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Biden's unconstitutional free ride for student loan borrowers ends August 1

Teaching students fiscal responsibility: The new guardrails rein in Biden-era student loan cancellation, reduces federal spending on loan forgiveness, and imposes stricter borrowing and repayment structures.

By:

Amanda Head

July 28, 2025

In an announcement video posted to X, Department of Education Secretary Linda McMahon announced that beginning August 1, the Department of Education will resume charging interest on student loans under the Saving on a Valuable Education (SAVE) Plan enacted under former President Joe Biden. That plan was ruled an unconstitutional overreach of power by the United States Supreme Court in June 2023.

The Biden administration introduced the SAVE Plan in the summer of 2023 and billed it as an affordable repayment program, but it was legally challenged and is now defunct. Critics argued in editorials that it was “straight up buying votes” and a blatant attempt to buy votes for the Democratic Party.

This change marks a broader overhaul of the federal student loan system under President Trump’s administration, which will phase out the SAVE Plan and other income-driven repayment plans that claimed to eliminate or lower payments for borrowers, but in practice handed the bill to American taxpayers.

The Trump administration’s view on the issue is that loan cancellations are “vile” and are not a viable option as it merely shifts debts from one party to another, specifically not allowing American taxpayers to take on debts that are not their own.

Admin presents online array of options

In the announcement, McMahon encouraged borrowers to go to a link, StudentAid.gov, to learn about what they are characterizing as affordable, legal repayment options, as the Department of Education will provide assistance in identifying new plans.

The debate over whether student loans should be forgiven is steeped in the issue of what is objectively considered fair. Many, especially Republican legislators, question why student loans should be forgiven when hundreds of thousands of young Americans enlist in the military to pay for their education with their service.

They also ask why mostly liberal arts majors were favored in the now-moribund plan over young Americans who skip a four-year degree and opt instead for vocational or trade school.

What changes are coming?

The One Big Beautiful Bill Act, which Trump signed on July 4, overhauls the federal student loan system, impacting nearly 43 million borrowers with stricter borrowing limits and reduced repayment options. The SAVE plan will be fully phased out by July 1, 2028, and interest accrual will resume on August 1, 2025.

New borrowing limits which will go into effect in July of 2026, cap graduate student loans at $20,500 annually and $100,000 lifetime, while professional degrees will be limited to $50,000 annually and $200,000 lifetime. Parent PLUS loans are capped at $20,000 per year and $65,000 per child. Also, there will now be a combined loan limit for undergraduate and graduate loans of $257,500.

Repayment options are to be streamlined into two plans: a standard plan with 10- to 25-year terms based on debt size, and the Repayment Assistance Plan (RAP), which ties payments to income. The former starts at $10 monthly for those earning $10,000 or less, up to 10% of adjusted gross income for higher earners. The RAP waives unpaid interest and provides up to $50 monthly principal reduction for lower-income borrowers, but requires a $10 minimum monthly payment.

Loan forgiveness under RAP extends to 30 years, compared to 20 or 25 years in prior plans, making it less likely for typical borrowers to qualify. Current borrowers can access the older Income-Based Repayment (IBR) plan for loans made before July 1, 2026, offering forgiveness after 20 or 25 years.

The legal issues surrounding SAVE have created administrative complications, thus IBR forgiveness processing is paused, with refunds promised for any overpayments.