August 5, 2025
The “Big, Beautiful Bill” is set to bring the largest overhaul to federal student lending in decades, dramatically reshaping education financing for students, families, and the financial institutions that serve them. For credit unions, the coming years will separate those who support community prosperity from those who quietly cede young members to aggressive competitors.
How the Big, Beautiful Bill Will Affect Student Borrowers:
- Tighter Federal Loan Caps & Fewer Repayment Options
The bill eliminates powerhouse programs like Grad PLUS and institutes strict new borrowing limits for graduate, professional, and parent PLUS loans as of July 2026. Only undergraduates will be relatively unaffected by caps, but all graduate and parent borrowers will find federal options sharply curtailed. Meanwhile, almost all income-driven plans including SAVE, are being phased out, replaced by just two options: a basic income-driven plan and standard extended repayment.
The impact? Higher education and professional degrees will see financing gaps for all but the most affluent students.
- Students (and Families) Will Go Elsewhere
With lower caps imposed and fewer federal repayment protections, an increasing number of students and parents will be forced to turn to the private market for supplemental loans. This scenario threatens to hand your young, financially promising members to national banks, fintechs, and online lenders, unless credit unions intervene.
- Vulnerable Borrowers at Greater Risk
The bill narrows eligibility for Pell Grants to full-time students only, leaving working students and caregivers more exposed. It also removes deferment and forbearance options, further risking financial instability in your communities. Graduates in high-cost professional fields like future doctors, lawyers, and healthcare providers that your community depends on will face “financial chokeholds” as lifetime caps bite and repayment safety nets disappear.
Why Credit Unions Must Step Up—Now
Credit unions are purpose-built to serve the whole community, not just the most profitable. The new environment presents both a mandate and a business opportunity for credit unions to offer private student loans and student loan refinance products
- Retain Your Members (Before Someone Else Does)
About 20% of credit union members currently have student loans with other lenders. If you aren’t helping these borrowers manage their debt, your competitors will, and you’ll lose both young members and their families, often permanently.
- Provide Real Savings and Financial Counseling
Credit unions can offer education financing at more competitive rates, lower fees, and flexible terms, helping relieve payment burdens for graduates and professionals. By supplementing with strong financial education programs, you become the trusted advisor, not just a commodity lender.
- Strengthen Community Impact and Economic Health
When members struggle with education debt, it impacts homeownership, small business growth, and local economic vitality. By ensuring affordable access to private student loans and refinancing, credit unions can build community financial stability and generational wealth.
- Expand Member Relationships—Now and in the Future
Data shows that borrowers who obtain student loans through a credit union are significantly more likely to return for auto, home, and small business loans. Failing to serve this crucial need diminishes future member relationships across all product lines.
What Should Credit Unions Do?
- Launch or expand private student loan and refinancing programs before the changes take full effect, using fintech partnerships to scale quickly if needed.
- Educate your community about the new rules and their options.
- Proactively identify and counsel at-risk borrowers within your membership to prevent financial distress (and churn).
- Leverage your mission: Highlight your not-for-profit, member-centric model and commitment to keeping education affordable and financial well-being within reach.
Letting students and families drift to banks and fintechs isn’t just poor business, it misses the credit union movement’s foundational call to community. As the Big, Beautiful Bill upends student lending, choose to be the partner your young members (and their future prosperity) need most. Now is the moment to prove credit unions’ value not just as lenders, but as anchors of local economic opportunity and generational well-being.