Senate Republicans revealed details of their changes to President Donald Trump‘s One Big, Beautiful Bill Monday, and the changes could impact student loan borrowers in surprising ways.
Federal student loan borrowers could benefit from the extension of a rule regarding employers helping workers pay off their loans and actually end up having more paid off over time.
Why It Matters
The Trump administration has been less friendly to student loan borrowers than former president Joe Biden, who enacted several key initiatives targeting student loan forgiveness.
Recent court records revealed that the Trump administration was negotiating a deal with the Treasury to oversee federal student loans and dissolve the Department of Education in the process.
However, the plan was put on hold after a federal judge blocked the administration’s broader efforts to dismantle the Department of Education.
What To Know
Under the new bill released by the Senate GOP for consideration, several updates would be enforced for student loan borrowers.
Under current law, an employee can exclude up to $5,250 and an employer can exclude up to the same amount each year for the purpose of educational assistance.
That can include employers paying for workers’ tuition, fees, books, supplies and more. Employers were also able to pay off student loan balances if they were incurred before January 1, 2026, but the GOP bill calls for eliminating that requirement and continuing to allow employers to pay off loans for employees.
The maximum exclusion for taxable years after 2026 could also be higher based on inflation amounts.
“While there are still many student loan borrowers who do not have the luxury of their employer offering a repayment benefit, to those who do have such, it ensures this valuable option will continue to assist them in the years ahead,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
The proposal bill from the GOP also extends the exclusion from a taxpayer’s income any income that results from the discharge of student debt on account of death or total disability for the student. There’d also be an additional requirement, however, that the taxpayer have a work-eligible Social Security number to get that exclusion starting after December 31, 2025.
Altogether, the Senate has pushed back on some of the House’s more aggressive ideas, said Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast.
“They rejected expanding loan limits for undergrads and Parent PLUS borrowers, said no to risk-sharing between schools and students, and are proposing to simplify repayment into just two options: standard and income-driven. So instead of a maze of plans, borrowers would pick one or the other.”
Also included in the bill are changes to Medicaid, including tightened eligibility requirements. Medicaid provider taxes, which help states finance Medicaid costs, would go down to 3.5 percent from 6 percent by 2031.
What People Are Saying
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “The extension of the exclusion would actually be good news for borrowers who are benefiting from their employer assisting with repayment. Current law allows employers to pay $5,250 per year in student loan assistance to employees if they choose to do so. The new law would both extend this rule and allow it to increase due to inflation.”
Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: “Wedged in amongst many negatives for student loan borrowers, the extension and expansion of employer payments is a win. The Bill seeks to make the tax treatments of employer educational assistance in the form of student loan repayments permanent and provides for the annual amount to be indexed with inflation.”
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast told Newsweek: “I think it is a small win, but a win nonetheless. If your employer pays part of your student loan and it’s not counted as taxable income , that’s a win. The employee keeps more of their paycheck, and the employer gets a retention and recruitment tool. That $5,250 exclusion goes further when it’s tax-free. Everyone benefits and it doesn’t cost the government much to implement.”
What Happens Next
The Senate could pass the bill only if they lose three or less votes.
Several GOP senators, including Senate Budget Committee Chair Lindsey Graham of South Carolina and Senators Ron Johnson of Wisconsin, Mike Lee of Utah and Rick Scott of Florida, have criticized the bill, saying it furthers the national debt far too much.
The post Student Loan Update: How Senate GOP Changes to Trump Bill Impact Borrowers appeared first on Newsweek.
