Part 2 of The Big Beautiful Bill: Higher Education.
Graduate School Enrollment
Now that the Big Beautiful Bill is the law of the land and has been signed by President Trump, I would like to look to the future and share some insights on important topics and outcomes. Rather than posting a lengthy article, I will share a five-part series on this topic over the next week. You can expect a new article every day at 830am. If you want to read the 870-page bill, you can access it here.
Higher Education Transformation
It is no secret that higher education is undergoing a critical shift in its market and funding. Higher education leaders are overseeing a change in the role of universities and their impact on local economic development. Whether it is the enrollment cliff, online and remote learning, AI, or declining budget appropriation, it feels like the perfect storm.
For some universities, these challenges will lead to closure. The number and frequency of closures have increased over the past five years.
The Big Beautiful Bill adds another challenge by making college less affordable to students and introduces new accountability measures that will complicate long-term planning for higher education.
Changes to Expect
Federal student loans get major caps. Graduate students will face new borrowing limits, with Master's students capped at approximately $20,500 per year and professional students (including those in law and medicine) limited to $50,000 annually. The popular Grad PLUS loan program that allowed unlimited borrowing? Gone entirely.
Parent PLUS loans are now limited. Parents can only borrow up to $65,000 per student, a change that will disproportionately impact Black and Latino families who rely heavily on these loans.
Income-driven repayment gets gutted. The Biden administration's SAVE plan and other popular repayment options will be eliminated, leaving borrowers with just two choices. Nearly 8 million current borrowers will face higher monthly payments and lose any path to loan forgiveness.
Colleges face new accountability measures. Programs must prove their graduates earn more than high school diploma holders, or risk losing access to federal student aid. One analysis found that fewer than half of two-year degree programs would pass this earnings test. The accountability measure tracks the median earnings of students by program and compares them to the average earnings of adults ages 25 to 34 with only a high school diploma. If students don’t earn more than adults without a college degree for two out of three consecutive years, then the program would lose access to federal loans for at least two years. (Link)
Pell Grants see mixed changes. While the program wasn't cut as deeply as originally proposed, students will need to maintain higher credit loads to qualify for full grants. To qualify, students will now have to enroll in 30 credit hours per year, up from 24 hours previously. For most universities, this means that their students will need to take one additional class per semester to be eligible for Pell Grants. On the positive side, Pell Grants will now be available for short-term job training programs.
The Real-World Impact
For students: Millions will be forced to turn to more expensive private loans or abandon their educational goals entirely. Graduate school becomes less accessible, particularly for students from working-class families.
For universities: Institutions that rely heavily on graduate programs for revenue will see their bottom lines hurt. The accountability measures could force program closures.
For families: The changes push millions into "the riskier and more expensive private student loan market."
Summary of Provisions
Inside Higher Education provides a concise summary of the key higher education provisions and their respective functions. (Link)
It Could Have Been Worse
The final version of the bill did not include many of the concerning proposals. Cuts to the Pell Grant program and a 21 percent endowment tax rate were eliminated from the final legislation.
The Takeaway
The Big Beautiful Bill Act will fundamentally transform higher education, making college less accessible for millions of students while shifting costs to families and private lenders. Higher education leaders will have to change how universities operate and who they serve.
Stay tuned for Part 3 of the Big Bill Beautiful series to be released tomorrow. Tomorrow, we dig into who is on Medicaid and the local regional impact. Find out how many people in your region might be impacted by changes.
-Dr. A
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About the Author
Dr. Abdullah Al Bahrani is an economics professor and an award-winning educator. His research focuses on household finance and economic education. In addition to this newsletter, he has a YouTube channel and an Instagram account to share his economic insights. His goal is to improve economic literacy and well-being.
Do You Miss Part 1?
Part 1 of The Big Beautiful Bill: Feature or Glitch
Now that the Big Beautiful Bill is the law of the land and has been signed by President Trump, I would like to look to the future and share some insights on important topics and outcomes. Rather than…
This is a tough one to see go through because we all know the power of a college degree, both financially but also personally. It's sad to think about how many amazing students there are on the margin who will now miss out on that opportunity.
Why should taxpayers back higher education loans? What neighborhood effect is there? How does someone getting a degree in gender studies benefit the taxpayer? Why should we subsidize this, especially when tuition costs are 40-100k a year depending on the school. Is government funding the reason for all of the great contributions throughout its history from American inventors , entrepreneurs, scientists?
Look at the size of these endowment funds these universities run, they make you take courses you don’t need and offer degrees in made up fields with made up courses. They’re liberal cesspools. These loans are only made because banks know the taxpayer will pick it up when the student can’t pay. The US shouldn’t guarantee or back any of these higher education loans except in certain cases. Why should the people who didn’t go to college subsidize others for their own choice? In the end all we get is inflation and a decrease in the standard of living. Bailouts is the name of the game.