What changes will Trump’s ‘Big Beautiful Bill’ bring for colleges and students?
While university dormitories in the United States are filled with fresh sheets and mini-refrigerators, students and their families face a new loan environment.
The “Big Beautiful Bill” by President Donald Trump, signed on July 4, has changed the amount that students can request – including higher education, such as medical and law faculty – and how money must be reimbursed. The new tax law also aims to increase the responsibility of colleges in terms of student investment protection.
The Congressional Budget Office estimates that the bill will reduce more than $ 300 billion in funding for colleges over a period of 10 years. The government will also absorb funds from the increase in taxes on rich schools with large endowments.
Why we wrote this
As the courses start on university campuses in the United States, schools and students absorb the changes that recent law will bring to everything, educational loans on endowments.
In a survey published this month by US News & World Report, less than a quarter – 20% – of students questioned said that they fully understood the changes made by tax law and what they involve. The “Big Beautiful Bill” has changed the financial landscape of higher education in a number of key areas.
What changes can borrower students and their families wait?
From July 1, there will only be two reimbursement options for new loans, reduced by a handful of options, including savings from the Biden era on a precious education plan, which is being eliminated. The Ministry of Education said that the new law “simplifies the student loans reimbursement system”.
The new options include the standard reimbursement plan, which has a fixed monthly payment which could be reimbursed in 10 to 25 years, depending on the amount borrowed. The other is the reimbursement assistance plan, a plan focused on income which fixes monthly payments from 1% to 10% of the gross income adjusted from a borrower. He extends payment to 30 years, against previous options of 20 or 25 years. The government’s loan simulator page, where students and their families can determine the loan conditions that suit them best, does not yet reflect legislative changes.
Longer payment periods and financial assistance discounts will oblige students to contract private loans, for which there is no option for forgiveness of loans, explains Sabrina Calazans, executive director of the non -profit student debt crisis center.
The bill also modifies the more current parent loan program by capping the loan. Currently, parents can borrow the total cost of the cost so that children can go to school, less any other financial assistance than students receive. Parents currently have the way for grandfather the limits and reimbursements of existing loans. But from July, the overall ceiling will be $ 65,000 and the annual limit will be $ 20,000. Parents can borrow for several children, but the $ 65,000 ceiling applies to each child. Changes, according to opponents of the bill, will affect low -income families more. Supporters say that the law will oblige colleges to keep the tuition fees in check.
In addition, Graduate Plus loans, which currently allow borrowers to receive the total amount of higher education costs, will be eliminated. These loans will be capped at a lifetime total of $ 100,000, or $ 20,500 per year. Professional loans of higher education for the law, medical and dental schools will be capped at $ 200,000 in total, or $ 50,000 per year.
“At present, Grade Plus, Parent Plus, they are essentially a white check in the federal government. Whatever the college says that it must invoice, the federal government must give students a loan to this amount, no question asked, “explains Preston Cooper, principal member of the American Enterprise Institute.
Mr. Cooper wrote an analysis decomposing the percentage of graduate students currently borrowing above the limits listed in the new bill – a percentage which, according to him, is not significant. “About 20% of students in master’s programs are currently using the $ 20,500 ceiling,” he wrote. “This share drops only 10% in public institutions, which have lower tuition fees.”
He recognizes that students from professional schools may have to turn to private lenders, but that their income will place them in the top 10% when they get their diploma, which should allow them to reimburse them.
According to the association of American Medical Colleges, the average cost of public medicine studies for 2024-2025 was $ 286,454 and $ 390,848 for private schools.
A study carried out in 2006, when the Grade Plus program was created, says Cooper, showed that when students had access to unlimited loan amounts, schools billed tuition fees more. He thinks that schools taking advantage of the program will be forced to slow down tuition fees after the program elimination, which he promotes.
For her part, Ms. Calazans plans that the change could be dramatic.
“What will happen is that people will move their career path so as not to continue these diplomas, especially low-income people, or we will see people to maximize their federal aid, but also to take a significant amount of private student loan debt,” she said.
Just over a third of respondents in the US News & World report said they were considering less schooling due to the bills.
How does the new law aims to hold more responsible colleges and universities?
Under the new bill, something called the “Profits test” initiative will start on July 1, 2026. The undergraduate programs may lose eligibility for the federal student loan if their graduates do not exceed the profits of median income for adults with a secondary school diploma. This is different from the original version of the bill proposed by the House of Representatives, which suggests that colleges pay penalties based on unpaid federal loans for former students.
The profits test also applies to higher education programs and calls for the same penalties if graduates of the program do not earn more than adults holding a baccalaureate.
The test, says Mr. Cooper, ensures responsibility “for programs that produce elegantly bad results”.
What can schools expect in terms of taxes?
In a decision that could have training effects in some of the country’s richest schools, the new tax bill increases the endowment tax or the excise tax, on the investment profits of these colleges, from the current rate of 1.4% to 4% or 8%, depending on the registration of students. Private non -profit colleges and universities with equivalent to $ 500,000 to $ 750,000 per capita will pay the current rate, but those whose allocations are $ 750,001 to $ 2 million will pay 4%. Schools with more than $ 2 million per student will pay 8%. Schools of less than 3,000 students registered will be exempt from new changes.
“The impact of this tax will also be felt far beyond our campus and our hometown,” wrote President Maurie Mcinnis of the University of Yale, in a letter to the campus community on July 3. Yale is one of the schools that will pay 8%. “Tax universities undermine education and research that feeds medical breakthroughs that save lives, innovations that change the life and economic growth of communities across the country and in the world,” she added.
Yale estimates that he will pay $ 280 million during the first year of the new tax, which begins in 2026. Some experts believe that increases in tuition fees could be a result of tax increases.
“Some of these colleges will pay more in excise tax than their annual financial aid,” explains Mark Kantrowitz, expert in financial aid.
“The point that these colleges argue,” he says, “is that the federal government removes money that could be used to make college more affordable.”
