms have far-reaching implications:

• Increased Financial Burden: Higher monthly payments under RAP, the elimination of subsidized loans, and longer forgiveness timelines could lead to a “mass wave of defaults,” according to Sabrina Calazans of the Student Debt Crisis Center. A Student Borrower Protection Center analysis estimates that borrowers could pay an additional $2,929 per year under RAP compared to the SAVE plan.
• Reduced Access to Higher Education: Caps on loans and Pell Grant restrictions may deter students from pursuing college, particularly at graduate or professional levels. This could impact fields like medicine, law, and engineering, which are popular among Indian-American students.
• Economic and Social Consequences: Cuts to financial aid could exacerbate inequality, disproportionately affecting low-income and minority communities. The Yale Budget Lab reports that the bill reduces income by 2.9% ($700 annually) for the bottom 20% of households while increasing income for wealthier households.
• Impact on Community Colleges: Part-time students, including many Indian-American students attending community colleges, may lose Pell Grant eligibility, forcing them to take on more debt or forgo education.

What Indian-American Students and Families Can Do

For the Indian-American community, navigating these changes requires proactive planning:

1. Explore Private Loan Options Carefully: If federal loans are insufficient, compare private lenders for competitive rates and terms. Look for loans with flexible repayment options and consider co-signers to secure better rates.
2. Maximize Scholarships and Grants: Apply for merit-based and need-based scholarships offered by colleges, community organizations, and Indian-American associations to reduce reliance on loans.
3. Consider Community Colleges and In-State Schools: These institutions often have lower tuition costs, making them viable options for cost-conscious students.
4. Stay Informed: Monitor updates on the Big Beautiful Bill, as implementation details may evolve. Resources like the U.S. Department of Education’s website and financial aid offices can provide guidance.
5. Advocate for Change: Engage with policymakers through community organizations to voice concerns about the bill’s impact on education access.

Conclusion

The Big Beautiful Bill represents a seismic shift in the U.S. higher education landscape, with significant implications for students and student loan borrowers. While current borrowers are largely protected, new borrowers face a future with fewer repayment options, no PSLF, and stricter loan limits. Pell Grant changes and the elimination of subsidized loans further challenge low- and middle-income students, including those in the Indian-American community. By understanding these changes and exploring alternative financing options, students and families can better navigate the evolving world of higher education funding. Stay tuned to NRI Globe for more updates on policies affecting the Indian-American community and beyond.

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