The Federal Reserve System’s ability to provide financing to the Consumer Financial Protection Bureau (CFPB) is severely curtailed by the One Big Beautiful Bill Act (OBBBA). OBBBA (Pub. L. 119-21), which President Trump signed into law on July 4, drastically cuts the amount of money the CFPB is eligible to collect.
Section 12 U.S.C. 5497(a)(2)(A)(iii) of the Dodd-Frank Act, which caps the amount of financing the CFPB can receive from the Federal Reserve System, is amended by Section 30001 of the OBBA. The present funding cap, which is set at a maximum of 12% of the Federal Reserve’s inflation-adjusted total operating expenses for 2009, is lowered to 6.5% as a result of the OBBBA’s roughly 50% budget cut to the CFPB.
This cut is in line with the Trump administration’s continuous attempts to deregulate, which include presidential orders and agency actions aimed at the regulatory operations and scope of the CFPB.
“This is one of the most harmful and expensive bills Congress has ever considered,” said Pennsylvania Rep. Brendan F. Boyle, ranking member of the House Budget Committee. “It’s morally wrong. It’s economically reckless.”
The Congressional Budget Office estimates that during the following 10 years, the OBBBA will increase the national debt by almost $3.3 trillion. The Committee for a Responsible Federal Budget also identified the following cuts:
- An estimated $4.1 trillion more is added to the national debt through 2034—more borrowing than any reconciliation bill in history;
- Social Security and Medicare insolvency is accelerated to 2032—a year earlier than under current law; and
- The tax code is more complicated and less fair—creating new deductions, credits and phase-outs that treat similar income differently and increase the number of itemizers.
Important programs that customers have grown to rely on may have survived despite the growing government deficit, but they will now operate very differently.
For instance, OBBBA reduces by half the annual Federal Reserve System money available to the Consumer Financial Protection Bureau (CFPB). According to Thomson Reuters, this means that only 6.5% of Fed earnings—instead of the previous 12%—will be available for the agency’s operating expenses. The Washinton Informer revealed more ongoing details about the recent action.
What This Means for Americans, Student Debtors & More
The continuous funding slash, which has already resulted in litigation against CFPB plans to reduce staffing from 1,700 to just 200, the withdrawal of significant lawsuits filed prior to the current Trump term, the revocation of previously adopted rules, and the suspension of investigations, is being continued with this financial cut.
“While stopping a complete defunding of the Consumer Bureau was a victory and the Senate’s proposed ceiling is larger than that in the House-passed budget bill, the Senate’s big brutal bill still signals an intent by this Administration and Congress to significantly abandon the federal government’s obligation to protect consumers from harms in the financial marketplace,” noted Mike Calhoun, “President of the Center for Responsible Lending (CRL). “American consumers count on the Consumer Financial Protection Bureau to protect their wallets from harm. Lowering the Bureau’s budget ceiling by nearly half suggests that many of those consumers are likely to be let down.”
The more than 42 million student loan debtors who owe over $1.7 trillion in total are also facing other urgent financial challenges. Loan payments for the 8 million borrowers who signed up for Saving on a Value Education (SAVE), a repayment plans that links loan payments to borrower income, will remain halted starting on August 1, although interest on these loans will start to accrue once more.
“Slashing vital programs that protect civil rights, consumer protections, health care, and education for working families to benefit the rich and powerful is wrong,” said Richard Dubois, Executive Director of the National Consumer Law Center. “The massive cuts to the Consumer Financial Protection Bureau buried in the bill further empower large corporations over people.”
Particularly, 3.9 million Parent PLUS loan recipients will see additional modifications. Three-tiered loan limitations will be implemented for both yearly borrowing and total lifetime loans on July 1, 2026. Professional degrees such as those for doctors and attorneys are included in the three tiers, along with two more for other graduate and undergraduate programs.
Parent PLUS loans for undergraduate courses will be limited to $20,000 annually, or $65,000 overall for each student. According to the Education Data Initiative, the average in-state student living on campus at a public four-year university spends $27,146 during the course of one academic year.
Under this arrangement, graduate student loans will have a greater lifetime ceiling of $100,000, but a slightly higher yearly cap of $20,500. Professional schools will be eligible for the program’s highest loan caps, which are $50,000 a year and $200,000 in total.
Further, two additional student loan programs—Pay as You Earn (PAYE), which has a 10-year repayment cap, and the Income Contingent Repayment (ICR) plan, which has a 12-year cap for combined loans—will be phased out by June 30, 2028. Loan servicers will assist borrowers who are enrolled in both programs in transferring to alternative repayment arrangements.
However, having access to loan servicers is necessary to receive prompt assistance in time to meet the deadline. Before the government can handle any new requests, the 1.5 million cases that are currently seeking resolution by servicers must be finished, according to the New York Times.
Pell Grants for moderate- and low-income college students may have survived, much like the CFPB, but new terms of access will probably result in less funding for two- and four-year programs. The law was amended at the last minute to permit short-term, unaccredited job-training organizations to administer Pell Grants.
“The American people demanded lower costs, and what did they get? A brutal bill that will push millions off their healthcare, leave children to go hungry, and push dreams of a college education even further out of reach for working people across this country,” said Aissa Canchola Bañez, Policy Director for the Student Borrower Protection Center.
The post One Bill, Big Impacts: What the OBBBA Means for Borrowers first appeared on The MortgagePoint.
