Editor’s Note: The “One Big Beautiful Bill Act” was signed into law by President Donald Trump on July 4, 2025.

On July 3, the U.S. House voted 218-214 to pass the final version of the “One Big Beautiful Bill Act.” This comes just two days after the Senate’s “vote-a-rama” and contentious debate, which saw Vice President J.D. Vance break a 50-50 tie to pass the chamber’s version. The bill, which was passed through the budget reconciliation process, contains what are, arguably, the most consequential changes in federal education policy since the 2008 reauthorization of the Higher Education Act (HEA). It now awaits President Trump’s signature.

What’s in the Final Version?

  • No Pell Cuts; Workforce Pell is “In”: The roller coaster journey has finally come to an end, with Workforce Pell across the finish line. The bill reinserted the previous language, which was “Byrd bath-ed” last week, but without a pathway for non-accredited actors. The bill authorizes Pell grant usage for accredited programs between 150-600 clock hours in length that meet new accountability standards starting in award year 2026-27.
  • Student Loan Caps: Eliminates the Grad PLUS loan program, limits Parent PLUS loans, and creates new aggregate and annual loan limits for graduate and professional learners.
  • Gainful for All: Applies to all institutions and will require degree programs to meet earnings threshold requirements in order to remain eligible for federal loan programs.
  • Streamlined Loan Repayment Programs: Sunsets existing repayment programs on July 1, 2026 and establishes two new repayment plans in their place: a standard repayment program with a fixed repayment amount and an income-based repayment plan.
  • Indexing Caps on Employer-Education Assistance to Inflation: Provides for yearly increases to the current $5,250 cap based on inflation (rounded to the nearest increment of $50).
  • Borrower Defense Delay: Delays the implementation of the Biden administration’s regulations on borrower defense to repayment and closed school discharge for 10 years.
  • Increase Endowment Tax: Creates new tax rates on investment income for private colleges and universities that meet certain size thresholds. The new tax rate will vary based on the amount of endowment funds per student from 1.4% starting at $500,000 per student to 8% with endowments larger $2 million per student.
  • School Choice: Contains a tax credit for individuals donating to scholarships used to support school choice. The language would allow states to voluntarily participate in the tax credit and would allow individual donors to claim a dollar-for-dollar tax credit worth up to $1,700 annually.
  • Medicaid Cuts: Includes cuts to Medicaid and new work requirements for beneficiaries (80 hours per month) to stay covered. States would also be required to check beneficiaries’ eligibility for Medicaid more frequently and implement cost-sharing for some services delivered to higher-income enrollees. The cuts to the program will affect medical services rendered, which means fewer dollars to cover services administered with Medicaid funds. In the absence of current levels of Medicaid funding, the need is going to be felt by schools servicing those families, placing additional demands on scarce resources. [KFF]

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