The Big Beautiful Bill’s Impact on College Planning

The One Big Beautiful Bill Act passed by Congress and signed into law by the president earlier this month consisted of numerous changes across many aspects of the tax and financial world, as well as several other areas that the government regulates. We are still learning more about it and some aspects of it are yet to be fully implemented. As more information within this bill comes in, we find this an appropriate time to discuss a couple of the changes with respect to college planning. 

The first and likely most significant aspect is that this bill made multiple changes to the government administered student loans. This comes in a time when the cost of college is becoming increasingly out of reach for families each year, causing more families to utilize loans to pay for school. On the student side, the federal government is no longer administering subsidized Stafford loans. Historically for students who qualified, the federal government offered loans which would not accumulate interest until the student left “in school” status. This is no longer the case and all students who utilize Stafford loans are now subject to the unsubsidized version, where the loans accumulate interest during school. 

On the parent’s side, a significant change was placed on the PLUS loan. This is the government loan offered in the parent’s name. This particular loan was historically dangerous for many families as parents who qualified could borrow up to the full cost of college. As a result, many families put themselves in financial hardship by borrowing more than they could pay back before retirement. This loan is now capped at an amount of $20,000 per year and a lifetime limit of $65,000 per student. While this loan now has guardrails, we still recommend using caution with this loan, as the rate is near 9% and has an origination fee. Regardless of the size of the loan, it is important to look at your own retirement plan before you consider loans to help your students further their education. 

One more important change is that this bill modifies eligibility for federal Pell Grants within the need-based aid package. This bill continues the Biden era change of family income having a larger impact on qualification for these grants than it did historically. This will certainly help low-income families but may cause families who were previously borderline candidates for need-based aid to now be excluded from receiving it. 

With all these above changes in mind, what does this mean for your family? As the cost of college exceeded inflation once again in 2024-25, it is consecutively becoming more challenging for moderate to high income families to qualify for need based aid. This is going to cause more families to need to take loans out to cover this cost. However, there are now more strict guidelines on federal government administered student loans. This is going to cause families to utilize private loans and get more creative with strategies to plan for college.

A+ College Planning is always available to speak with your family about how to create a plan or modify your existing plan to navigate the new challenges and opportunities this new legislation, along with the rising cost of college.