The GOP's massive tax cut and spending plan has huge implications for the American way of life, impacting food assistance, health care for low-income people, farm policy, energy, the environment — and not least, higher education.
"These are going to be some of the biggest changes in higher ed policy in 20 years," said Lesley Turner, a scholar of student loan policy at the University of Chicago.
Federal loan programs
The bill does away with the Grad PLUS program that allows graduate students to use federal loan programs to borrow up to the full cost of attending school. Turner said during an online briefing for the Chronicle of Higher Education that the measure also limits Parent PLUS under which parents borrow to support their kids.
Turner said the bill returns federal lending limits to what they were 20 years ago.
"For the first time since 2005, and for the first time since the existence of the Parent PLUS loan program, there are now strict limits on what students can borrow through the Grad PLUS program and what parents can borrow on behalf of their dependent students," said Turner.
Loans will have a $20,000 annual cap and a $100,000 lifetime limit. Professional programs like medical and law school will have a $50,000 annual borrowing limit and $200,000 lifetime. She said individual schools also can set limits on federal borrowing that are lower than the federal limits for both grad and undergrad students.
And the return to 2005 limits do not take into account two decades of inflation.
"And as you might expect, the programs that will be most affected, the programs where we've seen the highest levels of graduate student borrowing in terms of per student amounts, are health professions, medical students, dentistry programs," said Turner.
Grad PLUS had essentially eliminated the need for grad students to self-finance, or to go to the private lending market, she said.
The current federal distinctions between graduate program and professional program are not clear, she added, raising the prospect that a university might create a program labeled "professional," in business administration for instance, to get higher borrowing limits for students. Turner said that part of the policy is not fully baked-in, and Congress could address it later if that becomes an issue.
One of the reasons for the creation of Grad PLUS was to get more underrepresented and vulnerable students into graduate education. Turner's research suggested it did not do that anyway, even in programs that lead to higher average salaries.
"It seems like, at least for this era, being able to borrow from the federal government was not the binding constraint faced by students in these groups that are not well represented in graduate education," she said.
Longtime critics of Grad PLUS had argued since there was effectively no loan cap, it allowed colleges and universities to raise tuition indefinitely. Turner and co-authors also studied prices and found the data supports a GOP contention that Grad PLUS did embolden tuition hikes.
"In programs where the Grad PLUS programs led to larger increases in borrowing, those programs also had larger increases in prices, on the order of a 64-cent ... per dollar increase in federal borrowing, which is pretty big," said Turner.
A question for the future, she said, is whether eliminating Grad PLUS will have measurable effects on price — will program prices go down or will increases be smaller on average? She was cautious in making a prediction because the bill does not just go back to 2005, the relative borrowing limits are lower after inflation, which, she said could decrease access.
Another big question mark is the effect of the changes on the private student loan market and on what kind of grads institutions send out into the world. At the start of the century, Turner said about 25% of all loan dollars going out to students each year came from the private market.
In recent years, less than 15% of loans come from private lenders. The contraction happened during the financial crisis like the contraction in mortgage lending and other consumer loans. It never rebounded.
"I think the extent to which access is affected and we need to worry about the number of MD students coming out of schools going forward will really depend on what happens with private students loans, whether the lenders expand their offerings and whether these loans will be available to students who otherwise would have taken out grad plus," said Turner.
The reconciliation also dramatically simplifies repayment plans. Student borrowers will have access to only two plans — a standard mortgage-style program of equal monthly payments and a "repayment assistance plan," an income driven offering that forgives remaining balances after 30 years. The income-based plan compresses several versions into one.
"For low-income borrowers, very low income borrowers in particular, it's less generous," said Turner.
There also are new accountability provisions that limit loan forgiveness and payment deferrals. Turner said those are the biggest changes since "cohort-related default sanctions" came in more than 30 years ago. Those could make students less willing to ask and less able to qualify for loans.
For degree programs, students will have to meet an earnings benchmark. Students leaving undergrad programs will have to earn more than the typical high school graduate, and for departing grad students the benchmark will be based on the typical earnings of those who have an undergraduate degree, she said.
Illinois State University impact
Illinois State University Financial Aid Director Bridget Curl said the impact to graduate students from the cancellation of Grad PLUS will be small, affecting about 20 per year, but may be crucial for those who are affected. They may have to explore private alternative loans, but not all will qualify, she said.
For undergraduate students, Curl said the cap on the Parent PLUS program is the most significant. Most Parent PLUS borrowers for ISU students are borrowing $11,000-13,000 per year, well under the $20,000 cap.
About 600 students have parents who take out loans above the cap size, averaging $25,000 per year, she said. They won't be able to do that anymore. Curl said it might still be manageable for many of those affected.
"They can work through applying for other loan assistance. They can look to see if they can reduce that anyway, what they are using those funds for to see if they can cut some of those costs or here at ISU and most institutions probably have some sort of payment plan," said Curl.
Even under the cap, there may be issues for some parents with tighter rules to qualify for loans.
"There will be some students that their parents won't be able to get approval for the Parent PLUS loan, and that's how their parents were planning on funding. It certainly could impact whether they can attend," said Curl. “We have found that borrowers will get more leniency and credit approval with the Parent PLUS loan than necessarily with the private loan."
She said last spring the state of Illinois Comptroller's office Illinois Loan program partnered with a state loan program in Iowa and that could be an option to explore.
A majority of ISU parent borrowers have income between $100,000-$200,000, said Curl.
The simplification of repayment plans that offer less flexibility and less loan forgiveness makes it more important than it used to be for students to consider [before they arrive on campus] whether they will be able to repay the loans once they get a diploma, said Curl.
"It is rare that our families are looking that far ahead, but I think it's important that families need to start looking that far ahead."Bridget Curl, ISU's financial aid director
"It is rare that our families are looking that far ahead, but I think it's important that families need to start looking that far ahead. Look at what career they're going to pursue and what the average salary is for that kind of career, and then there are loan calculators to see what your payment would be and then figure out is it financially feasible for you to do that," she said.
For many students of previous generations, the traditional college experience included trying subjects on for size to see if they want to make a life in that field. Sometimes students change majors in the middle. That ethos had already been diminishing, and the loan repayment changes suggest that could now be a more risky economic path than before.
The majority of ISU students borrow from federal plans, about 12,000 per year. Most will likely not run up against lifetime caps for loans. There are 1,000-2,000 whose parents borrow from Parents PLUS. And there are about 2,000 students who use private alternative loans. They may need to be more aware of the caps to avoid running out of space before they graduate.
One of the provisions of the bill is to pro-rate loan limits for students who are less than full time, said Curl. That's about 1,000 student loan borrowers at ISU. Curl said they will be affected, though the government has not yet released any chart on the prorated amounts.
Two negotiated rule-making communities will meet from the fall through January. ISU anticipates regulation will come from that.
“If they implement those for the ‘26-‘27 academic year, that's going to be a quick turnaround time. Schools and families would love to have more time than that to plan and prepare," said Curl, noting families usually start making decisions about financial aid and loans starting after they choose a college or university in February.
Workforce education
There is some good news for college students. The bill enlarges student eligibility for grants in programs designed to fill gaps in the economy. Heartland Community College President Keith Cornille said Workforce Pell is something Heartland has wanted for years.
"Finally, we're going to see some adjustments that have shorter term type of programs that will be Pell grant eligible now," said Cornille.
Heartland has increased the number of certificates and degrees by 40 in the past seven years, and many of those are shorter term courses of study. Cornille said many of those could now be eligible, particularly Certified Nursing Assistant and Medical Assistant programs.
Previously, students in very short-term programs of less than 15 weeks were not eligible to receive Pell grants.
Workforce Pell extends Pell grant eligibility to accredited programs as short as eight weeks and as short as 150 clock hours, said Liz Clark, vice president for policy and research at the National Association of College and University Business Officers [NACUBO] during the Chronicle of Higher Education briefing.
"It's really good news for the programs and offerings that they offer say in nursing or information technology, truck driving, their efforts to reach non-traditional students and bring them into certificate programs," said Clark.
The Education Department has yet to write the rules and regs that affect shorter duration programs. Clark said existing standards for longer duration programs may be a guide for community colleges.
"There was some level, with the accreditation requirement, of quality assurance here that this would not just be Pell grants going to fly-by-night programs that are offering little quality education," said Clark.
She said it is not yet clear whether some of the embedded certificate programs where students learn on the job, or micro certificates aimed at a particular small skill set, will be eligible.
Another workforce provision affects all employers — not just universities. Clark said section 127 now allows employers to provide up to $5,250 in support for higher education.
"That provision has now been made permanent after 40 years, and in fact there's an inflation adjustment," said Clark.
And employers can use section 127 to help workers pay off student loans, a provision that began during the pandemic and is now permanent.
Uncertainty
The old saying is the devil's in the details, and Clark said there's a lot of devil and a lot of detail in this legislation.
"I think if you talk to any business officer these days, they will tell you that they've spent the last several months modeling, modeling, modeling," said Clark, adding there are many reminders in the bill to pay attention to varying dates when certain changes take effect.
“Also, once we know one institution, we know one institution. All of these issues are really going to turn dials in different ways for different colleges and universities," said Clark.
She said the year until implementation of many provisions offers time for strategic planning and clarity to emerge.
"Will the private market pick up this market and will students express interest in going to that private market?" said Clark.
Cornille said some multi-year programs may or may not survive.
"Our TRIO program, for example, which we just received word was funded again for this given year, but we don't know about the long-term consequence is for that, and that's a program for first-generation students to help them have success," said Cornille.
TRIO is typically a five-year award, but Cornille said there is no certainty of that in this cycle.
Beyond the "Big Beautiful Bill" provisions, Cornille said the new federal budget will be proposed and formed before October, and other programs could be at risk.
"You look at adult education and the changes that could happen in that arena, too, could have significant implications on our community, especially for individuals that want to earn a GED or need English as a second language.," said Cornille.
He said losses in that area could close the door on further education and harm both immediate employment prospects and the ability of people to bootstrap themselves into higher earning jobs later.
Cornille said he’s also watching potential shifts in the accreditation process that give validation to programs that make institutions eligible for Title 4 money. He says not knowing what the process is may diminish the ability to have an accrediting institution come in and say here is where you do well and here is where you can do better.
Earlier this year, the U.S. Supreme Court cleared the way for mass layoffs at the Education Department that inflects what will happen with the provisions of the Big Beautiful Bill. Cornille said the Education Department will have to enact the changes with less than half the staff it had at the start of the year.
"I think that's a big concern. When you look at everything they want to change with these programs, it's going to create some angst when it comes to how do we make this happen," he said.
Extraneous factors in the mix
Provisions ostensibly affecting matters outside the higher education sector may be relevant to the outlook as well — some bad, some not.
Liz Clark of NACUBO said changes in charitable giving laws offer new benefits for people who don't itemize tax returns.
"Providing an incentive for what are frankly lower dollar donors but those are donors that significantly support college and university annual fund campaigns, very important to the annual budgets at colleges and universities," she said.
There also are new limits on people who do itemize their taxes who tend to be larger dollar donors. She's not sure how those provisions will pan out.
Sweeping changes to Medicaid and nutrition programs from the big bill also have implications for colleges and universities. Cornille said reductions in Medicaid will hurt health care access for some students. And the bill shifts the way Medicaid is funded.
"If the federal government is moving more of it on the states, then that means what is going to happen with state dollars and often times higher education is one of those areas that's cut when state appropriations have to be adjusted," said Cornille.
"People are understandably worried and it's a really difficult time," added Clark.
The end of renewable energy tax credits will affect colleges and universities that had been moving to renewable fleet vehicle and wind and solar power generation for their campuses, she said.
Colleges and universities have a lot to cope with.
"I think most business officers are sophisticated enough that an across-the-board cut is not right, good, or strategic. They're going to be looking at different ways to address any shortfalls," said Clark.
They may try to make tougher and more precise choices on what research to fund. There may be university hiring freezes. Colleges and universities may look for new ways to budget benefit programs, for example by requiring employees to meet a higher match for retirement programs, she said.
Things for higher ed to watch in the coming year
- What happens in statehouses. Will there be statehouse choices to cut higher ed funding?
- Litigation on the administration cap of indirect research costs at 15% — will it chill further research and cause program cuts at big universities?
- The administration wants further rescission packages. Will those happen?
- How will Congress put together appropriations for FY 2026 on Oct. 1?
- Next year "mandatory sequestration" kicks in. How much will that crimp federal spending?
- The Big Beautiful Bill pushes some decisions back to the states. How long will it take to gain clarity?
- Some observers say Congress does not appear to be as interested in cutting National Science Foundation and other research as much as the administration wants. Will that continue?
For now, though, there is some breathing room. Pell grants and work study are in place for students enrolling in the fall. These are elements of higher education that survived steep reductions in the earlier House version of the bill.
