By Kritika Agarwal
Last week, President Trump signed H.R. 1 into law after it narrowly passed the House in a 218-214 vote. In addition to making the 2017 tax cuts permanent and cutting Medicaid and the Supplemental Nutrition Assistance Program, the nearly-900-page legislation also includes several measures that will make it harder for Americans to gain access to, and succeed in, college.
Among other things, the bill caps the amount of loans students can borrow to attend graduate and professional programs; puts into place measures that would block federal loans for programs whose graduates do not earn income above a certain threshold; and increases taxes on endowments, which universities use to provide financial aid to students.
Caps on Graduate Loans
The bill imposes a lifetime cap of $100,000 in borrowing for graduate students and $200,000 for professional students. Annually, graduate students will be able to borrow no more than $20,500 while professional students will be able to borrow no more than $50,000 under the new law.
The bill also terminates Grad PLUS loans, which graduate and professional students have used to pay for education expenses not covered by other financial aid, starting July 1, 2026. Finally, the bill caps the amount of money parents can borrow on behalf of their dependent; going forward, Parent PLUS loans will be capped at $20,000 annually and at $65,000 in total.
As AAU noted in its letter to the Senate opposing these provisions, arbitrary caps on student loans for graduate and professional programs will limit Americans’ ability to pursue studies in certain programs at institutions of their choice. For example, the bill would make it harder for students to attend medical schools, likely worsening the nation’s projected physician shortage.
The bill also eliminates current income-driven repayment plans, which have allowed borrowers to adjust loan repayments based on their income and family size, by July 1, 2028. Borrowers currently enrolled in income-driven repayment plans will be required to switch to one of two new repayment plans between July 2026 and July 2028. The new repayment plans will be available to students starting July 1, 2026.
Reduced Student Aid Eligibility
Starting July 1, 2026, the bill would block federal loans for undergraduate programs if half or more of the degree completers from that program earn less than the median earnings of high school graduates aged 25-34 in the state. It would also block federal loans for graduate programs if half or more of the degree completers earn less than the median earnings of bachelor’s degree holders in the same field and state.
These provisions could lead to students being unable to receive federal loans to attend certain programs of study that do not yield high earnings upon graduation, including programs in the humanities or in social work that provide other societal benefits.
Increase in Endowment Taxes
The bill raises taxes on the annual investment returns of university endowments to as much as 8% depending on the number of students paying tuition at the university and the size of the endowment. It does not exempt religious institutions or institutions not participating in federal financial aid programs from this tax.
Endowments are composed of charitable donations, and universities withdraw funds from their endowments to support a variety of institutional activities. Nearly half of all endowment spending goes toward student financial aid; universities also use endowment funds to support academic programs, faculty positions, scientific and medical research, and other campus operations. Higher endowment taxes will, inevitably, result in less institutional aid for students attending college.
Kritika Agarwal is assistant vice president for communications at AAU.