Posted on July 24, 2025
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Access to higher education has evolved significantly, as doors have opened to welcome students from all walks of life. Institutions that were once only available to the wealthy or elite, are now available to all genders, ethnicities, cultures, and socioeconomic statuses. Increased financial aid, perceptions about the importance of higher education, and flexibility in curriculum and technology have all contributed to increased enrollment in college and graduate school programs. However, these strides may be in jeopardy with HR1. HR1 will significantly impact students’ and families’ decisions about attending college and/or graduate school in the upcoming years. HR1 changes student loan repayment options, sets new borrowing limits, and alters federal financial aid.
- Student Loans - money borrowed that must be paid back with interest.
- Direct Subsidized Loans - a federal student loan where a borrower isn’t generally responsible for paying interest while in an in-school, grace, or deferment period.
- Direct Unsubsidized Loans - offers students a low, fixed interest rate and flexible repayment terms. It’s not based on financial need.
- Direct PLUS Loans - available to graduate students and parents of dependent undergraduate students for which the borrower is fully responsible for paying the interest regardless of the loan status.
- Repayment Options - different ways a borrower can pay back a loan or debt.
- Forbearance - allows borrowers to temporarily stop making monthly student loan payments or temporarily make smaller payments for certain situations (financial difficulties, medical expenses, change in employment, other acceptable reasons).
- Free Application for Federal Student Aid (FAFSA) - a form required to be eligible for federal student aid (i.e., federal grants, work study, loans) and must be completed every year.
- Pell Grants - a federal grant for undergraduate students with financial need, designed to assist students from low-income households.
FAFSA and Pell Grants
Starting in 2024, students and families who were completing the FAFSA were required to list certain assets (i.e., family farms, fishing enterprises, small businesses, etc.). As of July 1, 2026, these assets will no longer be part of the federal financial aid eligibility calculation, making it easier for some individuals to qualify for aid.
Another change under HR1 will greatly impact Pell Grants. The Federal Pell Grant program is the largest federal grant program available only to undergraduate students who demonstrate exceptional financial need on their FAFSA. Unlike loans, Pell Grants typically do not need to be repaid. Also, award amounts tend to change yearly–for the 2025-2026 award year, students could receive a maximum of $7,395. Under HR1, the use of Pell Grants has been expanded, allowing individuals to use their award money for non-degree programs, such as job training, at accredited institutions starting July 1, 2026. While this change expands access to the workforce for low-income students, if a school awards a student financial aid that equals or exceeds the cost of attendance, that student will not receive the Pell Grant.
New Borrowing Limits
Both graduate students and their parents will be limited in how much money they can borrow for student loans. Before HR1, students and their families could borrow up to the school’s cost of attendance, minus other financial aid received. The use of the federal Grad PLUS loan program and federal Parent PLUS loan program made college and graduate school more accessible. However, effective July 1, 2026, parents will only be able to borrow $20,000 per year, at a lifetime cap of $65,000 per student. Additionally, the Grad PLUS program will no longer accept new borrowers and will impose caps. For professional school degrees, borrowers will be limited to $50,000 per year and $200,000 total (not including undergraduate debt). For other graduate degrees, the cap will be $20,500 per year and $100,000 total, also not including undergraduate debt. For graduate student borrowers this is especially troubling as little financial aid is often available for graduate school. Taking away the Grad PLUS program makes it more difficult for graduate students to afford tuition and/or living expenses.
Student Loan Repayment Options
HR1 will streamline student loan repayment options, however, borrowers may pay more than before. Beginning on July 1, 2026, borrowers will have the choice between a “refashioned” standard repayment plan or the Repayment Assistance Plan (RAP). The standard repayment plan requires fixed payments that are made over a term of years based on the amount of the loan. The larger the loan, the longer the term; with payments ranging from 10 to 25 years. RAP is most similar to what some borrowers know as the Income-Driven Repayment (IDR) plan, tying payment amount to a borrower’s adjusted gross income. These payments will range anywhere from 1% to 10%, while previously existing IDR plans will cease to exist for new borrowers.
HR1 also eliminates the Saving on a Valuable Education (SAVE) plan, the Biden-Era repayment plan that was the most affordable option for many borrowers. Almost 8 million student loan borrowers are currently under this plan which will be defunct starting August 1, 2025. Under SAVE, payments were based on 5% of a borrower’s income. Now, with the repayment plan changes, some borrowers will not be able to afford their payments. Further, HR1 eliminates loan deferments for individuals experiencing economic hardship and unemployment and decreases how long students can be in forbearance from 12 to 9 months.
Current students and those assessing higher education affordability must stay on top of their loans and further information about how student loans will be impacted by HR1. Low-income students, and those of color especially, may see significant reductions in access to college and graduate school. While students will still have access to private loans, these loans often have much higher interest rates, reduced protection for borrowers, and sometimes require certain credit scores. One thing is for sure, borrowers will be forced to make tough choices regarding their degrees.
