House Republicans, led by Speaker Mike Johnson, are considering measures that could significantly impact student loan borrowers.
These proposals aim to offset the cost of extending tax cuts introduced during President Donald Trump’s first term. The potential changes include eliminating certain student loan repayment plans, introducing taxes on college scholarships, and increasing taxes on university endowments.
One of the key proposals involves ending income-driven repayment plans, such as the Saving on a Valuable Education (SAVE) plan. The SAVE plan allows borrowers earning less than 225% of the federal poverty line (approximately $32,800 annually for a single person) to forgo monthly payments and prevents interest from accruing as long as payments are made. Eliminating such plans could lead to an average increase of $200 per month in student loan payments for millions of borrowers, totaling an additional $127 billion over the next decade.
Another proposal under consideration is the taxation of scholarships and fellowships, which are currently tax-exempt when used for tuition and related expenses. Removing this exemption could create new financial burdens for students and families.
Additionally, the House Committee on Education and the Workforce has suggested increasing the tax on income from university endowments from the current 1.4% to 14%, potentially expanding the number of institutions affected.
Public opinion appears to be largely against these proposed changes. A recent poll indicates that a majority of voters, across party lines, oppose cuts to student loan safety nets and financial aid programs. Specifically, 60% of voters, including a majority of Republicans, oppose eliminating income-driven repayment options.