Higher Education on the Chopping Block

How Republicans’ Reconciliation Bill Affects Students, Families, and Borrowers
Blog Post
Images of students from all different backgrounds in front of the Capitol.
Mandy Dean/New America
July 7, 2025

Change is coming to higher education. Last week, Congressional Republicans pushed through, and President Donald Trump signed, budget legislation via an expedited process called reconciliation. The bill, which has been unpopular with Americans, cuts close to $300B from the higher education system and also makes deep cuts to programs including SNAP and Medicaid. The changes to federal financial aid and public benefit programs will likely make college more expensive, especially for low and middle income students who will now face reduced access to resources that help them meet their basic needs.

Here are five things you need to know about the higher education provisions in the reconciliation bill and why they matter for students, borrowers, and families.

  1. Parents and graduate students who take out federal student loans will face new loan limits. The reconciliation bill leaves current loan limits in place for undergraduate students. But where they could previously borrow up to a school’s cost of attendance—a metric which includes items such as tuition, fees, books, housing, and other personal expenses—graduate students and parents who take out loans for undergraduate students will face new caps, and graduate students will no longer be able to take out Graduate PLUS loans. Most graduate students will be able to borrow $20,500 per year and up to $100,000 total; professional students, such as doctors or lawyers, who often face higher costs for their education, will be able to borrow $50,000 per year, up to $200,000 total. Parents will be limited to $20,000 per student per year, with a $65,000 per student total cap.
  2. New student loan borrowers will have new repayment plans. Borrowers who take out loans beginning in July of 2026 will no longer have access to the host of existing repayment plans. Instead, they will be eligible for two new plans: one with fixed payments and one with income-based payments. On the fixed payment plan, borrowers would repay for 10 to 25 years, depending on how much they borrowed. Under the new income-driven repayment plan, the Repayment Assistance Plan (RAP), borrowers would repay a percentage of their incomes based on how much they earn for up to 30 years. While the new law streamlines repayment options, those with the lowest incomes will face higher monthly bills than they would under the current system. Borrowers will also lose access to important protections, like the ability to defer payments due to economic hardship or unemployment.
  3. New very short-term programs are eligible for Pell Grants. Beginning in July of 2026, students can use Pell Grants to attend programs as short as 8 weeks long. (Currently, Pell Grants are available to students enrolled in programs as short as 15 weeks.) While this provides a new option for students, there are few consumer protections for these programs, and analysis has shown that these credentials often do not lead to economic security.
  4. Colleges would be responsible for making sure graduates earn more than if they had not attended. The reconciliation bill holds degree and graduate certificate programs accountable for ensuring that those who complete the program earn more than those with a high school diploma (for undergraduate programs) or a bachelor’s degree (for graduate programs). If a program’s earnings are too low for two out of three years, the program would lose access to the ability to offer federal student loans—but not Pell Grants—to enrolled students.
  5. Students, borrowers, and colleges should expect uncertainty. Many of these changes, and others not mentioned here, are intertwined. For example, the reconciliation bill limits access to the Pell Grant for certain middle-income families, makes cuts to borrowing and repayment, and makes changes to the way we monitor the value of a college degree. Experts have predicted the outcomes of some of these individual policy changes: loan caps without additional aid could push families toward private student loans, some programs with low returns on investment could close or modify their offerings (as has happened previously with new accountability rules), the number of very short-term programs could grow significantly, and more borrowers could default on their loans. But it is hard to know the true impact to the system when these changes are collectively implemented, and the implementation process will likely be lengthy and challenging, given the complexity of the programs and the massive cuts that have been made to staff at the Department of Education.

We also don’t know how states, colleges, and families will manage the impact of federal cuts on their budgets. Here are five additional things we will be watching:

  1. State funding of higher education may decrease and lead to higher tuition rates. Federal cuts to programs like SNAP and Medicaid will create pressures on state budgets that will likely impact higher education funding levels. States will have to decide how to raise additional revenue, cut spending, or a mix of both. Cuts to higher education budgets could result in colleges charging higher tuition to make up for lost funding, which happened in the wake of the Great Recession.
  2. College budget shortfalls could lead to decreased support to help students complete college. Low-income students who rely on Medicaid and SNAP will likely face reduced access to resources to support their essential needs on top of higher tuition costs. Some colleges have already reduced staffing in response to financial pressures, and further cuts could accelerate that process. Meeting students’ basic needs helps boost their ability to stay enrolled and graduate, so threats to staffing or programs that meet essential needs will likely result in more students dropping out with debt but no degree.
  3. Workforce challenges could impact community needs. An estimated 72 percent of jobs will require a college credential by 2031. If cuts to higher education reduce the number of people who can afford to go to college, communities could face worsened shortages of workers in critical fields like healthcare, reducing the services they can access.
  4. College budget shortfalls could lead to reduced jobs and economic activity. Colleges are often an economic driver and a critical employer for their communities. University and hospital systems tend to be the one of the largest employers in their states, alongside Walmart. Reduced funding to higher education could result in less local economic activity. U.S. colleges and universities employ over 4 million people, and some may lose their jobs if colleges reduce staffing to deal with state or other funding losses.
  5. The private student lending market will likely expand, which could put some borrowers at risk. While loan limits are an important policy tool, it can be a challenge to know where to set those limits, and this bill doesn’t fully address some of the underlying issues with the loan program. As a result, these caps will likely push some families into the private market, where costs are higher, there are fewer protections, and some may not be able to access aid.

The reconciliation bill reflects a mixed, but ultimately troubling, reality: more accountability for schools but significant cuts to healthcare, food, and the tools students depend on to pay for and succeed in college and beyond.

If you are interested in learning more, the New America Education and Work programs are made up of researchers, writers, and advocates focused on improving students’ experiences and outcomes through federal policy recommendations and have a variety of pieces explaining the specific provisions and implications of this bill.