On July 4, the Trump administration signed budget reconciliation legislation — known as the One Big Beautiful Bill — which will take effect in the 2026–2027 academic year.
Among the policies in the bill are changes that affect financial aid programs for higher education students. The confirmed list of changes and impacts is still unfolding, but the main components focus on graduate financing.
Loans and grants
Pell Grant eligibility has expanded to include shorter-term, workforce-aligned programs. Parent PLUS loans are capped at $20,000 per dependent student each academic year, with a lifetime maximum of $65,000. All borrowers face a $257,500 cap across all federal student loans.
Graduate PLUS loans, which allow students to borrow beyond unsubsidized amounts, will be eliminated.
Anthony Jones, the executive director of scholarships and financial aid, told the Chronicle how graduate students can finance their programs without federal loan programs.
“The real big change is for graduate students, those working on their master’s or their doctoral degree,” Jones said. “There’s private loans, and we’re certainly looking at how can we identify private loans that have the best terms, best interest rate, things like that. We’re working to identify those and be able to have ways students can compare them to make the best choice.”
Federal loan limits for professional and graduate degrees have increased, but the elimination of PLUS loans has raised concerns about whether students in more expensive programs can make up for the loss in financing.
“They cut off the loan in hopes of stopping large borrowing, is what they said. But the concern is there are students who needed to borrow to cover those costs, and now that’s gone,” Jones said. “All that’s left are private loans, which may not have as good of terms, like interest rates. With some of the other loans, you don’t have to go into immediate repayment while you’re still in school. On most private loans, you do. So, it pushes people to other loans, possibly, that may not be as generous.”
Shifts in aid
Marshall Steinbaum, an assistant professor of economics at the U, explains the national shift in loan emphasis away from need-based aid, determined by socioeconomic background, and merit-based aid, determined by academic performance.
“In the last decade or so of higher education, is the shift from what’s called need-based aid to merit-based aid,” Steinbaum told the Chronicle. “Rather than the children of the least well-off parents paying the lowest price, it’s actually the children of the most well-off parents paying the lowest price. What I think they’re trying to do is climb the rankings of prestige.”
He explained how the changes will differently affect in-state and out-of-state students.
“The way that you appear to be a more prestigious institution is by admitting more merit-based students or students who can qualify better merit-based aid,” Steinbaum said. “Again, those tend to be the children of better-off parents, especially from out-of-state. So the out-of-state students are very attractive to public universities because they pay much higher tuition than the in-state students.”
FAFSA and repayment plans
Changes to FAFSA include reinstating exemptions for small businesses, family farms and fishing businesses, which had been removed under the FAFSA Simplification Act of 2022.
Steinbaum explained the effects of the FAFSA Simplification Act and its connection to the broader shift in loan emphasis.
“That reduces the burden to fill out the FAFSA separately on the part of the applicants, but it gives the institutions more information about your ability to pay, basically, and they can use that information against you,” Steinbaum said. “My concern in the move to merit-based aid is basically that they see what people are able to pay and then basically charge you an amount that’s exactly the maximum you’re willing to pay without the benefit of competition, especially for students who don’t have that many options about where to go.”
Beginning July 1, 2026, new federal student loan borrowers will have two main repayment options: the Standard Repayment Plan and the Repayment Assistance Plan (RAP). The revised Standard Plan will offer lower monthly payments for loans greater than $25,000. The RAP, an income-driven option, will set monthly payments at 1% to 10% of a borrower’s gross income.
The SAVE, IBR, ICR and PAYE repayment plans will be phased out, with borrowers required to transition to a new plan by July 1, 2028. In addition, unemployment and economic hardship deferments will be eliminated.
