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The One Big, Beautiful Bill Act ( ), which was signed into law on July 4, 2025, introduces several significant changes to the higher education landscape that will require careful attention and adaptation from all institutions. The resources below contain ̽»¨Â¥'s summary of the bill and its impacts to higher education.

For additional information or questions regarding the topics below, please contact GR@aacrao.org

Legislative Summary

• Federal Financial Aid
  • After July 1, 2026, Grad PLUS loans will be eliminated
  • Caps Parent PLUS loans at $25,000 annually and $65,000 total per student
  • Implements Caps on Federal Loan borrowing at the following thresholds:
    • $257,000 cummulative borrowing limit applies to all student loans, except Parent PLUS Loans
    • $20,500 annually and $100,000 for graduate school
    • A $50,000 cap annually and a cummulative loan cap at $200,000 for professional school
  • College programs, excluding certificates, that fail an earnings test will be ineligible for federal student loans
  • Maintains subsidized loans for undergraduate students
  • If you would like more information, our partners at the National Association of Student Financial Aid Administrators (NASFAA) have put together a included in the final bill.
• Student Loan Repayment 
  • Overhauls loan repayment options by eliminating all current income-driven repayment plans by July 1, 2028. Borrowers will be required to transitionas to one of two new repayement plans starting in 2026.
    • Standard Plan: Set monthly amount, with the options to pay over 10 to 25 years depending on loan amount
    • Repayment Assistance Plan: Monthly payments based on a borrower's income, with payemtns ranging from 1% to 10% if their discrtionary income
  • Public Service Loan Program (PSLF) will have stricter eligibility requirements
• Pell Grant
  • Expands Pell Eligibility to certain accredited short-term programs
    • Eligible programs must offer between 150-600 hours of instruction over the course of 8 to 15 weeks and align with high-skill, high-wage or in-demand fields.
    • This change takes effect on July, 1, 2026 and applies to the 2026-2027 aid year
  • Puts $12.67 billion into the Pell grant fund in order to address the funding shortfall
  • Maintains the current definition of a full time student at 24 credit hours annually and maintains eligibility for students enrolled less that half time
  • Prevents students who receive scholarships or grants that cover their full cost of attendance from receiving Pell Grants
• Institutional Accountability
  • Programs that fail to show their graduates earn more than an adult in the same state with only a high school diploma could be cut off from loans
  • This new endowment tax system is only applicable to private instiutions
  • Only domestic students can be included when calculating this tax, disproportionately impacting instiutions with high international student enrollment
  • Overhauls the flat 1.4% college endowment tax and introduces a new tiered system. Private colleges with fewer than 3,00 students are exempted from the new tax.

  Endowment Value per Domestic Student	Tax Rate
  $500k - $750k	1.4%
  $750k - $2M	4%
  Above $2M	8%

   

• Medicaid
  • Substantially reforms and cuts the federal Medicaid program. These cuts will likely result in additional pressures on states and their budgets.
  • There are an estimated 3.4 million students that utilize Medicaid as their primary form of insurance.
• Supplemental Nutrition Assistance Program (SNAP)
  • States will now be required to pay a portion of SNAP benefit costs for the first time, rather than the federal government covering 100%.
  • Beginning in FY 2027, the federal government will reduce its administrative cost share to 25% from the current 50%, meaning states will be responsible for covering 75% of administrative costs.
• 529 Plans
  • Expands the scope of 529 education savings plans by broadening the definition of “qualified education expenses.” Qualified education expenses now include:
    • Tuition, fees, books, supplies, equipment, and other expenses incurred to enroll in or attend a recognized postsecondary credential program
    • Fees for testing as required to obtain a recognized postsecondary credential
    • Fees for continuing education as required to maintain a recognized postsecondary credential
  • This provision applies to distributions made after July 4, 2025, the date of enactment.

Additional Resources

 (July 4, 2025)

 (July 2025)

 (July 2025)

 (July 2025)

NASFAA Lunch & Learn: The One Big Beautiful Bill Student Aid Provisions (July 2025)

 (July 2025)

̽»¨Â¥ Executive Director Statement Regarding the Final Reconciliation Package (July 2025)

(August 2025)

(August 2025)