Trump Reforms Drive Taxpayers’ Student Loan Losses Down to 30-Year Low

The federal government will lose far less money on new student loans this year thanks to the One Big Beautiful Bill Act, according to a new report from the Congressional Budget Office. The new policy will slash federal losses to 4 cents per dollar lent in 2026 from 18 cents per dollar in 2025 — the lowest cost since the Direct Loan program began in 1994. The legislation, signed into law by President Trump on July 4, 2025, is set to take effect on July 1, 2026.The shift will save approximately $315 billion over the next 10 years, according to the Congressional Budget Office. The savings come mainly from replacing income-based repayment programs with a new Repayment Assistance Plan and imposing stricter limits on how much graduate students can borrow. The preliminary subsidy rates “point to a new era in the federal student loan program,” writes the Committee for a Responsible Federal Budget. Under the One Big Beautiful Bill Act, “the government now expects to get back almost as much as it lends out — a huge reversal from recent years, when student loans were projected to lose hundreds of billions of dollars over a decade.” In addition to reducing fiscal costs, the bill also establishes a “do no harm” standard that links federal loan eligibility to student outcomes. This means degree programs can lose access to federal funding if their graduates’ earnings are too low.“The ‘do no harm’ standard means that colleges and universities will think twice before creating new low-quality programs and relying on student loans to fund them,” senior fellow at the American Enterprise Institute, Preston Cooper, wrote in an analysis of the new program. Mr. Cooper, along with other researchers, has suggested that the bill’s loan program reforms could help rein in tuition growth and prevent excessive interest from accumulating on student debts.The Federal Reserve Bank of New York reported that 9.6 percent of outstanding student loans are overdue by three months or more, “reflecting continued effects from the resumption of payment reporting following the extended pandemic forbearance period.” The Fed further noted that the flow of student loans into delinquency had surged to 16.2 percent from 0.7 percent at the end of 2024.

Trump Reforms Drive Taxpayers’ Student Loan Losses Down to 30-Year Low

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