Policy Changes and What They’ll Mean for You
Trying to get your head around policy changes affecting higher education and student loans can make you feel like taking a long nap. But these changes matter: they’ll have an impact on how much college costs you, what kind of support is available, and ultimately how you find yourself living your day-to-day life both in school and in work.
Back in 2008, borrower protections were enhanced and interest rates were lowered for millions of students. The One Big Beautiful Bill Act (OBBBA), passed in July 2025, introduced the most sweeping changes to federal student aid since that time. You’ll feel these changes soon, as most provisions take effect on July 1st, 2026. The OBBBA is ending the federal Grad PLUS program, capping Parent PLUS loans, restricting access to higher federal loans through borrowing caps, reducing repayment and deferment options, and pulling back support for part-time learners. By restricting government loans and shifting a larger share of them to the private sector, access to college and graduate school will become an even greater burden—and sometimes an impossibility—for those who aren’t wealthy.
Private loans create a number of barriers for non-wealthy students: Unlike federal loans, they typically require a strong credit history or a cosigner with assets, which many lower-income students may lack. Private loans do not offer the same consumer protections as federal loans, and they often charge higher or variable interest rates, making the total cost of a degree significantly more expensive over time. Early survey data indicates that over a third of students have considered canceling their plans for further education, specifically due to these federal policy changes.
While state policy plays an important role in higher education funding, we’re going to focus here on federal policy—what the One Big Beautiful Bill Act’s changes will mean for you as an undergraduate or as you consider graduate school. We’ll offer some suggestions for what you can do to be strategic in navigating the new policy landscape.
FEDERAL POLICY CHANGES TO UNDERGRADUATE FINANCIAL AID
Student loan repayment terms will be less generous. After July 1, new borrowers are expected to face stricter income-driven repayment (IDR) terms. Monthly payments may be calculated on a larger share of income. For some plans, forgiveness timelines may be longer. (Longer timelines mean smaller monthly payments, generally leading to higher total interest costs over the life of the loan.)
WHAT TO DO: Borrow as little as possible now, as repayment terms are likely to become less forgiving, not more.
The maximum Pell Grant is increasing modestly, but it won’t fully cover the cost of college. Expanded eligibility for short-term and workforce programs means that certificates and shorter programs may now qualify for aid.
WHAT TO DO: Combine Pell with state aid, scholarships, and institutional grants—you won’t be able to rely on it alone.
New accountability rules for colleges are being implemented to track whether programs leave students with too much debt relative to their earnings. Some programs (especially career-track or for-profit) could lose access to federal aid if they fail these tests. [institutional accountability]
WHAT TO DO: Before choosing a major or program, investigate how much graduates earn and how much debt they typically have.
The rollout of the new FAFSA has been a bit rocky, so schools may adjust their aid offers later than usual. Comparing offers from schools may be harder if packages arrive at different times. (The FAFSA form is used by schools to calculate how much aid you are eligible to receive, and provides access to the largest source of financial aid, including Pell Grants, federal student loans, and Federal Work-Study.)
WHAT TO DO: Submit your FAFSA as early as possible. Do follow up with financial aid offices, and don’t assume silence means everything is fine.
Official “cost of attendance” estimates are likely to increase as federal policy pushes schools to better reflect actual living costs (housing, food, transportation). You may be allowed to borrow more to cover your living costs, but this means you’ll be taking on more debt.
WHAT TO DO: Budget to include all your living costs, including tuition. Borrow more only if it’s absolutely necessary.
THE BOTTOM LINE
Policy changes, while not necessarily dramatic, focus on shifting and tightening rules, placing more responsibility on students to navigate the system. Here’s what to keep in mind:
• Remember the total cost of college, not just tuition; include rent, food, transportation, and the time needed to complete your degree.
• Be strategic about borrowing, knowing that every dollar you borrow now may be harder to manage later.
• Choose flexibility over narrow career paths, and pick majors (and experiences) that keep multiple career doors open.
• Use every free resource your college offers: career services, advising, mentorship, internships—they matter more than ever.
FEDERAL POLICY CHANGES TO GRADUATE FINANCIAL AID
Previously, the federal government made financing graduate education straightforward: Borrowers could take out as much money as they needed at a known interest rate. Under the OBBBA, federal student loans for most graduate schools are capped at $20,500 a year. A few graduate programs in fields like law, medicine and dentistry have higher federal borrowing limits at $50,000 a year. Even then, the costs are such that many students will have to turn to private lenders. Many programs, including social work, aviation and nursing, have been asking the Education Department to be labeled “professional” so they can be eligible for the $50,000 loan caps. Note that there are still many graduate degrees where students have average loans well under the $20,500 yearly cap. Here’s what you need to know:
New or revised repayment plans are now less generous for graduate loans, and grad borrowers are being treated as higher-risk and higher-responsibility. A larger share of your income will likely count toward monthly payments, and forgiveness timelines may be longer. This means that monthly payments after graduation could be higher than you expect.
WHAT TO DO: Before you enroll, don’t just look at your total debt. Estimate what your monthly payment will be; that will give you the real picture.
Loan forgiveness will be harder to count on as tightening and legal scrutiny of broad loan-forgiveness efforts continue. Public Service Loan Forgiveness (PSLF) still exists, but with stricter compliance and fewer gray areas. It’s important that you do not plan your future around the expectation of loan forgiveness, and missing paperwork or new eligibility rules might mean you lose benefits you were counting on.
WHAT TO DO: View loan forgiveness as a possible bonus, not a strategy. Structure a plan assuming you’ll repay most (or all) of your loans.
Grad PLUS loans (which allow borrowing up to the full cost of attendance) remain available, but policymakers are increasingly focused on whether unlimited borrowing is sustainable. While you can still borrow large amounts, that doesn’t mean you should. Be aware that future policy changes could tighten access to or the terms of loans, especially for high-debt programs.
WHAT TO DO: Even if policy doesn’t cap the amount you borrow, be smart and set your own limits.
More scrutiny is being given to graduate program outcomes, evaluating whether programs leave students with too much debt relative to earnings. Programs with poor outcomes (especially certain master’s and professional degrees) may face restrictions or loss of federal aid access. This means that some grad programs may raise admissions standards, cut enrollment, change pricing—or even cease to exist. More data will become available on earnings and debt outcomes.
WHAT TO DO: Look into what graduates actually earn 1–5 years out, as well as the typical debt that students take on, to see if these figures are reasonable and feasible for you. Compare programs based on outcomes, not reputation.
There are no major new grant expansions for most graduate students, and federal support remains heavily loan-based. This means that most grad students will continue to rely primarily on debt financing. You’ll have to use your own initiative to fund gaps by finding and applying for assistantships, employer support, and scholarships.
WHAT TO DO: Look into funded programs, employer tuition assistance, and part-time or flexible options that let you earn while studying.
THE BOTTOM LINE
Current policy changes may not shut you out of graduate school, but they do raise the stakes. You can still borrow what you need, but you’ll need to plan on how to realistically manage loan repayment. If you plan carefully, grad school can be the right path forward:
• Don’t think first of the degree; decide on the type of job you’re aiming for, then look into programs to achieve that end.
• The same degree from different schools can have wildly different outcomes and debt, so compare ROI (return on investment) across programs.
• Be aware that living expenses + interest can quietly double your total cost.
• Get real-world experience early. Internships, apprenticeships, and work experience matter as much as the degree—and sometimes more.
STATE POLICY CHANGES
To keep tuition costs stable, some states are increasing funding for public colleges. Other states are facing budget pressure and shifting more costs onto students. Community colleges in many areas are expanding free or reduced-tuition programs, most often with eligibility requirements. This means that the same degree could have a dramatically different cost, depending on where you go. Starting off at a lower-cost school and transferring to your target university can significantly reduce your debt load.
WHAT TO DO: Ask the financial aid office about state-specific programs, possible tuition guarantees, and what steps are involved should you want to transfer to a different school.
SO HOW SHOULD YOU BE THINKING ABOUT THIS?
With current policy changes, it’s especially challenging to work out how to afford college and graduate school. But that doesn’t mean furthering your education won’t be worth it—quite the opposite. You’ll cultivate the skills and flexibility best suited to face the evolving job market in a world of dramatic technological change, and you’ll discover your motivation as an active part in shaping this exciting historical moment.
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