One Big Beautiful Bill Is an Implementation Nightmare for Higher Education

Last week, the House passed its One Big Beautiful Bill Act, which takes a $350 billion wrecking ball to higher education access and affordability. The changes to higher education combined would radically alter everything from how much in federal Pell grants and loans students are able to receive, how much colleges charge, how borrowers repay their loans, and a complicated proposal that would seek to hold colleges responsible for their students’ loan repayments.

Secretary McMahon has repeatedly described the Department as “an agency that is responsibly winding down.” While the Department is hoping to wind down, House Republicans are proposing legislation that would require it to dramatically ramp up to implement one of the most complicated set of changes in several decades, setting off an implementation nightmare that would leave the millions of students and borrowers who rely on it in the lurch.

The legislation and projected costs do not consider whether the policies could be implemented on the quick timelines in the bill that account for the “savings” to pay for tax cuts for billionaires. The complex level of changes would require a multi-year-long effort of dramatically revamping Department of Education regulations, processes, contracts, technology systems, and the creation of entirely new ones, with the bulk of these changes occurring over the course of two years.

These changes would be unlikely on these timelines in a normal environment, but it's happening at a time when the Trump administration is taking steps to shutter the Department of Education, which has already lost nearly half its staff, many of whom would typically be responsible for implementing and overseeing such changes. While a court ruling this week requires that the Department must reinstate staff, a spokesperson said the Administration was already challenging the ruling, and it's unclear if or how many staff will actually return. According to testimony of departed staff submitted as part of the ruling, the Department is already severely hampered and unable to meet its existing statutory requirements across nearly every office, while staff left standing are being told to “do less with less.”

Much of the text included in the bill comes directly from the College Cost Reduction Act, a proposal led by Congresswoman Virginia Foxx, intended to reauthorize the Higher Education Act. Reauthorizing the Higher Education Act was last done in 2008 and is long overdue for an update. What’s playing out through the budget reconciliation process, an expedited path to pass legislation related to spending, is reauthorization on steroids—complex and far-reaching policy changes without the public discussion, analysis, and bipartisan Congressional support that would typically be required.

Unfortunately, the proposed cost estimations and impacts are best guesses because much of the data required to appropriately analyze the proposed impacts on students and institutions do not exist. Aside from the lack of data, the bill is incredibly complicated and will have interactive effects that make analyzing its impact impossible (such as limiting Pell eligibility while also capping student borrowing), and could upend the higher education financing system as we know it.

This piece looks at what’s in the bill, what would be required for implementing the Student Success and Taxpayer Saving Plan both in terms of new processes and data, and discusses these changes in the context of staffing changes to the Department of Education.

One category of changes with the earliest implementation dates alters who is eligible for the Federal Pell grant, the nation’s bedrock program to make college affordable for low-income students. Data are publicly unavailable to provide analysis on the impact of the changes, but according to the Congressional Budget Office (CBO), changes will reduce awards for more than half of Pell recipients, and at least 10 percent of recipients would lose eligibility entirely.

Proposed language restricts eligibility and awards in four primary ways. First, it increases the number of credits a student must take in a year in order to be eligible for a full grant (30 credits, up from 24). Second, it increases the number of credits that must be taken in order to be considered part-time (15 credits, up from 12). Third, it eliminates eligibility for students enrolled less than half-time. The increases to what is considered half-time, mean that students who are currently considered part-time would not be eligible for a grant in addition to those enrolled less than that. It also raises questions for schools about whether students would need to take more than 7.5 credits in order to receive any Pell, because 7.5 doesn’t easily translate into credits obtained and would more likely require taking 8-9 credits. And it raises questions about how this information would be tracked, since the changes in full-time and part-time eligibility do not appear to apply to loans, which would operate under current credit requirements. Finally, it makes students who have a Student Aid Index twice that of the maximum Pell award ineligible.

On the scale of changes, this is one that is easier than others to implement because the Department already has access to the data needed and processes in place to execute the changes. But it’s also highly technical, reliant on a variety of technology systems, vendors, and contractors, and requires intensive rewriting of school and student-facing guidance and resources from Department staff that will need to be undertaken.

Changing technology systems takes time, and it's unlikely these could be implemented on the timeline provided in legislation. It typically takes more than a year for new elements to be incorporated via the FAFSA development process, which includes making changes to multiple Department back-end systems. Schools’ own vendors (i.e., those that design and maintain the software and tools institutions use in their financial aid offices) need additional time on top of ED’s own changes—often multiple months—to make corresponding changes in their systems. Technology systems needing updates include those involved in administering the Free Application for Federal Student Aid (FAFSA), those required to disburse aid, such as the Common Origination Disbursement (COD) system, and those required to track aid, such as the National Student Loan Data System (NSLDS), among others. This will require work from various vendors and contractors, which requires staff oversight. One of the more time-consuming and staff-intensive roles will be to update the Federal Student Aid Handbook, a lengthy guide for financial aid administrators and colleges on everything from the FAFSA application process, to aid packaging, and loan and grant eligibility and public-facing guidance documents for students. It would typically also require additional training and staffing for the various call centers that provide guidance and information to students, parents, and schools. However, the Trump Administration has slashed staffing and hours and sought to rely more heavily on an AI assistant, Aidan. These steps will need to be undertaken multiple times to account for all of the changes proposed across different areas of the legislation.

While slashing funds for Pell recipients overall, the legislation expands eligibility for Pell grants to very short-term programs as short as 8 weeks long, including those offered by unaccredited providers. While the goal is to help students quickly skill up to get new jobs, it has the potential to open up the Pell program to fraud, explode costs, resulting in another Pell shortfall which this legislation hopes to fill, and funnel low-income students into programs with no economic boost. For more on this provision, see here.

Opening up Pell to unaccredited providers is unprecedented and will require new data collection and significant verification and oversight processes if the goal is to ensure money flows to providers that can ensure value and strong outcomes for students. By July 1, 2026, the Department will need to conduct rulemaking to establish the program and a new process for awarding Pell to new workforce programs that take into consideration factors such as the length of time in existence, completion and job placement rates, and the median value-added earnings to include new unaccredited providers.

The budget reconciliation proposal includes specific timeframes tied to the bill's passage for creating, developing, and implementing three new repayment plans that would apply differently to current and future borrowers, including the more than 13 million borrowers enrolled in an income driven repayment plan. These changes would make monthly student loan payments significantly more expensive than they are today for many borrowers, and the new income-driven repayment plan—the repayment assistance plan, or RAP—would penalize the lowest-income borrowers.

Proposed language makes a number of complex changes to student loan repayment. First, it eliminates most of the current income-driven repayment plans and amends others to create a new one for existing borrowers, requiring borrowers to be placed in the new plan within 9 months of the bill’s passage. Second, it creates a new tiered standard plan that would require future borrowers to make fixed payments over a period of 10-25 years depending on how much they borrowed. Third, it creates a new income-driven repayment plan, accessible to both current and future borrowers, called the Repayment Assistance Plan (RAP), which would allow borrowers to pay their loans based on their income and receive forgiveness after 30 years of payment, significantly longer than the current plans. Both of these plans must be available within 18 months after passage of the legislation. For a full explanation of all the ways the terms of the new plans differ from current options and their implications for borrowers, see here.

One of the largest challenges with implementing the various provisions on repayment is the rapid and strict timeline under which the new plans are expected to be operational. Under these timelines, the Department must develop and issue regulations and make the repayment plans operational within a set period of time. While the legislation waives the long process of negotiated rulemaking for the income-based repayment plan for current borrowers, and leaves open the possibility of doing the same for plans for new borrowers, issuing regulations and setting up plans is not a small task. All three plans will require the Department to issue regulations, guidance, and materials for servicers and borrowers.

The Department relies on a variety of contractors to manage the student loan repayment system and will need to change existing contracts to ensure the new plans are created and implemented going forward. With respect to new borrowers, the Department must coordinate with servicers to move 13 million borrowers into the new amended IBR plan, conduct oversight to ensure that borrowers are moved appropriately, payments are calculated correctly, and changes are clearly communicated to borrowers. With respect to the new RAP plan, the Department must incorporate new data elements for the calculation of family size, which will make the process of data sharing between the IRS and ED (to facilitate enrollment and recertification for an IDR plan) more challenging to implement.

The legislation makes changes to how much aid is available to students by limiting aid to the median cost of attendance nationally for similar programs and makes a substantial number of changes to loan amounts and eligibility. The biggest problem? No one has any idea what the limits will look like. The interactive effects of these cumulative changes, and the lack of data available, make it difficult to analyze the impacts, but for some students, they can borrow more and more quickly than under today's terms, while for others, they can borrow less. In all cases, there is a chance of running out of student aid before a student finishes their program which could result in higher drop-outs, more defaults with higher levels of loan debt, or a greater reliance on costly private lending to fill in gaps when their aid runs out.

First, the legislation proposes an untested and highly confusing change that would dramatically reshape how much aid students are eligible to receive. It does so by limiting annual aid, including Pell grants and student loans, to a median cost of attendance across similar programs. For more details on this provision, the questions remaining, and its potential impacts, see here. Second, it eliminates subsidized loans which are loans available to low- and middle-income families that don’t accrue interest while a student is enrolled, and Grad PLUS loans, which are loans that are available to graduate students. It puts new lifetime caps in place for how much students can borrow including $50,000 for undergraduate students, and up to $150,000 depending on the type of graduate program you can attend. Finally, it limits access to the Parent PLUS loan which is available to parents to cover the cost of their children’s education to a cap of $50,000 across all of their children.

Across all changes, the Department will need to conduct rulemaking to change regulations in support of these changes, which would be no small feat given the implementation date for the changes to be operational for the 2026-2027 academic year. Like changes to the Pell program, the Department will need to undertake the same processes of updating the various technology systems which require contractual changes, months of lead time, updates to public facing materials for students, revisions to the FSA handbook, and providing additional training and staffing to the various call centers.

However, one of the most difficult challenges that make the current proposals unworkable is that data on the cost of attendance data by program on which they all rely does not currently exist. Institutions are expected to report this data on a student level as part of the Financial Value Transparency regulations that were finalized in 2023. However, the Trump administration delayed the required reporting which was due in February until September 30th, 2025. Once the data is available, the Department will need to construct the median cost estimates by program at the national level and conduct data verification and dissemination to schools in order for them to be able to package aid based on ED determined cost of attendance (COA)’s.

The data used has the potential to be highly fraught because neither institutions nor policymakers have any indication of where the cards will fall in terms of medians or whether or not students will be able to cover costs at the rate institutions currently charge, which impacts institutional revenue, and makes planning impossible. There is a high likelihood for the data to be skewed based on all types of factors including how many programs are offered nationally, the type of institutions that offer a program, the geographic locations of the programs, the number of students enrolled from out of state, and the list goes on. It will also have to be recalculated each year based on institutional COA’s, since institutions are still able to charge beyond the median used to determine aid eligibility, and sets up incentives for institutions to raise the prices of their programs if they fall below the median in order to capture more aid going forward. The high variability and unpredictability also makes communicating costs to students impossible, despite years of efforts from institutions to be more clear on costs and available aid.

The legislation eliminates a number of current consumer protections in exchange for a vast and highly complex new system that would seek to hold institutions accountable by requiring that they make annual payments on a portion of their students’ unpaid debt. It would then redistribute collected funds to colleges that agree to commit to a price guarantee for students in the form of a grant for institutions to lower costs and improve student success. There is a need for both increased accountability in higher education and incentives for institutions to improve how well they serve students. But the way the system is constructed in legislation is unimplementable in part because the data needed doesn’t exist, but it would also set up a complex system where the Department would have to track student enrollment and completions, loans both by student and institution, earnings for each student from the IRS, balances owed and paid at both the student and loan levels all of which would require streamlined data connections and analysis far beyond the Department and its servicers and vendors current capacity.

The risk-sharing proposal requires the Department to first establish three sets of cohorts for each institution by 2027-2028. The cohorts would consist of undergraduate and graduate completing cohorts for each individual program offered by the institution, a single undergraduate non-completing cohort consisting of any student that separated from the institution in the previous year without finishing, and graduate non-completing cohorts for each individual graduate program. Based on the number of programs currently offered by institutions, this would amount to roughly 340,000 cohorts each year, which would double each consecutive year, eventually resulting in millions of calculations for each data point needed. The Department would then have to subtract loans from students that are included in another cohort and students that are in various forbearances, include consolidations in some cases, but exclude them in others. Inexplicably, the Department would also need to exclude defaults, which means that schools with a large number of defaulters would pay less overtime than schools whose students repay successfully over a longer period of time. Students completing multiple programs at the same institution would also need to be separated into each program cohort. These exclusions and modifications would need to be done annually depending on students’ loan status and if they enroll somewhere else.

Once the cohorts and applicable loans are accounted for, the Department will need to create the non-repayment loan balance for each cohort (roughly 340,000 of them) but one key piece of data needed isn’t available in Department systems. The loan repayment balance consists of the total amount owed and unpaid for each cohort, plus the total amount of interest and principal forgiven. The Department doesn’t currently collect how much borrowers pay to complete the calculation. This means the Department would have to collect this information from servicers and revise its current data collection to obtain this new information. Changing or altering data collections takes time and needs additional approvals as well as programming and instruction.

Finally, the Department will need to establish the reimbursement payment formula for each individual cohort (again, roughly 340,000 of them), which consists of the total tuition relative to their earnings to be up and running by award year 2028-2029. For completing cohorts, the calculation requires the median value-added earnings of students divided by the total price charged to students by program for the hundreds of thousands of programs offered by institutions. For non-completing cohorts, it consists of the non-repayment balance multiplied by the percentage of students who did not complete at the institution level within 150 percent of time, with some caveats for students who transfer from a two-year college. The reimbursement percentage remains constant over the life of the cohort, so these values will only be calculated once and then be applied to the changing non-repayment balance. Reimbursement for each cohort continues each year until the loans are paid, which could be 30 or more years based on the new repayment formula and the process must be repeated each year for new cohorts. That means the Department will be calculating and institutions paying on millions of varying percentages and cohort loan amounts far into an unforeseeable future.

By 2028-2029, the Department must also conduct rulemaking and set up a process for awarding PROMISE grants, a new grant program funded by repayments from risk-sharing funds. To be eligible, institutions must determine a maximum total price they will guarantee for each program offered based on a set of income and student aid index categories. Institutions must detail how they would use the funds to increase affordability, access and success. For the Department’s part, it will need to create a grant formula to be calculated annually using the median value added earnings for students who completed any program adjusted for geographic differences, the maximum total price, the total amount of Pell grants received, and the percentage of low-income students who completed a course of study within 100 percent of the program length, up to a maximum of $5,000 for each federally aided student. Much of the burden will fall on schools who need to establish a setup of a maximum total price guarantee for each program based on student income and student aid indexes. But it will also require setup from the Department of the formula, significant guidance and instruction for institutions, capacity for review of materials for each institution for each program offered, and oversight from the Department to ensure institutions are meeting their price guarantees and using the funds as promised.

All of these changes would need to be executed against the backdrop of mass firings across the Department including many of the offices and staff that would play a role in implementation. In a survey of financial aid administrators released just this week, 59 percent of financial aid offices surveyed reported changes in responsiveness or delays in processing times. This includes disruptions in the system used by students to apply for aid and for institutions to receive information to award aid, lack of responsiveness to questions, long delays and wait times to call centers. The survey confirms many of the predictions in declarations submitted by departed staff in an ongoing court case, that the Department is unable to meet its statutory obligations and all of the systems that make the Department function, such as the distribution of aid, student loan servicing and collections, and vendor and school oversight are at risk. These early warning signs do not bode well for implementation of the largest policy changes to higher education in the last decade as proposed in the reconciliation bill.

The Department has previously struggled to oversee borrower accounts and the student loan servicers that manage them, and now has sufficiently less capacity to do so. Yet the legislation would require the creation of several new repayment plans and the moving of millions of borrowers across plans on short timelines. According to the Executive Director of the Office Loan Portfolio Management, who oversaw four divisions encompassing everything from services to borrowers, student loan servicing and collections, contracts, and ensuring servicer compliance, and whose staff were reduced by half, the position of leadership was to “stop offering customers the Cadillac and give them the Toyota instead.” As a result of the RIFs, they predicted, the burden would be on borrowers and schools to identify problems and advocate for their resolution, and puts the entirety of the aid system at risk. Cuts and staffing losses included the Vendor Performance division which ensured servicers were properly managing and servicing borrower accounts, crediting balances, providing notification of servicer transfers, appropriately administering discharge and forgiveness, and the team worked to identify any data anomalies and systemic issues, such as borrowers payment history being deleted. Without this oversight, there is a high likelihood that borrower information is lost, payments are applied incorrectly, and information not communicated accurately with no one to oversee the changes.

The Department no longer has the capacity to address and resolve borrower complaints. According to a staff member from the Ombudsman’s office, which is responsible for helping borrowers and already had a backlog of complaints before the office was eliminated, staff helped address issues such as whether a student hadn’t received their loan disbursement, were owed a refund from their servicer, or whose accounts still reflected a balance when their loan should have been forgiven. When errors occur, there is no longer capacity within the Department for working with borrowers to resolve issues.

The Department’s capacity to oversee institutions, hold schools liable for wrongdoing, and ensure aid is administered appropriately is also severely diminished. The legislation not only significantly changes aid eligibility and opens aid to new unaccredited providers unaccustomed to administering aid, it also eliminates various consumer protections in place to protect students, including rules to provide relief to borrowers that have been defrauded by their schools or whose schools have closed. According to a declaration from a former staff member, 8 of 11 regional offices responsible for overseeing schools were eliminated including the office responsible for publicly traded companies with the largest for-profit school groups, all but one of the financial analysts conducting financial oversight of schools, all but one of the analysts overseeing changes in ownership, and all but two to three staff conducting compliance audits of schools. The staff member predicted the loss would result in outright fraud and an increase in improperly spent funds, students being taken advantage of, and wasted taxpayer dollars.

The Department’s capacity to collect, analyze, and disseminate data and research is almost non-existent yet the legislation would require multiple new data collections and formulas to assess millions of payments from and disbursements to schools. Staffing cuts include the entire Office of the Chief Data Officer which managed the Department’s ability to leverage data through approval of information collections, coordinated data across the Department and federal government, maintained the College Scorecard, the primary website for information on schools and programs, including accessing data from IRS on salaries to be able to determine student earnings post completion. Cuts also include nearly the entirety of the National Center on Education Statistics, the primary entity for collecting and analyzing data including information on colleges and their students, leaving a staff of 3 to manage all of the data collections and contracts to run the collections, many of which themselves were cut. These staffing losses of data collections, systems, and intricacies will severely limit data collection and analysis going forward, including for the new accountability scheme and median cost of college proposals.

The Department is already severely hampered and the changes in legislation will surely break existing systems. A failure on this level with all of the complex interactions among the various policies will make last year’s FAFSA implementation breakdown seem like a walk in the park. It also raises questions of whether the policies can be implemented on the timelines proposed on which Congress is basing its savings. There is agreement across the political spectrum that the Higher Education Act is need of an overhaul. But rushing massive changes through the budget reconciliation process without any idea of their impact or whether or not they can be implemented is a $350 billion gamble.