The Senate’s newly proposed tax and spending bill introduces significant changes that could impact millions of Americans, particularly student loan borrowers and families seeking tax deductions. The legislation would simplify repayment plans and re-work tax incentives to meet multiple economic needs. It worries some in higher education about the impact it will have on access and affordability within that sector.
Under the proposed legislation, student loan borrowers will have only two repayment options: a standard repayment plan with fixed payments and an income-based repayment plan known as the Repayment Assistance Plan (RAP). While intended to make repayment easier, this change would reduce the flexibility in repayment that has been key to helping borrowers with financial hardships.
Additionally, the bill would remove the unemployment deferment and economic hardship deferment from the fold of available deferments. Millions of borrowers are using these tools today to temporarily stop their payments through times of economic distress. These deferments allow graduate students to borrow the full cost of attendance, less any federal aid. This important relief allows borrowers to focus on making their monthly payments.
The Senate bill represents a new and welcome paradigm shift. It further suggests capping how much a person can borrow from the federal government for their education. This limitation raises serious concerns over access to postsecondary education. It would be particularly burdensome on lower-income students who are already dealing with financial emergencies.
The proposed legislation doesn’t stop at student loans alone. It creates new federal employment conditions for enrollees aged 19 to 64 who are applying for coverage or are currently enrolled in an ACA expansion category. These people have to work at least 80 hours per month. This additional requirement makes it even more difficult for them to access quality healthcare benefits.
The bill’s effects on families relate to how it handles tax credits. The child tax credit is now temporarily enhanced – increased from $1,000 to $2,000. It is set to expire after 2025, unless Congress decides to extend it. This rollback would be devastating to millions of families who rely on this credit to survive.
Under this policy, some households are allowed to deduct up to $10,000 worth of annual interest on new auto loans from their taxable income. This new amendment will provide them with better vehicle financing. This provision is meant to relieve some of the financial burdens of car ownership.
It would provide $1,000 one-time deposits from the federal government to help children born during the years 2024-2028. Starting in 2026, all children born to U.S. citizens will be entitled to these tax-advantaged savings accounts. This national initiative serves to raise awareness about the importance of early financial literacy and developing positive savings behaviors.
The bill calls for some really big changes to current tax breaks. The IRA as signed into law by former President Joe Biden created and extended a number of these tax incentives. Sadly, these valuable incentives are currently on the chopping block to be repealed. Most notable are the consumer tax credits linked to clean energy initiatives, which are poised to ripple throughout the country and transform environmental sustainability efforts long term.
Howard Gleckman, a senior fellow at the Urban Institute, commented on the potential implications of raising caps on certain deductions:
“If you raise the cap, the people who benefit the most are going to be upper middle-income, since lower earners typically don’t itemize tax deductions.”
This perspective highlights concerns that changes in tax policy may disproportionately favor higher-income individuals while providing limited relief for lower-income taxpayers.
The bill as proposed has already caught the attention—and ire—of some policymakers and economic experts, who suggest it might do more harm than good. Jonathan Smoke, an industry analyst, emphasized the limited immediate financial benefit for taxpayers:
“The math basically says you’re talking about [financial] benefit of $500 or less in year one.”
This claim is important because it underscores the purpose of the bill to advocate for families and students through numerous provisions. It acknowledges that the short-term boost will likely be small.