In a significant development for higher education policy, House Republicans have unveiled a sweeping proposal to reform student loans and financial aid through the federal budget reconciliation process. This effort, which complements President Trump’s recent executive order on accreditation reform, signals a renewed push to rethink how the federal government supports students and holds institutions accountable for outcomes. These changes are long overdue.

What makes this proposal especially notable is the legislative pathway being used to advance it. Because it is being considered through the budget reconciliation process, it can pass the Senate with a simple majority, avoiding the 60-vote threshold required to overcome a filibuster. This means Republicans could enact these reforms without Democratic support, provided the entire caucus is unified. However, for the proposal to move forward, the Senate parliamentarian must rule that all provisions meet the requirements for inclusion under reconciliation rules—namely, that each change has a direct impact on federal spending or revenue.

The proposal includes a number of substantive changes. It would eliminate subsidized undergraduate loans (leaving in place unsubsidized loans) and the Grad PLUS loan program for new borrowers beginning in 2026. It introduces lifetime borrowing caps—$50,000 for undergraduate students and $100,000 for graduate students—and consolidates existing income-driven repayment plans into a single, streamlined “Repayment Assistance Plan.” This plan would cancel outstanding debt after 360 qualifying payments, providing clarity and consistency for borrowers navigating repayment.

For borrowers, this streamlining of repayment could be a game-changer. Today’s system is notoriously complex, with multiple income-driven repayment options, inconsistent rules, and confusing enrollment processes that often leave borrowers in limbo or in default. By consolidating repayment into a single, easy-to-understand program with automatic forgiveness after a fixed period, the proposal offers long-overdue simplicity. At the same time, the new plan preserves a generous safety net: borrowers with low incomes would still make affordable monthly payments—often as low as $0—and would never be required to repay debts that are truly beyond their financial capacity. It’s a pragmatic reform that balances simplicity, protection, and fiscal responsibility.

Eliminating the subsidized loan program for undergraduates also contributes to that simplification. Under the current system, borrowers must navigate a number of loan options, each with different interest accrual rules and eligibility requirements. Removing this distinction reduces administrative confusion for both students and institutions. Moreover, the modest savings generated from phasing out subsidized loans can help fund the proposal’s expanded investment in grant funding to institutions—better aligning federal spending with student success.

The proposal’s call to eliminate the Grad PLUS loan program will likely face strong resistance from colleges and universities, but it’s a necessary and long-overdue reform. The sharp rise in student debt over the past decade has been driven in large part by uncapped borrowing for graduate and professional programs. These loans have enabled institutions to dramatically expand expensive master’s degrees—many of which offer questionable labor market value to students—knowing that federal dollars would flow regardless of outcomes. In many cases, graduate programs have become profit centers for universities, subsidizing other parts of the institution without delivering meaningful returns to the students who fund them. Imposing borrowing caps and removing the open spigot of Grad PLUS is a first step toward restoring discipline to the system and protecting students from accumulating unsustainable debt.

Changes to the Pell Grant program are also on the table. The proposal raises the full award threshold from 12 to 30 credit hours per year, an adjustment aimed at encouraging timely degree completion. At the same time, it expands Pell eligibility to include students enrolled in short-term workforce training programs, reflecting a broader definition of postsecondary success.

Crucially, the proposal introduces new accountability measures for institutions. Colleges whose students fail to repay their loans would be required to reimburse a portion of those losses, creating financial incentives for schools to ensure students leave better off than they arrived. Meanwhile, schools that maintain low tuition costs and deliver strong student outcomes would become eligible for performance-based grants. This policy framework, sometimes called “risk-sharing” also enjoyed bipartisan support in recent years.

While the reforms are being led by Republicans, their foundations are not uniquely partisan. The idea of tying federal funding to student outcomes was central to the Obama administration’s gainful employment regulations, and income-driven repayment plans originated in bipartisan legislation passed in the early 1990s. What’s being proposed now builds on these ideas but extends them more broadly and equitably across the higher education landscape.

It has been more than a decade since Congress enacted comprehensive higher education reform, even as college costs have continued to rise, student debt has surpassed $1.6 trillion, and too many students leave school with little to show for their investment. The current system continues to treat all programs equally, regardless of their track records in delivering student success. This proposal offers a long-needed course correction by linking federal support to measured outcomes. As debate over the details continues, one thing is clear: this proposal represents a serious effort to modernize higher education policy. It’s time to move past the status quo and toward a system that protects students, respects taxpayer investment, and rewards institutions that deliver real economic value.