The recent enactment of a comprehensive policy bill marks a pivotal moment for higher education in the United States. With a dramatic flyover by a military aircraft, the President celebrated the Fourth of July by signing this legislation into law, highlighting the efforts of congressional members who met a tight deadline.
This new law, which narrowly passed through the House, is set to reshape the operational landscape of colleges and universities. While advocates for higher education express concerns that the bill may adversely affect low-income families, supporters argue that these reforms are essential for the future of education.
Central to the discussions surrounding the legislation, often referred to as the One Big Beautiful Bill Act, are the proposed cuts to Medicaid, amounting to nearly $1 trillion, alongside tax code modifications that favor wealthier individuals. However, the 870-page document also introduces significant changes to higher education policies, including limits on certain student loans, the elimination of the Grad PLUS program, and a new accountability system based on graduates’ earnings. Experts in higher education warn that these changes could have detrimental effects on university finances and access to education.
Notably, the bill does not include some of the more alarming proposals that had raised concerns among college leaders, such as reductions to the Pell Grant program and a substantial tax on endowments for wealthy private institutions. These colleges will still face an increased tax rate on their endowments, which could rise to 8 percent from the current 1.4 percent.
While some higher education lobbyists have acknowledged the Republicans’ decision to avoid deeper cuts, they remain apprehensive about various aspects of the new legislation.
The removal of Grad PLUS loans could deter many students from pursuing graduate education, which would significantly impact universities that depend on graduate program tuition for revenue. Additionally, capping Parent PLUS loans at $65,000 per student may disproportionately affect Black and Latino families, who are more likely to utilize these loans. The legislation also streamlines repayment plans, offering future borrowers only two options. Consumer advocates are concerned that these changes could worsen the student debt crisis and push students toward private loans.
These modifications to student loans are set to take effect in July 2026.
In a positive development, lawmakers have agreed to extend Pell Grants to short-term job training programs, fulfilling a long-standing objective for community colleges and other educational institutions. However, a last-minute amendment has excluded unaccredited providers from this expansion.
“Although the bill has seen some improvements from its initial draft, it still presents a combination of new taxes and spending cuts that will compel college administrators to make tough decisions, further straining the resources that help make education affordable,” stated the president of a national association for college business officers. “The long-term consequences of this legislation for higher education and American innovation could be significant.”
Overall, the One Big Beautiful Bill Act is projected to add approximately $3.3 trillion to the national debt over the next decade, according to estimates from the Congressional Budget Office. While Republicans aimed to reduce spending and address the growing deficit, the pressure to achieve a legislative win ultimately prevailed, despite some lawmakers hesitating to support the bill.
Republican leaders and administration officials have praised the legislation, asserting that it will lower college costs and enhance accountability. A key feature ties access to federal student loans to the earnings of graduates. Programs that fail to demonstrate that their graduates earn more than individuals with only a high school diploma may lose access to federal loans. Preliminary analyses suggest that less than half of two-year degree programs would meet this earnings criterion, although community colleges typically rely less on loans.
“In general, the Senate’s accountability proposal aims to strengthen the higher education system,” noted a senior fellow at a conservative think tank. “However, the current political climate presents a unique opportunity to reform the federal role in higher education, and lawmakers should seize this chance.”
Another analysis indicated that programs likely to fail the earnings test enroll only about 1 percent of students. However, this test would not apply to certificate programs, where a significant number of students pursue credentials that may not yield the expected earnings increase. Experts have suggested that the accountability framework should also consider program costs and student debt levels.
Colleges generally favor the earnings-based accountability model, which resembles previous regulations, although lobbyists had hoped for further adjustments. House Republicans had initially proposed a plan that would impose annual penalties on institutions based on students’ unpaid loans, which could have resulted in substantial financial losses for colleges.
The president of a national trade association for for-profit institutions expressed gratitude for the passage of this significant legislation, commending the expansion of Pell Grants and other provisions. However, he voiced concerns regarding certain aspects of the new accountability framework, while appreciating that the measure applies uniformly across all sectors of higher education.
Concerns about the loan caps and the elimination of Grad PLUS loans were also raised, with the president stating that these cuts could negatively impact students and limit access for those in need. He expressed hope that Congress would reconsider these provisions in the future, while also acknowledging the inclusion of many priorities in the final bill.
The president of an association representing state colleges and universities highlighted that cuts to Medicaid and other programs would adversely affect regional public universities, which often bear the brunt of budget constraints.
“The federal government has never before divested itself of financial responsibilities to such an extent, jeopardizing already strained state and local budgets as they attempt to manage new obligations,” he remarked.
He urged Congress to reclaim its constitutional authority over government spending, advocating for the full funding of programs and institutions that serve postsecondary students across the nation.