New student loan limits also add to consumer financial stress
By Charlene Crowell
On the nation’s 249th birthday, President Donald Trump signed an 870-page bill known as the One Big Beautiful Bill Act (OBBBA).
But brutal – not beautiful – would be a more apt description of the widespread harm now facing families across the country.
“This is one of the most harmful and expensive bills Congress has ever considered,” said Pennsylvania Congressman Brendan F. Boyle, Ranking Member of the House Budget Committee. “It’s morally wrong. It’s economically reckless.”
The OBBBA will add about $3.3 trillion to the national debt over the next 10 years, according to the Congressional Budget Office. Additional cuts identified by the Committee for a Responsible Federal Budget cite:
• $4.1 trillion more is added to the national debt through 2034 – more borrowing than any reconciliation bill in history;
• Social Security and Medicare insolvency is accelerated to 2032 – a year earlier than under current law; and
• The tax code is more complicated and less fair – creating new deductions, credits, and phase outs that treat similar income differently and increases the number of itemizers.
Beyond the ballooning federal deficit, key programs that consumers have come to rely upon may have survived, but will now exist in markedly different ways.
For example, OBBBA cuts in half the amount of funding the Consumer Financial Protection Bureau (CFPB) can annually receive from the Federal Reserve System. As a result, instead of the long-standing 12 percent of Fed earnings allotted for the agency’s operating expenses, now only 6.5 percent will be available, according to Thomson Reuters.
This funding slash continues the ongoing agency assault that has already seen litigation challenging CFPB plans for staffing cuts from 1,700 to only 200, the withdrawal of large lawsuits filed before the current Trump term, revoked rules earlier enacted, and a suspension of investigations.
It is difficult to understand the reasoning behind the continued CFPB assault when the agency has returned over $20 billion to 195 million financially defrauded consumers.
“While stopping a complete defunding of the Consumer Bureau was a victory and the Senate’s proposed ceiling is larger than that in the House-passed budget bill, the Senate’s big brutal bill still signals an intent by this Administration and Congress to significantly abandon the federal government’s obligation to protect consumers from harms in the financial marketplace,” noted Mike Calhoun, President of the Center for Responsible Lending (CRL). “American consumers count on the Consumer Financial Protection Bureau to protect their wallets from harm. Lowering the Bureau’s budget ceiling by nearly half suggests that many of those consumers are likely to be let down.”
Nor was CRL alone in alerting consumers to the harm wrought by OBBBA.
“Slashing vital programs that protect civil rights, consumer protections, health care, and education for working families to benefit the rich and powerful is wrong,” said Richard Dubois, executive director of the National Consumer Law Center. “The massive cuts to the Consumer Financial Protection Bureau buried in the bill further empower large corporations over people.”
Other time-sensitive financial adjustments are also confronting the more than 42 million student loan borrowers who collectively owe nearly $1.7 trillion.
Starting August 1, the 8 million borrowers who enrolled in the repayment plan, Saving on a Value Education (SAVE), which ties loan payments to borrower income, will continue to have their loan payments suspended, but the interest on these loans will begin to accrue again.
Other changes are specifically in store for 3.9 million borrowers of Parent PLUS loans. Starting July 1, 2026, three-tiered loan limits take effect for both annual borrowing and total lifetime loans. The three tiers span professional degrees – like those for physicians and lawyers, and two others for other graduate and undergraduate studies.
For undergraduate studies, Parent PLUS loans will be capped at $20,000 per year, or $65,000 total per student. The average in-state student attending a public 4-year institution and living on-campus spends $27,146 for one academic year, according to the Education Data Initiative.
Graduate student loans in this program will be slightly higher on an annual basis – $20,500; but have a larger lifetime cap of $100,000. The program’s highest loan caps will be reserved for professional schools at a rate of $50,000 per year and $200,000 total.
Additionally, two other student loan programs will be eliminated no later than June 30, 2028. Pay as You Earn (PAYE) that set a 10-year repayment limit, and Income Contingent Repayment (ICR) plan that provides a 12-year limit for consolidated loans. Borrowers enrolled in both programs will need to switch to other repayment plans with the help of loan servicers.
But getting timely assistance early enough to meet the deadline depends upon access to loan servicers. As reported by the New York Times, 1.5 million cases are already pending resolution by servicers and these must be resolved before the department handles any new requests.
Much like the CFPB, Pell Grants that support moderate and low-income college students may have survived, but new terms of access likely will reduce the amount of aid that supports four- and two-year educational studies. A last-minute change to the bill now allows unaccredited, short-term job-training programs to administer Pell Grants.
“The American people demanded lower costs, and what did they get? A brutal bill that will push millions off their healthcare, leave children to go hungry, and push dreams of a college education even further out of reach for working people across this country,” said Aissa Canchola Bañez, Policy Director for the Student Borrower Protection Center.
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.
