Following a flyover by a B-2 bomber, President Donald Trump signed a sweeping policy bill into law Friday, celebrating the Fourth of July and commending congressional Republicans for meeting his self-imposed deadline.
The legislation, which narrowly passed the House on Thursday, promises to significantly change how colleges operate. Higher education groups and advocates warned that the bill will hurt low-income families while proponents praised the changes as necessary reforms.
Much of the debate over the bill dubbed the One Big Beautiful Bill Act centered on the nearly $1 trillion in cuts to Medicaid, as well as changes to the tax code that will benefit the very rich. But the 870-page piece of legislation also overhauls higher education policy to cap some student loans, eliminate the Grad PLUS program and use students’ earnings to hold colleges accountable. Taken together, higher education experts say, the legislation would transform the sector, hurt universities’ finances and hinder college access.
But the legislation doesn’t include some of the proposals that most worried college leaders, such as cuts to the Pell Grant program and a 21 percent endowment tax rate. Wealthy private colleges will still face a higher tax rate on their endowments, up to 8 percent. (The current rate is 1.4 percent.)
Some higher ed lobbyists commended Republicans for backing off some of the deeper cuts, but they are worried about a number of changes in the bill.
Eliminating Grad PLUS loans could mean fewer students attend graduate school, which would be a hit to universities’ bottom lines, especially at institutions that rely heavily on graduate programs for tuition revenue. Similarly, capping Parent PLUS loans at $65,000 per student could hurt Black and Latino families, who disproportionately use the loans. The legislation also consolidates repayment plans, giving future borrowers two options. Consumer protection advocates worry the bill will exacerbate the student debt crisis and drive students to private loans.
The student loan changes take effect July 2026.
Catch Up on Our Coverage of the Bill
Lawmakers also agreed to expand the Pell Grant to short-term job-training programs, achieving a long-sought goal for community colleges and other groups. In a last-minute change, the expansion excludes unaccredited providers.
“While somewhat improved over its original version, [the bill] contains a mix of new taxes and spending cuts that will force even more difficult decisions on chief business officers and further strain revenue that helps make college affordable for students and families,” said Kara Freeman, president of the National Association of College and University Business Officers. “The long-term implications of this legislation for higher education and American innovation are likely to be profound.”
Over all, the One Big Beautiful Bill Act will add about $3.3 trillion to the national debt over the next 10 years, according to the Congressional Budget Office. Republicans said they had hoped to curb spending and address the growing deficit with the legislation, and some conservatives balked at the price tag. Still, pressure from the president to deliver a legislative victory won out, even as some lawmakers waffled for hours over whether to support the bill. Politico reported that Trump called lawmakers and met with them in person to make his case.
Republicans lawmakers and Trump administration officials praised the legislation, saying it would lower the cost of college and boost accountability. One of the major changes ties colleges’ access to federal student loans to students’ earnings. Programs that fail to show their graduates earn more than an adult with only a high school diploma could be cut off from loans. One rough analysis found that fewer than half of two-year degree programs would pass the earnings test, but community colleges are less reliant on loans.
“Overall, the Senate’s ‘do no harm’ proposal would strengthen the higher education system,” wrote Preston Cooper, a senior fellow at the conservative American Enterprise Institute, who conducted the analysis. “But the current political environment presents a once-in-a-generation chance to fix the broken federal role in higher education. Lawmakers shouldn’t miss the opportunity to go further.”
Another analysis from the Postsecondary Education and Economics Research Center at American University found that programs that would fail the earnings test enroll about 1 percent of students. But the test wouldn’t apply to certificate programs, where one in five students are pursuing a credential that doesn’t provide the necessary earnings boost, according to the PEER Center. Other experts have argued that the accountability plan should’ve taken into account the cost of programs and students’ debt loads.
Colleges generally preferred the earnings-based accountability plan, which is similar to the Biden administration’s gainful-employment rule, though lobbyists had wanted lawmakers to make some changes. House Republicans had planned to make institutions pay an annual penalty based on students’ unpaid loans, which could’ve cost colleges billions.
Jason Altmire, president of Career Education Colleges and Universities, the national trade association representing for-profit institutions, congratulated Congress in a statement Thursday for passing the “monumental legislation.”
He praised the short-term Pell expansion as well as the “no tax on tips” policy, among other provisions. But he’s concerned about parts of the new accountability framework, though “we strongly support the fact that the measure applies equally to all schools in all sectors of higher education, a longtime CECU priority.”
Altmire and CECU oppose the loan caps and eliminating Grad PLUS loans. “These cuts will negatively impact students and limit access for those who are most in need,” he said in the statement. “These provisions are ill-advised and we hope Congress will revisit them in the future. Overall, we are grateful that our voice was heard and so many of our longtime priorities were included in the final bill. We look forward to working with Congress to make improvements through future legislation.”
Charles Welch, president of the American Association of State Colleges and Universities, said in a statement that the cuts to Medicaid and other programs will hurt regional public universities, which are typically “the first victim of tightened budgets.”
“Never has the federal government divested itself of financial responsibility to such an extent, imperiling previously stretched state and local budgets as they seek to cover newly obligated burdens,” Welch said.
Welch added that colleges in the association must put their “profound disappointment in the reconciliation bill aside” to focus on the appropriations process, which will kick into high gear this month. The appropriations bills in Congress set the spending limits and direct agencies how to dole out federal dollars. The Trump administration has proposed deep cuts to the Education Department’s budget, including zeroing out college-access programs like TRIO.
“The American Association of State Colleges and Universities urges Congress to reassert its constitutionally endowed authority over government expenditures, eliminating executive overreach and fully funding the programs, grants, and institutions that serve our nation’s postsecondary students,” Welch said.
