Understanding Student Loan Repayment Policies: What Small Businesses Need to Know to Secure Government Contracts

For many small business owners and entrepreneurs, student loan debt is a significant financial factor. Recent changes to federal student loan repayment policies, enacted under the "One Big Beautiful Bill Act," have important implications not only for individual borrowers but also for small businesses seeking to secure federal government contracts. Understanding these changes can help business owners better manage their finances, maintain compliance, and effectively navigate federal procurement processes.
Key Student Loan Policy Changes and Their Impact on Small Business Owners
1. Reduction in Repayment Options
The new law significantly narrows federal student loan repayment options. Instead of a dozen or more plans, borrowers may now choose only between:
- Standard Payment Plan: Fixed payments over 10 years (or longer if loans are consolidated, up to 30 years).
- Repayment Assistant Plan (RAP): Payments based on adjusted gross income and dependents, but with less flexibility and a $200,000 loan cap.
This streamlining affects borrowers’ monthly cash flow and budgeting, which is critical for small business owners with federal contracts that require timely payroll, project delivery, and compliance.
Implications: Small business owners with student debt must carefully evaluate their repayment plans to ensure consistent cash flow. The collapsing of income-driven plans could increase monthly financial obligations, reducing available working capital.
2. Elimination of Many Forgiveness and Deferment Provisions
Previously available economic hardship and unemployment deferments—which paused payments and interest accrual—have mostly been eliminated. Borrowers now have access only to forbearance periods (up to 9 months in 24 months), during which principal payments are paused but interest must be paid.
Implications: Increased financial burden during downturns or unforeseen business disruptions (such as delayed government payments) could jeopardize contract performance and compliance with federal small business subcontracting requirements.
3. Federal Loan Limits and Impact on Graduate-Level Borrowers
The federal student loan limit is capped at $200,000, with elimination of programs like Grad PLUS loans. This particularly affects borrowers with advanced degrees in fields such as healthcare and law.
Implications: Small businesses founded by entrepreneurs with substantial graduate-level debt may face tougher financial constraints. This could influence decisions on when and how to pursue GSA schedule contracts or participate in complex federal solicitations requiring significant upfront investment.
Why Small Businesses Should Pay Attention
Managing Financial Health to Meet Federal Contracting Standards
Small businesses seeking federal contracts must demonstrate financial stability and compliance. Agencies often assess creditworthiness and financial management during the evaluation process or when reviewing SBA certifications (e.g., 8(a), HUBZone).
- Increased loan repayment obligations could strain cash flow.
- Understanding repayment schedules helps in planning for contract performance guarantees and bonding requirements.
- Awareness of student loan obligations supports accurate completion of financial disclosure forms common in SAM.gov profiles.
Navigating Procurement with Changing Financial Landscapes
As the federal government demands heightened operational resilience, small businesses with increased financial burdens might face additional challenges in:
- Meeting delivery deadlines.
- Maintaining staff and fulfilling labor compliance.
- Investing in certifications and registrations crucial for contracting, such as GSA schedules.
Practical Steps for Small Businesses
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Review and Adjust Student Loan Repayment Plans: Take advantage of the July 2026–July 2028 window to switch repayment plans. Check if the standard plan or RAP aligns better with your business cash flow.
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Consult Financial Advisors: Engage with financial professionals familiar with federal loans and business finances to optimize repayment without compromising business liquidity.
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Stay Informed on Federal Loan Policies: Monitor updates via SAM.gov and SBA newsletters, as student loan policy shifts may impact your business’s financial representations.
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Plan for Long-Term Financial Sustainability: Include student loan obligations in your cash flow projections when bidding for contracts or applying for GSA schedules to ensure sustained compliance and capacity.
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Explore Federal Loan Forgiveness Programs Carefully: While the new bill restricts forgiveness terms, some state and specialized federal programs remain—especially in underserved communities or targeted industries.
Conclusion
The “One Big Beautiful Bill Act” introduces sweeping changes to student loan repayment policies with direct ramifications for small businesses involved in federal contracting. Entrepreneurs carrying student debt should proactively adapt their financial strategies, accounting for reduced repayment flexibility and heightened obligations.
Effectively managing student loans not only safeguards your personal credit but also strengthens your business’s ability to compete for and perform on government contracts. Aligning your understanding of these policies with federal procurement best practices will position your business for long-term success in the government marketplace.
GovScout helps small businesses break into federal contracting. We simplify SAM.gov, surface winnable contracts, and give you the insights to grow in the public sector. Learn more at govscout.io.
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