The One Big Beautiful Bill Act and Federal Student Aid Changes

The One Big Beautiful Bill Act (OB3/H.R.1) is a sweeping federal package that significantly alters how students and families access financial aid. Beyond the bill itself, recent congressional actions, budget negotiations, and Department of Education processes add further complexity. Below is a high-level overview designed for individuals without a financial aid background.

1. Key Federal Aid Changes in OB3/H.R.1

Pell Grants

  • Funding is frozen at current levels.
  • Students with full scholarships that already cover the total cost of attendance may not receive Pell Grants in the same year.

Supplemental Educational Opportunity Grant (SEOG)

  • The program is eliminated.
  • This cuts a critical source of additional support for low-income students.

Federal Work-Study (FWS)

  • Funding is cut by 37% (about $451 million).
  • Fewer students will have access to on-campus jobs to offset costs.

Parent PLUS Loans

  • New borrowing caps:
    • $20,000 per year, per child
    • $65,000 lifetime maximum
  • Ends the current system where parents could borrow up to full cost of attendance.

Graduate PLUS Loans

  • Ends after July 1, 2026
  • Graduate students may rely on Unsubsidized Stafford Loans with new yearly and program limits.
  • A lifetime borrowing cap of $257,500 is established for graduate students.

2. Implementation and Campus Challenges

  • Timeline Concerns: Colleges are urging a one-year delay in implementation (from 2026-27 to 2027-28). Current systems (like Oracle PeopleSoft) are not yet ready to process the new rules, making it impossible to issue accurate financial aid offers on time.
  • Impact on Students & Families:
    • Families may face delays in receiving aid offers, making it harder to make enrollment decisions by the traditional May 1 deadline.
    • Reduced federal aid and stricter borrowing limits could push families toward higher-interest private loans.

3. Budget and Political Context

  • Appropriations Cuts: The House FY'26 education funding bill freezes Pell and TRIO, eliminates SEOG, and cuts FWS by 37 percent.
  • Staffing Reductions: Proposed cuts also slash Department of Education staff by 30 percent and the Office of Civil Rights staff by 35 percent, raising concerns about service and oversight.
  • Potential Government Shutdown: Congress is struggling to pass a continuing resolution to avoid a shutdown. While a shutdown would not stop FAFSA or loan disbursements, most Department of Education staff would be furloughed, delaying policy guidance.

4. Other Developments Impacting Aid

Negotiated Rulemaking

  • New rulemaking sessions are scheduled for late September.
  • These sessions are essential for deciding how OB3/HR 1 provisions will be enforced.
  • A shutdown could disrupt this process if Department staff are furloughed.

Gainful Employment & Financial Value Transparency (GE/FVT)

  • Colleges face two major deadlines:
    • September 30, 2025 - reporting for the 2024 cycle.
    • October 1, 2025 - reporting for the 2025 cycle.
  • Past launches of GE/FVT faced technical issues and limited guidance, raising concerns about whether institutions will meet the new deadlines.

5. What This Means for Students and Families

  • Less Federal Support: Students will see reduced access to grants and on-campus jobs.
  • Stricter Borrowing Rules: Parents and graduate students face borrowing caps, limiting federal funding options for students. loan flexibility.
  • Greater Reliance on Private Loans: With federal options restricted, many families may turn to private lenders, often at higher costs.
  • Timing Challenges: Aid packages may be delayed, creating stress and uncertainty in college decision-making.

Final Summary

The bill represents the most significant restructuring of federal student aid in years. Combined with budget cuts, ongoing negotiations, and new compliance requirements, these changes mean:

  • Students may have fewer resources.
  • Families will face tighter borrowing limits.
  • Colleges will struggle with implementation and timing.

Together, these shifts make paying for college - and planning for it - more uncertain for students, families, and institutions.