By Mark Huelsman and Aissa Canchola Bañez | June 8, 2026

Congress is Congress’ing again and it’s NOT looking great for students and borrowers.

Last week, House Appropriators unveiled their budget proposal to fund the U.S. Department of Education (ED), among other agencies for the fiscal year (FY) 2027. The Labor, Health and Human Services, Education, and Related Agencies (LHHS) bill, scheduled to be marked up on Tuesday, includes massive cuts to several crucial student aid programs. This includes a proposal to permanently eliminate Federal subsidized loans, which provide low-to-middle-income undergraduates interest-free student loans while they are enrolled in school and six months directly after they leave their program. 

The move comes less than a year after Congress passed and President Trump signed the “One Big Beautiful Bill Act” (OBBBA), which decimated the federal student loan system and the safety net programs that students and parents rely on to pay for college. The idea is certainly not new. House policymakers had originally included the elimination of subsidized loans in the House-passed version of the OBBBA, but the proposal failed to make it into the Senate bill. At the time, we along with our friends at TICAS sounded the alarm on how gutting subsidized loans would raise college costs and push even more students into debt. While it appeared that subsidized loans were no longer on the chopping block, Republican appropriators are now looking once again at pulling the rug from under families struggling to pay for college.

In the last year alone, more than 4 million students relied on subsidized loans to pay for their undergraduate education. In the midst of a growing affordability crisis and while states across the country are announcing further tuition increases, eliminating this program couldn’t come at a worse moment for working families. By our estimates, for undergraduate borrowers in a 4-year program who take the 6 months of interest forbearance and have the upcoming AY 2026-2027 interest rate of 6.52 percent:

  • Eliminating the subsidized loan program would force undergraduate borrowers to pay off an additional $3,885 in interest alone.
  • Dependent students would owe $32,639 by 6 months after graduation, as opposed to $28,754 under the current system. 
  • Independent students would owe $54,427 by 6 months after graduation, as opposed to $50,542 under the current system.
  • If interest rates were to increase to the statutory cap of 8.25 percent, borrowers would be in even worse financial straits.
  • Student loan borrowers could expect to owe an additional $1,000 in interest for each year that they are deprived of the interest subsidy, on average.

Saddling students with thousands of dollars in additional debt as soon as they graduate will cascade into larger monthly payments and increase the odds of borrowers falling into severe financial distress. Under the OBBBA’s new Standard Plan, the elimination of the interest subsidy would significantly increase the total amount paid by borrowers over the life of their loan. The following example demonstrates how much more a borrower would repay based on a 15 year repayment schedule under the new Standard Plan, with interest rates in the upcoming academic year of 6.52 percent:

  • Dependent students would see their total costs increase by $6,452. Their total annual payments would increase to $3,407 (from $2,977), amounting to an additional $430 every year for 15 years.
  • Independent students would see their total costs increase by $7,524. Their total annual payments would increase to $5,681 (from $5,179), amounting to an additional $502 every year for 15 years.

Now, House appropriators are attempting to justify these cuts by using the savings to tackle the current shortfall in the Pell Grant program, and add a meager $50 to the maximum Pell award. To be clear, it IS critical that policymakers find the resources necessary to protect and strengthen the Pell Grant program, especially as more students are now eligible for grants after Congress simplified the FAFSA. However, time after time, policymakers seem to be doing so on the backs of students and working families. And an extremely modest increase to the maximum award is cold comfort at a time when the Pell Grant’s purchasing power has declined drastically–even with a $50 increase, Pell will still cover less than a quarter of the cost to attend a public in-state four-year school 

This temporary jolt of funding comes at the cost of permanent cuts to the loan program. And history tells us that when Congress slashes eligibility or funding for student aid, cuts are enduring and painful. In 2011, the Pell Grant program faced a similar shortfall in the wake of the Great Recession, which caused the ranks of college-goers to swell as the labor market floundered. Lawmakers not only took an axe to Pell Grant eligibility by reducing the number of semesters a student could receive a grant (from 18 to 12 semesters), they also ended in-school interest subsidies for graduate and professional students, forcing graduate students to pay thousands more in interest charges each year. 15 years later, these cuts have yet to be restored, while other savings measures, including an elimination of year-round (sometimes called “Summer Pell”) took several years and substantial bipartisan intervention to come back.

These cuts have directly driven up debt for graduate students and low-income undergraduates who take longer to finish their credential. Now, the House is proposing to “rob Peter to pay Pell” once again. Yet this time, the impact could be far more dire, given the already compounding impacts of OBBBA’s cuts to the student loan safety net that have reduced federal loan eligibility for part-time students, graduate students, and parents, as well as provisions that have cut crucial safety net programs such as SNAP and Medicaid, and placed enormous fiscal pressure on state higher education funding streams. 

Paying for college has never been more expensive and risky now that the OBBBA has been signed into law, and the House appropriators’ funding proposal will add further insult to injury. 

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Aissa Canchola Bañez is the Policy Director at Protect Borrowers. Previously, Aissa led outreach and engagement efforts for the Office for Students and Young Consumers at the Consumer Financial Protection Bureau and served in senior policy roles in the U.S. House of Representatives and U.S. Senate.

Mark Huelsman is a Senior Fellow at Protect Borrowers and the Director of Policy & Advocacy at The Hope Center for Student Basic Needs.