House Republican Plan Would Spike Student Loan Payments and Sentence Many to a Lifetime of Debt

In January 2024, Rep. Virginia Foxx (R-NC), then-Chair of the House Committee on Education and Workforce, introduced the College Cost Reduction Act (H.R.6951). The bill proposed a significant overhaul of the federal government’s role in higher education. It would make student loan repayment more expensive for millions of borrowers, limit access to federal student loans, and roll back regulations intended to hold institutions accountable for how well they serve students.  

Notably for the more than 42 million Americans who hold federal student loan debt, the proposal would replace existing income-driven repayment (IDR) plans with a single plan that would increase payments for most borrowers and remove existing safeguards that protect borrowers from carrying debt for more than 25 years.  

In 2024, we published a preliminary analysis of the plan, which showed how three example borrowers would fare compared to the SAVE Plan. Our analysis showed that monthly payments for our example borrowers would be significantly higher under the House Republican plan. For some borrowers, that means that while they would be required to retire their debt more quickly, it would be at the cost of potentially unaffordable monthly payments. Removing borrowers’ ability to access a truly affordable monthly payment will likely cause a spike in loan defaults. 

In light of reports that the proposal is being considered for inclusion in a reconciliation package, we conducted further analyses to show how the plan would cause financial harm for millions of low- and moderate-income borrowers. 

Monthly Payments Increase for All Borrowers 

For the average borrower, the House Republican proposal would increase monthly student loan payments by almost $200. A borrower with average income for a recent bachelor’s degree graduate would see payments increase by $193 per month.  

Borrowers Would Be Forced to Choose Between Making Student Loan Payments and Meeting Basic Needs 

For low-income borrowers, the House Republican proposal requires monthly payments at a lower income threshold, thereby protecting less income for basic needs. A borrower with a $30,000 annual income (less than $700 monthly discretionary income) will need to pay $54 per month or fall into delinquency. 

Under the House Republican proposal, borrowers at this income level would be forced to choose between making student loan payments and covering housing, food, childcare, transportation, and medical costs, putting them at high risk of delinquency and default. 

Low-Income Borrowers Could Be in Debt Until They Die 

For borrowers whose incomes are persistently below 150% of the federal poverty level ($23,475 for a single person), the House Republican proposal is a lifetime sentence of student loan debt. While this borrower could stay in the plan with a $0 monthly payment, they would not receive the plan’s interest subsidies, and their balance would balloon. Because the plan includes no “light at the end of the tunnel”—even after decades of payments—this borrower could be in debt for life.

House Republican Proposal Departs from Widely Agreed-Upon, Bipartisan IDR Design Principles 

Under our current system of financing higher education—where millions of students face an “affordability gap” between college costs and available aid—the federal student loan program serves as a critical access tool. Without it, millions of students could not afford to enroll in college.  

The income-driven repayment (IDR) system was created in the early 1990s in response to a growing problem: too many federal student loan borrowers couldn’t afford their monthly payments under “standard” loan repayment plans. This meant many borrowers faced a monthly choice between making their student loan payment and paying other bills to cover their basic needs. Many such borrowers could not keep up and their loans went into default, which comes with severe consequences and is difficult to resolve. 

That’s where IDR plans came in: they adjust a borrower’s monthly payment by their income and family size to enable borrowers to stay current on their loans and avoid the devastation of default—even in times of financial hardship. Borrowers enrolled in an IDR plan default at much lower rates than those in non-IDR plans. There are currently more than 13 million borrowers enrolled in an IDR plan. 

Because lower income-based monthly payments can extend a borrower’s repayment term, IDR plans also provide a key protection: a light at the end of the tunnel. Instead of requiring borrowers to remain in the repayment system indefinitely, IDR plans discharge any debt that remains after a set number of income-based monthly payments (a maximum of 25 years’ worth, depending on the plan). Without a discharge provision, many persistently low-income borrowers would be stuck in the repayment system indefinitely without hope of ever repaying their debt.  

These two components—a more affordable monthly payment that adjusts based on income and family size, paired with a light at the end of the tunnel after a certain number of monthly payments—have been accepted as core tenets of IDR design for more than three decades and are reflected clearly in multiple instances of statute. The House Republican proposal radically departs from this approach and could leave many borrowers to face a lifetime debt sentence. This would most acutely harm low-income borrowers whose payments may never be enough to catch up with their debt.   

The House Republican plan also takes the regressive approach of treating lower-income borrowers more punitively than higher-income borrowers. Unlike other IDR plans, it would require a borrower whose income is so low that their monthly payment amount is $0 to make at least a $1 payment each month to keep their balance from ballooning. These borrowers would need to perfectly navigate the repayment system to make this $1 payment—and count on no processing delays or other servicing issues—or lose out on the touted benefits of the plan and watch their balance grow.  

Research shows that staying enrolled in an IDR plan is not as simple as it might sound. Whether intended or not, this provision would target the most vulnerable borrowers, who will have the most difficulty accessing the benefits of the plan. 

Notes

The effects of IDR design changes are challenging to model. A borrower’s experience with repayment in an IDR plan—how much they pay per month, whether their balance is in negative amortization, and how long they remain in repayment—is determined by the intersection of a complex formula with a borrower’s personal (family size) and financial (income) trajectories over time. 

To forecast total payments, total subsidies, monthly payment ranges, interest charged, and amount of debt forgiven across variations in IDR plan design, we crafted borrower examples based on assumptions about the following: amount of debt owed; interest rate; loan type (subsidized vs. unsubsidized, graduate vs. undergraduate); initial income when repayment begins; income growth over repayment period; employment status (e.g., years employed, part- vs. full-time); and family size over repayment period. Other factors that we integrated (where external data allowed) include level of degree earned, degree completion status, occupation, and race/ethnicity. 

We assume a 2.4% discount rate for Net Present Value (NPV) calculations based on CPI-U projections from the Bureau of Labor Statistics, and we assume 4% yearly income growth, also based on data from Bureau of Labor Statistics. Calculations that involve federal poverty levels are based on Department of Health and Human Services Poverty Guidelines for 2025. We use a variety of federal data sources to create borrower profiles’ initial earnings and original balances, and we assume 4.21% interest on undergraduate subsidized and unsubsidized loans and 5.76% on graduate unsubsidized loans. 

Borrower profiles are compiled using data from external sources as well as prior calculations from TICAS. Data sources may vary across borrower profiles; to remain consistent with our February 2023 analysis of the SAVE repayment plan, this analysis does not necessarily use the most recent of these data sources. Incomes included in borrower profile examples are AGIs reported in current U.S. dollars. 

All loan repayment amounts are calculated by TICAS and are rounded to the nearest $1. Comparisons to “Current Monthly Payment” are estimated payments under the SAVE plan.   

Initial incomes, original balances, and family sizes for the borrowers profiled above are as follows: 

1. $58,000 initial annual income, $30,000 original balance, family size of one 

1. $30,000 initial annual income, $8,000 original balance, family size of one (Note: This borrower is below 225% of the federal poverty level and would not be required to make a payment under SAVE, but is required to make a payment under the House Republican proposal.) 

1. $21,000 initial annual income, $16,000 original balance, family size of two (Note: This borrower is below 150% of the federal poverty level.)