How to Keep College Affordable Post-'Big Beautiful Bill'

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The One Big Beautiful Bill Act (OBBBA) has massive implications for the American economy. Perhaps the most unappreciated set of policies in the law relates to higher education and how students pay for skills training.

In 2022-23, the federal government accounted for over $140 billion in annual postsecondary student aid spending in the form of direct grants, loans, tax benefits, and other financial assistance. The signature law of President Trump’s second term reformed all these funding streams in ways that will fundamentally alter the higher education financing landscape.

Among other changes, the law allows Pell Grant recipients to attend shorter-term and workforce-aligned programs. It creates a “do-no-harm” accountability standard, blocking schools from offering federal student loans to students in programs that do not lead to higher earnings. It establishes lower federal student loan limits and fewer repayment plans. It also indefinitely extends and ties to inflation the $5,250 per year in tax-free educational assistance benefits an employer can provide to an employee. Student loan forgiveness is no longer tax-free as of 2026, except through the Public Service Loan Forgiveness program.

As the higher education sector and its partners grapple with what all these changes mean for the industry, it is important to keep in mind an important truth: They have agency. Taxpayer-backed assistance from the federal government is not the only determinant of college access, program affordability, and student success. Now is the time for institutions of higher education, states, employers, and other sources of private capital to meet the moment.

The suite of OBBBA reforms will likely nudge more universities to rethink how they dole out institutional aid and talk to families about overall return on investment. Institutions of higher education have served as central hubs of career preparation and economic growth for decades. The law will encourage many of them to remember or re-emphasize this core mission. Schools can and should double down on student financial wellness education. The more information students have about the long-term outcomes of their education, the better decisions they can make. Consequently, institutional financial aid offers will have to become more transparent so families can accurately weigh what option makes the most sense for them.

Many states cut higher education funding to help balance budgets, and this looks exceedingly likely as states are projected to spend more on Medicaid once OBBBA reforms take effect. Even in this austere budget environment, states can creatively address college affordability pathways in two ways.

The OBBBA empowers governors to determine which shorter-term programs lead to in-demand jobs in their states and, therefore, which can qualify for Workforce Pell Grants. Skilled labor is not less important than traditional higher education. It is a core part of our nation’s future, and states have an important obligation to put more students on this path to success. 

The law also leaves intact states’ ability to issue Qualified Student Loan Bonds to finance low-cost student loan programs. The federal government may be tightening the student loan spigot, but that does not prevent states from launching or devoting more bond authority to these consumer-friendly loan programs.  

For years, employers have criticized the quality of recent college graduates. In a recent survey, as many as 3 in 4 human resource leaders said college educations are not preparing people at all for their jobs. Employers must use their sizeable influence and their $5,250 per employee education tax benefit to their advantage by supporting access to and affordability of those programs that give students the skills they need to thrive in their organizations.

The OBBBA forces other stakeholders to reconsider their role in helping students finance college. Private student lenders must deliver more innovative alternatives where federal loans may no longer be available. Scholarship providers can target overlooked academic programs and students in emergency situations. Foundations can devote more resources to exploring innovative financing models and partnerships.

America’s economy relies on a talented and dynamic workforce. The federal government may have withdrawn some higher education support by passing the OBBBA, but a robust education-to-career pipeline remains an achievable goal as long as schools, states, employers, and the private sector step up.

Skills development and economic mobility are not relics of the past. Members of the National Council of Higher Education Resources are seizing this moment of opportunity to guide individuals through the process of achieving their career, training, and postsecondary educational goals. Those of us who are willing to collaborate, innovate, and invest in new and promising ideas can make sure future generations find their affordable pathway to prosperity.

The OBBBA may be the end of an era for higher education. But it is also a chance to build a system worthy of American students and taxpayers.



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