How will Trump’s new spending bill affect student loans?
President Donald Trump’s newly passed spending bill is set to overhaul the federal student loan system.
No Brands – News Value
On an August night in Texas, Pablo Pratt put his 1-year-old son to sleep and sat with his wife, trying to make the numbers work. Their rent was due, childcare was piled up, and after being changed to a now popular repayment option, the $582 student loan interest quietly hit their account.
Pratt, 28, was one of the millions registered in savings for the precious education (SAVE) plan, which he charged interest for the first time in a year. His family was already living on payroll when the surprising interest charges added additional stress.
“We’re just barely running on the coast,” says Pratt. “It’s spiral and then it leads to something else. You can go from good to really bad.”
With a $130,000 student loan debt, Pratt scrambled to compensate for his extra payment. He sifted through their garage and listed old coffee makers and Xboxes on the Facebook market. His wife seemed to pick up an extra babysitter shift. Ultimately, that wasn’t enough, and they got a loan from Pratt’s parents.
A cohort born between 1997 and 2012, Gen Z navigates the fast-changing landscape of student loans. Under the Trump administration, the elimination of general repayment options and changes in federal aid have made financial futures unstable for some youth, and in other cases they have been completely ousted from higher education. Young people who feel impacted say they are applied to work, experience anxiety and in extreme cases discussing movements abroad.
Student loan changes under the Trump administration
The executive director of the Student Borawer Conservation Centre (SBPC), a debt-focused advocacy group, says 2025 saw the most monumental change in the student loan system in 2020.
After nearly five years of break during the pandemic, student loan borrowers face financial consequences if they fall behind in their payments. The suspension of federal student loan payments was lifted in September 2023, but missed payments for more than 90 days began to be reported to the Credit Bureau until fall 2024. Borrower delinquency began appearing in credit reports in 2025, leading to a sudden drop in credit scores.
Additionally, nearly 8 million borrowers registered on the Save Plan began earning interest on loans for the first time on August 1st as former President Joe Biden placed the group in generously in July 2024.
“For those who are in debt right now, there’s no easy answer,” Pierce says. “A lot of people are trying to get bills they can’t afford. They need to make the very difficult choice between damaging their credit and achieving their goals.”
According to a July analysis of SBPC, people on save plans are generally more open to minimum monthly payments, but for typical borrowers in the plan, resuming interest fees alone could cost around $300 a month. This amounts to interest costs of over $3,500 per year.
Tyler Lobos, 22, knows that taking away student loans is a choice, but at age 17, that wasn’t the case. He finds that university degrees are extremely useful when it comes time to join the workforce, and the loan comes with territory. In his case it was $80,000.
But when he checked the student loan portal after graduating from Federal University of Bloomsburg, Pennsylvania, he had the feeling of sinking when he saw his loan staring at him.
“The only thing that takes my heart into is student loans,” says Robos. “When you were 17 years old and you went to college for the first time… you don’t understand that gravity.”
Robos says he is worried about almost every purchase he makes.
“I’ll definitely eat you,” says Robos. “It feels like a ball and a chain… I’m definitely trapped in these things.”
“People are now being pushed against the wall.”
Lobos had planned to use a save plan to pay off the loan, but it cannot be registered with the plan as a federal court injunction of February 18, 2025 prevented it from being implemented.
“Before I was a senior in college, I really looked good, so I knew that that salvation plan was an option,” says Robos. “It definitely puts a little more stress level, as it’s not like that anymore. It puts more on the borrower’s shoulder.”
When he learned about the changes Pratt saves, he was strongly applied to hundreds of jobs, trying to find a higher pay salary. He and his wife have been having a conversation about moving to a country that costs less than they would live in, like Bolivia, where his grandparents live.
Pratt holds a bachelor’s degree in international relations and global studies and history, and a master’s degree in information security and privacy from the University of Texas Austin University, but was unable to obtain a job in any of the fields he studied.
“Now people are pushing against the wall,” Pratt says. “It’s incredibly expensive (lives), but the degree has come to a place that’s not worth it.” Still, he’s considering going back to graduate school and putting his loan in a temporary school postponement.
Going forward, borrowers who receive new federal loans from July 1, 2026 are working on Trump’s megaville, known as one big beautiful bill. The law limits repayment options and cap borrowing restrictions for graduate students, including eliminating graduate students and loans, enforcing more students to apply for personal loans, or reconsidering educational options. Also, current borrowers will see a decrease in their repayment options by 2028.
“This is the biggest change in student aid policy I’ve ever seen,” says Megan Walter, senior policy analyst at the National Association of Student Financial Aid Administrators. “A lot of our concerns are how quickly they are trying to implement this, and it’s going to be difficult to explain to students.”
Gen Z is increasingly worried about their financial situation
Financial therapist Lindsay Brian Podvin says that some young people are deliberately opting out of higher education and related student loan debt by working in manual labor, as highlighted in a recent Virtiktok video on the side hustle of young employees. She noted that many Gen Z Z were getting older watching the recession of 2008, and then they graduated or developed years during the pandemic.
“Gen Z is starting to live financially with more debt, less social safety nets and higher costs. If millennials were told by the version that “just get a degree, it’s okay,” Gen Z couldn’t give the same message,” says Brian Podvin.
Cost of living is frequently cited as the highest economic concern among young people. A third of Gen Z and Millennials are worried that their finances could lead to the experience of homelessness, and according to a 2024 survey conducted by Acorns and Opinium Research, they may feel that they are almost three times more expensive than older respondents.
As young Americans navigate changes to student debt financing, Walter says new borrowers should take a holistic approach.
“You need to look every four years, you know what you need every four years and come back,” says Walter.
For second or third year borrowers at university, they are worried about passing the finish line, so Pierce recommends that they close the gap by accessing subsidies and cheaper loans to talk to financial aid office.
Walter hopes that more students will choose more cost-effective educational paths, such as starting with an associate degree at a two-year community college before transferring to a four-year university, or cut housing costs and attend schools closer to home.
“I don’t know where the bubble is. At what point are students saying, ‘This is affordable’ and people stop going? ” says Walter.
Kathryn Palmer contributed to this report.
Rachel Hale’s role in covering youth mental health at USA Today is supported by a partnership with Pivotal and Journalism Funding Partners. Funders do not provide editor input. Contact her at rhale@usatoday.com @RachelLeighhale x.
