The new law changes higher education rules by limiting certain student loans, eliminating the Grad PLUS program, and using students’ earnings to hold colleges accountable. However, students in specific training programs will now qualify for Pell Grants.
As many expected, the sweeping Republican domestic policy, a nearly 900-page piece of legislation that Donald Trump calls his “big beautiful bill,” which Congress approved last Thursday, will seriously impact colleges and students.
According to higher education leaders, it could make it more difficult for people to attend college.
The law would “make college less affordable,” according to Lynn Pasquerella, the president of the American Association of Colleges and Universities, told the New York Times. Pasquerella also mentioned that this could lead to schools being less diverse in terms of both socioeconomic status and racial composition.
The Times reports that the large Medicaid cuts in the bill could impact higher education. Experts warn that new work requirements may make it difficult for low-income students to balance work, school and family. While the requirements in the new legislation vary, they link general Medicaid eligibility to participation in a work program for at least 80 hours per month.
The changes to Medicaid funding won’t take effect until 2028, well after the 2026 midterm elections. However, some of the new work requirements could come earlier. They are to start no later than December 31, 2026.
Here’s how the new law will also affect college students and universities, and when you can expect it to start.
Getting student loans will be harder.
Expect new loan limits. The bill caps federal student loan borrowing for lifetime loans at $100,000 for graduate students and $200,000 for students pursuing degrees in law or medicine.
Grad PLUS loans will be phased out. The Graduate PLUS program, which helps many students pay for their graduate and doctoral degrees after they have used up their Stafford loans, will end in 2026. Current students will not be impacted; however, anyone planning to start graduate school after July 1, 2026, may need to rely more on private loans to cover their education costs.
Parents will be impacted. The new law lowers the maximum amount that parents can borrow to help cover tuition costs. It sets a limit of $65,000 on Parent PLUS loans, which are federal student loans that parents can take out to help their dependent undergraduate children. Additionally, these loans will no longer qualify for repayment programs.
Student loan forgiveness is going away. Starting in July 2026, new borrowers will have two choices for repaying their loans. The first option is a standard plan, where borrowers have 10 to 25 years to repay their loans with a fixed monthly payment. The second option is the Repayment Assistance Plan, which lets borrowers pay between 1% and 10% of their available income each month. In addition, the recently signed legislation removes the option for borrowers to pause their loan payments if they are having financial difficulties or are unemployed.
The SAVE program remains in limbo. Almost eight million borrowers enrolled in Biden’s SAVE (Saving on a Valuable Education) repayment plan are awaiting a judge’s ruling on the program’s legality. However, according to the new bill, these borrowers will need to pick a different repayment plan between July 2026 and the end of June 2028. If they don’t choose a new plan by July 1, 2028, they will automatically be put into the Repayment Assistance Plan, which will be based on their discretionary income.
Overall, these changes may make it harder for students to access higher education or force them to choose private loans, which typically have higher interest rates. Education and political leaders say that this situation could especially affect Black borrowers, who already carry a larger share of student debt and often find it more challenging to pay back their loans. In addition, institutions like medical school might be out of reach for some students, even though we desperately need more Black doctors. According to the Education Data Initiative, graduates of medical schools typically carry more than $240,000 in debt.
The amount of money graduates make may affect their student loans.
Under the new policy, degree programs will not be allowed to use federal student aid if their graduates fail to meet certain income thresholds. This rule applies to both undergraduate and graduate programs.
There has been a shared concern across political parties about how to evaluate the effectiveness of college programs and ensure they are accountable for their outcomes. Still, experts say that the bill does not adequately consider the complexities of different programs, as some aren’t primarily focused on financial success.
“You don’t necessarily pursue social work because your goal is to be rich,” Jon Fansmith, a senior official at the American Council on Education, explained to The Times. “You don’t pursue a master’s in English because your expectation is this is a path to a lucrative career.”
The bill does not specify a date when degree programs will lose federal student aid eligibility based on graduate earnings.
University endowments are subject to higher taxes.
Trump has consistently targeted university endowments, particularly Harvard’s $53 billion fund. In 2017, a 1.4% tax was introduced for colleges with endowments exceeding $500,000 per student, affecting a few wealthy institutions.
Colleges usually take out about 5% from their endowments each year to fund financial aid, faculty positions and everyday expenses, which is essential for helping students, but the new bill raises this tax on certain colleges. Schools like Harvard and Princeton that have endowments of $2 million or more for each student would have to pay an 8% tax on their investment earnings.
Analysts argue that the tax appears more like a personal attack than a fair policy, noting that the revenue it generates would be insignificant compared to the anticipated $3.3 trillion increase in the national debt resulting from the overall bill.
This change, however, spares colleges with fewer than 3,000 students from this tax.
The new endowment tax note is effective immediately. It applies to the current fiscal year that started on July 1, 2025.
Pell Grants can now be applied to non-degree programs.
The bill includes the Workforce Pell legislation, which will allow more learners and workers to use Pell Grants for short-term job training programs.
Previously, Pell Grants, which are federal grants for low-income students, could only be used for programs that lasted at least 600 clock hours and 15 weeks long. This meant that many valuable short-term training programs, which help students quickly get ready for in-demand jobs, were not eligible for funding. As a result, students interested in these programs often didn’t have access to federal financial aid.
The Workforce Pell legislation changes this by making Pell Grants available for shorter, career-focused programs. These programs could be in areas such as healthcare, IT, skilled trades, or other growing fields where employers need trained workers immediately, allowing students to earn credentials in weeks rather than years.
This policy will start on July 1, 2026.
It’s important to note that the Workforce Pell Legislation includes many rules and measures that were part of other bipartisan proposals from recent years. It was not solely crafted by the current administration.
