Featured Article: “The Big Beautiful Bill Gives Some of Higher Ed’s Ugliest Problems a Makeover”

The “One Big Beautiful Bill” has become law. On July 4, President Trump signed the 870 page piece of legislation into law, cementing sweeping financial reforms across various sectors, with some reforms influencing higher education. 
 

While some, even conservatives, decry the legislation as a whole, the majority of the higher education reforms are beneficial, even if the reforms in the bill’s final form are more moderate than when it was first proposed by the House. 
 

Since I wrote about the House version of the bill a few weeks ago, there have been several key changes to the One Big Beautiful Bill that deserve to be highlighted and clarified. So, to summarize in a few points the differences between the initial and final versions of the legislation, below is a quick summary:
 

House Version

• Contained risk-sharing, placing colleges and universities on the hook by requiring institutions to pay a penalty for unpaid student loans. 
• Pell Grant eligibility determined by maintaining a “full-time” status—i.e., students must take 15 credits per semester—with no grant money distributed for students taking less than 7.5 credit hours per semester.
• Student loans capped: graduate student loans capped at $100,000, and $150,000 for professional students, respectively; Parent PLUS loans capped at $50,000 per parent regardless of number of children; no subsidized loans; no Grad PLUS loans for new borrowers; and proposed lifetime limit of $50,000 for undergraduate loan limits.

Senate Version (Approved by House and Signed by President)

• No risk-sharing, instead opting for an “earnings test” in which schools could lose federal funding if students earn less after graduation than the median adult with a high school diploma.
• No change to Pell Grant eligibility status—i.e., students are not required to maintain “full-time” status at 15 credit hours per semester—but if other scholarships cover cost of attendance already, students are disqualified from Pell Grant funding. Pell Grant eligibility has been expanded to cover short-term job-training programs at accredited institutions, which was also proposed in the House version. 
• Student loans capped—though less strict: graduate student loans capped at $100,000, and $200,000 for professional students, respectively; Parent PLUS loans capped at $65,000 per student; no change to subsidized loans; no Grad PLUS loans for new borrowers made it into the final bill; and no limit to undergraduate borrowing.  

Additionally, the final legislation does contain endowment tax rates for the nation’s wealthiest institutions, but caps it at a mere 8 percent, compared to the House plan’s proposed 21 percent—note that the current endowment tax rate is 1.4 percent. The final bill retains the House’s tiered rate structure, but with slight modifications to the endowment value per student. For instance, the House version would have increased the tax rate to 21 percent for schools with more than $2 million in endowment value per student, versus the Senate version which only increases the tax to 8 percent. Colleges and universities will not be allowed to include international students in their student body tally when calculating endowment tax rates, which will make more institutions beholden to higher endowment taxes.

Regarding student loans, new borrowers will now have two options for repayment: “a Standard plan on a 10 to 25 year term depending on the loan amount, or the RAP plan, which requires 30 years in repayment before the borrower could qualify for student loan forgiveness.” Students currently on income-driven repayment plans will need to enroll in the updated income-based repayment plan or the Repayment Assistance Plan created by the bill starting in July of next year—which is when the student loan changes begin—through 2028. The bill appears to also prevent future illegal student loan bailouts like those attempted by the Biden administration. 

Overall, the One Big Beautiful Bill does more to reform higher education than other legislation in the many years. However, there are a few let downs and missed opportunities. The final version of the bill eliminated risk-sharing in favor of the earnings test, which will do little to hold most colleges and universities accountable, particularly grad programs. "Hopefully, the next reconciliation bill will include some debt-based accountability mechanisms," said Andrew Gillen in an article for Minding the Campus.

Until colleges and universities are saddled with the consequences of administrative bloat, education’s ideological reorientation toward political and social activism, and skyrocketing tuition prices, higher education is unlikely to change. Congress and the Trump administration have once again opted to kick the can down the road. Perhaps the states will do what Congress refuses: hold colleges and universities accountable.
 

Until next week.

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