Shifting Ground Part 2: Financial Aid and the New Economics of Aid
Higher education is entering a new era of financial pressure, and federal aid is at the center of the shift. The recently passed “One Big Beautiful Bill” represents the most sweeping set of changes in decades—and the implications for institutions, students, and families are profound.
What’s Changing in Federal Aid
Key provisions of the bill include:
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Elimination of the Grad PLUS Program (with limited continuation for current borrowers).
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Caps on Parent PLUS loans with new annual and lifetime borrowing limits.
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New limits on graduate and professional student loans—both annual and aggregate.
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Lifetime borrowing caps on all federal student loans.
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Changes to the Student Aid Index (SAI) formula, impacting aid eligibility.
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New accountability triggers—programs that fail “low earnings” thresholds risk losing Direct Loan eligibility.
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Funding boosts—including $10 billion to stabilize the Pell Grant program and a new Workforce Pell Grant for career-aligned programs.
Taken together, these provisions signal a clear shift: institutions will be pressured to reduce costs as federal borrowing power tightens.
What This Means for Campuses
The effects will be felt on multiple fronts:
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Reduced affordability for students → Students and families will have fewer borrowing options, forcing institutions to rethink tuition strategies.
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Financial stress on institutions → With average tuition discounting already at 56.3%, downward pricing pressure will intensify.
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New compliance risks → Aid programs that don’t meet outcome benchmarks could lose eligibility, threatening enrollment pipelines.
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Endowment pressure → Proposed endowment taxes could reduce financial stability at larger private institutions, especially during downturns.
What Leaders Should Do Now
To navigate these changes, higher education leaders—especially CFOs and enrollment executives—should:
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Model financial scenarios. Assess how new loan limits and affordability challenges could impact enrollment and budgets. Share findings with trustees and leadership early.
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Reevaluate tuition strategy. Planned increases may no longer be sustainable; institutions may need to expand institutional aid or scholarships to remain competitive.
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Explore alternative funding. Shift fundraising efforts toward scholarships and expand partnerships with employers and philanthropies to create new pathways of support.
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Start conversations early. Boards and leadership teams will need time to process the complexity of these changes. Begin scenario planning now to avoid reactive decisions later.
The Bottom Line
The “new economics of aid” will reshape how institutions balance access, affordability, and sustainability. Colleges and universities that act quickly—by modeling financial risks, adapting pricing strategies, and diversifying funding sources—will be best positioned to maintain enrollment health and student success in this new reality.
This article is part of our series, Shifting Ground: The 5 Forces Reshaping Financial Aid. In our next post, we’ll explore the rising pressure for student outcomes—and what it means for enrollment strategy.
