Colleagues,
I am writing to you today to share an initial analysis of the One Big, Beautiful Bill Act ( ), which was signed into law on July 4, 2025. This new legislation introduces several significant changes to the higher education landscape that will require careful attention and adaptation from all institutions. We encourage you to review the full text of the One Big, Beautiful Bill Act and assess its specific implications for your institution.
Much of the new law introduces challenges or significant changes for higher education institutions, but there are two items that we believe will support learner success:
The expansion of 529 plans: One good thing is the expansion of the scope of 529 education savings plans by broadening the definition of “qualified education expenses.” Traditionally, 529 savings plans have only covered costs associated with obtaining college, graduate or professional degrees; education programs at accredited institutions; registered apprenticeship programs; portions of elementary and secondary school tuition; and certain student loan repayments. 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; and 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.
The introduction of short-term Pell: The bill makes some short-term workforce training programs eligible for Pell. Eligible programs must offer between 150 and 600 hours of instruction over eight to 15 weeks and must align with high-skill, high-wage, or in-demand fields. Additionally, these programs must lead to recognized, portable, and stackable credentials that can transfer across employers. This is good news for community colleges and for institutions with robust connections to workforce programs. The program takes effect on July 1, 2026, and will apply to the award year 2026-2027.
There are several major changes in many areas that higher education institutions need to be aware of:
Federal Financial Aid: Beginning July 1, 2026, Grad PLUS loans will be eliminated, and Parent PLUS loans will be capped at $25,000 annually and $65,000 total per student. New borrowing limits will also be introduced for all student loans, except Parent PLUS loans. Lifetime caps of $100,000 for most graduate students, $200,000 for professional students, and a new overall limit of $257,000. Subsidized loans for undergraduate students will be maintained. 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.
Lawmakers have argued that these changes will reduce federal exposure to loan defaults by shifting more responsibility to borrowers. Learners who need more, like medical students, may need to turn to the private student loan lending market, which holds higher interest rates than federal programs. Institutions with students who rely on these loans could see a substantial enrollment drop in their graduate programs.
Student Loan Repayment: The law overhauls loan repayment options, eliminating all current income-driven repayment plans by July 1, 2028. Borrowers will transition to one of two new plans starting in 2026: a Standard Plan with set monthly amounts over 10 to 25 years, or a Repayment Assistance Plan with monthly payments based on income (1% to 10% of discretionary income). The Public Service Loan Program (PSLF) will continue to exist, but with stricter eligibility requirements.
Pell Grants: Despite the initial House version that increased required credits for access to federal aid, the current definition of a full-time student (24 credit hours annually) and eligibility for less than half-time students remains. However, students receiving scholarships or grants that cover their full cost of attendance will no longer be eligible for Pell Grants. The legislation also expands Pell Grant eligibility to accredited programs as short as 15 weeks and allocates $12.67 billion to the Pell Grant fund to address a shortfall.
We are relieved that Pell has been temporarily protected and are supportive of short-term Pell, but we don’t believe that the fight to maintain or increase Pell is over. Lawmakers cite concern that increasing Pell grants endorses the rising cost of higher education, and are looking for levers to address that concern. ̽»¨Â¥ disagrees with this approach, which doesn’t address the root causes of college costs and creates opportunity gaps for low-income learners.
Institutional Accountability Measures: Institutions will face a new earnings test for graduates. Programs whose graduates fail to earn more than a high school diploma holder in the same state in two out of three years could face being cut off from federal loans. We do not yet know how this will be implemented. It is not yet clear how this measure will impact the ongoing Gainful Employment and Financial Value Transparency regulations. We will be tracking this so we can provide compliance details for our members as they emerge.
| Endowment Value per Domestic Student | Tax rate |
| $500K - $750K | 1.4% |
| $750K - $2M | 4% |
| Above $2M | 8% |
Endowment Tax Overhaul: The law also overhauls the college endowment tax, replacing the flat 1.4% rate with a new tiered system for private colleges and universities. Only domestic students can be included when calculating this tax. Therefore, institutions with high international student populations will be disproportionately impacted.
The primary motivation for lawmakers is to generate revenue for the government, and those who supported the measure believe that institutions have abused their tax-exempt status. Private colleges with fewer than 3,000 students are exempt from this new tax structure. The significant tax burden on endowments will mean fewer resources available for learner scholarships.
There are also provisions that are not specifically related to higher education but are likely to impact learners.
Medicaid: The final bill includes substantial reforms and cuts to the federal Medicaid program. The Center for American Progress has estimated that 3.4 million students utilize Medicaid as their primary form of insurance. These cuts will likely result in additional pressures on states and their budgets. Losing Medicaid coverage could have serious health consequences for students, especially those with health conditions or disabilities.
SNAP Provisions: The legislation also makes significant changes to the 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%. Also, beginning in fiscal year (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.
The combined effect of Medicaid and SNAP changes could impact millions of families and make it more difficult for low-income students to afford college, access necessary healthcare, and impact the ability of families to afford groceries. Additionally, as the administration begins to shift responsibility for social support programs to the states, there will be inevitable state-level budget crises. When faced with the need to fill federal funding gaps to provide healthcare, feed families, and support K-12, higher education has historically been a lower priority for states. For institutions, this could impact enrollment and retention of low-income learners and an increase of institutional support needs for affected learners.
Many of these changes do not go into effect until July 1, 2026. As implementation details emerge, they will require careful consideration and planning for our member institutions. ̽»¨Â¥ is concerned the sheer magnitude of changes will present significant implementation challenges for the Department of Education in providing the necessary details for institutions to communicate effectively with impacted learners and to remain in compliance. It will require updates to regulations, processes, technology systems, and guidance materials within tight timelines, all while facing staffing shortages and resource constraints. We will continue to press the administration for details, and as we learn more, we will translate these changes into actionable guidance to support your work.
One of our core functions is advocacy, ensuring that institutional voices are heard in the halls of legislation and policymaking. This week, ̽»¨Â¥ members participated in Hill Day, using their collective voices to share their perspectives with legislators and their staff. Members shared their thoughts and concerns and had productive conversations with legislative and committee staff on both sides of the political aisle. Our work, which is issue-based and non-partisan, was recognized and well-received.
This bill, when combined with the Trump administration’s budget proposal, lays out a significantly different vision for higher education. ̽»¨Â¥ will continue to analyze the impact of the legislation and the budget proposal, and work with policymakers to advocate for policies that are implementable for institutions and that support learner access and success.
Sincerely,
Melanie Gottlieb,
Executive Director, ̽»¨Â¥