The One Big Beautiful Bill Act (OBBBA) was passed and signed into law on July 4, 2025. This is an extremely large and complicated law which combines a number of Trump administration priorities into one piece of legislation. While we do not intend to cover every aspect or line item of this legislation, we are providing a summary of a few key aspects of the legislation for our clients as it relates to taxes, investments and the wider economy.
Our focus here will be the provisions included in the legislation related to our country’s education system. As a partial method to create savings within the overall legislation and offset the costs of the legislation, as well as in response to certain actions taken by the Biden administration to cancel large portions of student debt, a number of changes were made to certain education programs. We have compiled this information utilizing an analysis performed by Holland & Knight, LLP. Please see a summary of the OBBBA below relating to education policy.
- Repayment Plan Revisions
- Income-Contingent Repayment (ICR) Plans Replaced – ends existing ICR plans for new borrowers beginning 7/1/26, replaces with a single Repayment Assistance Plan (RAP)
- New borrowers choose between:
- Standard Repayment Plan – fixed monthly payments over 10-25 years based on total principal
- Repayment Assistance Plan (RAP) – income-based repayment based on AGI, with $10 per month minimum payment
- Payments continue until balance is zero or 360 qualifying loan payments made, whichever is earlier
- If ineligible for RAP, may be placed in existing Income-Based Repayment plan (IBR) which determines payment based on discretionary income
- Payments under RAP count toward Public Service Loan Forgiveness (PSLF) eligibility
- Department of Education will transition existing borrowers on an ICR to RAP or IBR no later than 7/1/28
- More frequent eligibility recertifications – eligibility for RAP or IBR will be recertified annually
- Termination of Grad PLUS Loans beginning 7/1/26
- Limitations on Student Loans
- Adjustment to annual and lifetime loan limits for graduate and professional student borrowers and parent borrowers beginning 7/1/26. Amounts below are in addition to any amount borrowed for non-graduate education:
- Graduate Students:
- Annual limit: $20,500
- Aggregate lifetime limit:
- If never professional student: $100,000
- If also professional student: $200,000 (minus any amount borrowed for professional programs)
- Professional Students:
- Annual limit: $50,000
- Aggregate lifetime limit:
- If never graduate student: $200,000
- If also graduate student: $200,000 (minus any amount borrowed for graduate programs)
- Parent PLUS Borrowers:
- Annual limit: $20,000 for each dependent student
- Aggregate lifetime limit: $65,000 for each dependent student
- Lifetime Maximum Aggregate for All Students (other than Parent PLUS loans): $257,500
- Graduate Students:
- Part-time Student Borrowers – caps reduced in direct proportion to enrollment
- Institution Discretion – institutions can set their own limits, as long as they are applied consistently to all students
- Phase-in – Borrowers with loans for programs that are in process as of 6/30/26 may be exempt
- Adjustment to annual and lifetime loan limits for graduate and professional student borrowers and parent borrowers beginning 7/1/26. Amounts below are in addition to any amount borrowed for non-graduate education:
- Student Loan Deferment and Forbearance
- Ends unemployment and economic hardship deferments for Direct Loans issued after 7/1/27
- Caps forbearance for Direct Loans at 9 months over 2 year period
- Allows two opportunities to rehabilitate defaulted Direct, Federal Family Education Loan (FFEL) or Perkins loans beginning 7/1/27, instead of the existing one opportunity
- Student Aid Eligibility Adjustments
- Revised Needs Analysis – beginning with the ’26-’27 award year, excludes certain family-owned assets when determining student need for federal student aid, including:
- Family farms on which the family resides
- Family-owned and controlled small businesses with fewer than 100 FTE employees
- Family-owned fishing businesses and related expenses
- Pell Grant Eligibility:
- Includes foreign income in AGI for purposes of determining eligibility beginning 7/1/26
- Students with a Student Aid Index (SAI) that equals or exceeds twice the amount of the max Pell Grant will be deemed ineligible for the Pell Grant for that academic year
- Ineligible if they receive non-federal grants exceeding the cost of attendance
- Revised Needs Analysis – beginning with the ’26-’27 award year, excludes certain family-owned assets when determining student need for federal student aid, including:
- Workforce Pell Grants are expanded to students in short-term workforce programs at accredited postsecondary institutions beginning 7/1/26, with certain eligibility criteria
- Institutional Risk-Sharing and Accountability
- No aid for “low-earning outcomes” programs – institutions cannot award federal student aid for programs with “low-earning outcomes”
- If median earnings of specified grad cohort less than median earnings of a working adult with a lesser credential or no credential for the corresponding year, measured in accordance with the statutory formula
- Institutions must warn students if a program does not satisfy the earning outcomes requirements for one year during the covered period
- Programs that lose eligibility may not apply to regain eligibility for two years
- No aid for “low-earning outcomes” programs – institutions cannot award federal student aid for programs with “low-earning outcomes”
- Further Delay of Student Loan Discharge Rules
- Further delays implementation of Biden-era borrower defense to repayment and closed school discharge regulations (already delayed due to court challenge)
- Restores regulations in effect on 7/1/20