One Big Beautiful Bill’s Impact on Higher Education

Action: On July 4, the President signed the long-anticipated tax bill, One Big Beautiful Bill Act, into law after intense negotiations in both the US House and Senate. The new law has a number of implications for the higher education sector and students, with sweeping changes to student loan borrowing, repayments, and institutional accountability. The bill also creates a tiered endowment tax for certain institutions of higher education. Additionally, the new law advances a bipartisan priority by expanding Pell Grant eligibility to include short-term job-training programs.

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The new law eliminates Graduate PLUS loans, which are frequently used by graduate students to cover remaining expenses after financial aid is applied and the unsubsidized federal loan limit is reached. The loans, which currently have no limit and are available through participating higher education institutions, will phase out by July 1, 2026.
Also effective on July 1, 2026, all Federal student loan borrowers will face new limits, including an aggregate lifetime limit of $257,500. Parents who borrow for dependents through the Parent PLUS Loan program will be limited to a $20,000 annual and $65,000 lifetime ceiling for each dependent. Graduate students will have a $20,500 annual limit and $100,000 lifetime limit. Higher limits apply to students in professional programs, such as law and medical school, who may borrow $50,000 per year and $200,000 over a lifetime.
- Of note, the average annual tuition and required fees for full-time graduate programs in the 2023-24 school year were $11,827 for public institutions and $20,515 for private institutions, excluding course materials, housing, and other expenses. Professional programs were significantly higher, with the median annual tuition reaching $52,450 for medical school and $42,780 for law school.
The law also replaces the SAVE income-driven repayment plan, with the Repayment Assistance Plan (RAP). RAP increases the minimum required payment and extends the loan forgiveness timeline to 30 years, up from the current range of 20-25 years.
In addition, the law imposes greater accountability on colleges by tying Federal funding eligibility for academic programs to the median earnings of program graduates. Program graduates must earn more than the median income of a local high school graduate (for undergraduate programs) or a working adult in the same field (for graduate programs).
Finally, the bill establishes a tiered endowment tax maintaining the existing 1.4% rate, rising to 4% and 8% depending on an institution’s endowment size and student population.

One Big Beautiful Bill’s Impact on Higher Education

July 10, 2025

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The new law eliminates Graduate PLUS loans, which are frequently used by graduate students to cover remaining expenses after financial aid is applied and the unsubsidized federal loan limit is reached. The loans, which currently have no limit and are available through participating higher education institutions, will phase out by July 1, 2026.

Also effective on July 1, 2026, all Federal student loan borrowers will face new limits, including an aggregate lifetime limit of $257,500. Parents who borrow for dependents through the Parent PLUS Loan program will be limited to a $20,000 annual and $65,000 lifetime ceiling for each dependent. Graduate students will have a $20,500 annual limit and $100,000 lifetime limit. Higher limits apply to students in professional programs, such as law and medical school, who may borrow $50,000 per year and $200,000 over a lifetime.

Of note, the average annual tuition and required fees for full-time graduate programs in the 2023-24 school year were $11,827 for public institutions and $20,515 for private institutions, excluding course materials, housing, and other expenses. Professional programs were significantly higher, with the median annual tuition reaching $52,450 for medical school and $42,780 for law school.

The law also replaces the SAVE income-driven repayment plan, with the Repayment Assistance Plan (RAP). RAP increases the minimum required payment and extends the loan forgiveness timeline to 30 years, up from the current range of 20-25 years.

In addition, the law imposes greater accountability on colleges by tying Federal funding eligibility for academic programs to the median earnings of program graduates. Program graduates must earn more than the median income of a local high school graduate (for undergraduate programs) or a working adult in the same field (for graduate programs).

Finally, the bill establishes a tiered endowment tax maintaining the existing 1.4% rate, rising to 4% and 8% depending on an institution’s endowment size and student population.

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