Federal student aid plays a critical role in making higher education accessible for millions of students every year. Recent discussions about the “big beautiful bill,” a budget reconciliation bill, have sparked questions about how changes proposed in both the House and Senate versions of the bill will impact federal student aid programs. While some similarities exist between the two versions, there are also key differences that could shape the future of financial aid.
What Is the Goal of the Budget Reconciliation Bill?
The White House describes this bill as a way to streamline federal bureaucracy, bring jobs back to America, increase the child tax credit, and invest in the nation’s infrastructure. Changes to federal student aid programs are part of the bill’s broader scope, but these modifications have sparked both hope and concern within the education community.
While the goal is to pass the bill on July 4, most changes related to student aid are not expected to take effect until 2026.
Senate Bill vs. House Bill: How They Compare
After the House passed the bill, it advanced to the Senate for review. The Senate has had the chance to evaluate the proposed changes, make revisions, and draft its own version of the reconciliation bill. Let's breakdown how they compare.
Changes to Student Eligibility
Both the House and Senate bills propose to modify eligibility for federal student aid by narrowing the definition of eligible non-citizens. Refugees, asylees, parolees, human trafficking victims, and battered immigrants are excluded under both versions. However, the Senate bill introduces additional restrictions, excluding Ukrainian and Afghan parolees as well.
Changes to Cost of Attendance
One significant change in the House bill is the introduction of the “median cost of college” concept. This would use a national median cost as the basis for awarding need-based federal aid, replacing the institution-specific Cost of Attendance model. The Senate version, however, does not include this change, opting to retain the current method for establishing the cost of attendance.
Asset Exemptions in the FAFSA®
Both bills restore a provision exempting family farms and small businesses from being considered as assets on a student’s Free Application for Federal Student Aid (FAFSA).
Federal Student Grants
Federal student grants are the most common forms of need-based aid. Many students rely on these non-loan options to help cover the costs of college.
Pell Grants and Mandatory Funding
Pell Grants are the most well-known form of federal student aid, and both bills aim to increase mandatory funding for this program in the amount of $10 billion dollars. The House version of the bill allocates these funds over three fiscal years, while the Senate version allocates this funding in fiscal year 2026.
Workforce Pell Grant Program
Both bills agree on creating the Workforce Pell Grant program, designed to support short-term programs leading to jobs in high-demand fields as determined by their State. However, the Senate bill excludes remedial, non-credit, English language learning, or study-abroad coursework from eligibility.
Enrollment Status
The House bill proposes to exclude less-than-half-time students from receiving Pell Grants while increasing the credits required for full-time student status from 24 to 30. The Senate bill maintains the current credit requirements and eligibility for less-than-half-time students.
Additionally, the Senate bill introduces a rule that disqualifies students from receiving Pell Grants if their other grants or scholarships already cover their full cost of attendance. For students eligible to receive a Pell Grant, who are unable to receive the Pell Grant, that student will see their Pell Lifetime Eligibility Usage (LEU) reduced.
High SAI Restrictions from Receiving Pell
Both bills introduce a fix to address a known issue: students with a high SAI can still qualify for a full Pell Grant. The House bill includes a provision preventing students from receiving a Pell Grant if their SAI is more than double the maximum Pell Grant amount. The Senate bill retains this language but adds an effective date of July 1, 2026.
Changes to Federal Student Loans
Federal student loan programs are among the most significant sources of financial aid for students. Understandably, many are deeply concerned about how the reconciliation bill could impact their eligibility, loan options, and repayment plans.
Direct Subsidized Loans
The House bill seeks to eliminate Direct Subsidized Loans for undergraduates, while the Senate bill will maintain this loan option for undergraduate student.
Parent PLUS Loans
The House bill tightens requirements for Parent PLUS Loans, mandating that students borrow the maximum federal loans available before their parents can access PLUS Loans. It also proposes a $50,000 aggregate borrowing cap per parent--regardless of how many dependents they have.
The Senate bill offers different limits, allowing borrowing up to $20,000 per year and $65,000 overall for each dependent student, without requiring students to max out other loan options first.
Grad PLUS Loans
Both bills propose eliminating Grad PLUS Loans but include legacy provisions allowing current students to complete their education using this option.
Loan Limits and Lifetime Borrowing Caps
For undergraduate students, the House bill ties loan limits to the median cost of education and sets a $50,000 cumulative borrowing cap. The Senate does not include these changes in their bill.
For graduate students, the Senate proposes annual caps of $20,500 for graduate students and $50,000 for professional students, with an aggregate loan limit of $100,000 for graduate students and $200,000 for professionals.
Both bills introduce lifetime borrowing caps. The House sets a $200,000 cap, including both student and parent loans, while the Senate proposes a higher $257,500 cap, excluding Parent PLUS Loans.
Lifetime borrowing caps would be determined by the total amount borrowed, not their outstanding balance. This means that even if you repay your federal student loans after reaching the cap, you would no longer qualify for additional loans. Currently, borrowers can repay their loans and regain eligibility to borrow up to their aggregate loan limit.
The House bill introduced a provision enabling schools to establish loan limits at the program level. The Senate version included the same provision and establishes an effective date of July 1, 2026.
And finally, both bills introduce loan proration, requiring schools to adjust annual loan amounts based on the student’s enrollment status.
Student Loan Repayment and the Repayment Assistance Plan
Both bills introduce the Repayment Assistance Plan (RAP) as a new income-driven repayment option with a minimum $10 monthly payment. However, the House bill restricts borrowers from switching between RAP and the Standard 10-year repayment plan, while the Senate allows this flexibility for borrowers.
The Senate also permits borrowers to submit additional documentation if their adjusted gross income (AGI) doesn’t accurately reflect their financial situation. However, it includes a spouse’s AGI for married borrowers regardless of tax filing status, unlike the House bill.
Institutional Accountability and Relief
For years, the public has sought to find a way to ease the costs of college, as well as require schools to be held accountable for outcomes. The House has introduced an institutional risk-sharing model, set to take effect in the 2028-2029 award year, for schools participating in federal student loan programs.
The Senate bill, while lacking a specific model, introduces an accountability framework. These measures resemble the gainful employment rules that educational institutions have encountered over the years. Under this framework, schools risk losing program eligibility if graduates fail to meet certain earnings thresholds based on their program level.
The House bill introduces regulatory relief for certain schools by eliminating the 90/10 rule and repealing the Biden administration's closed school discharge and borrower defense repayment regulations. Additionally, the bill removes the use of the term "gainful employment.”
The Senate's version of the bill preserves the 90/10 rule and gainful employment regulations. Additionally, it reinstates the 2019 guidelines for closed school discharges and borrower defense to repayment.
What This Means for Students and Families
Whether you’re a student, parent, or education professional, the proposed changes to federal student aid are likely to affect you. These updates touch on key areas such as eligibility criteria, loan limits, grant funding, and repayment plans—offering much to consider.
The goal of these reforms is to create a more streamlined and efficient system, though debates around equity and accessibility remain. While no final bill has been passed yet and the specifics of what will move forward remain uncertain, staying informed is crucial as these changes could significantly impact federal student aid programs.