On Thursday, May 22nd, 2025, the House of Representatives passed H.R. 1, the "One Big Beautiful Bill Act," via budget reconciliation. One of its goals is to extend President Trump's 2017 Tax Cuts and Jobs Act (TCJA) tax cuts for the wealthiest Americans without violating rules for budget legislation, and it does so at the expense of the working and middle classes.

 H.R. 1:  An Overview 

Extending the 2017 TCJA tax cuts, which largely benefit America's wealthiest residents, will add $3.8 trillion to the national deficit over the next decade. However, Congressional budget reconciliation rules hold that any bills passed under this process must reduce the federal deficit. This leaves the House and the Senate with at least $3.8 trillion worth of cuts to existing federal programs to add to this bill in order to get it passed. If the resources the federal government provides to the wealthiest Americans are on the rise, then how might the scale balance out for the working and middle classes?

"The [Congressional Budget Office] estimates that in general, resources would decrease for households in the lowest decile (tenth) of the income distribution, whereas resources would increase for households in the highest decile."  – Preliminary Analysis of the Distributional Effects of the One Big Beautiful Bill Act, CBO

For the 2026-2034 period, the Congressional Budget Office (CBO) finds that the federal government will spend $698 billion less on Medicaid, $267 billion less on SNAP, $8 billion less on Pell Grants, and $51 billion less on federally subsidized (Graduate and Parent PLUS) student loans. It will also extract $23 billion from American colleges and universities, which serve millions of students from all backgrounds each year, by implementing a tiered system to increase the college endowment tax.

These are just some of the changes to federal government spending implemented into H.R. 1, but they share one thing in common: reducing economic mobility, financial security, and health and well-being for the everyday American.

 What would changes to higher education look like? 

H.R. 1 will fundamentally destabilize colleges and universities from the bottom up. These institutions will have less financial bandwidth to meaningfully support students, and their students will have less access to the financial resources that allow many to attend in the first place.

The current college endowment tax sees institutions with endowments worth at least $500,000 per student pay a 1.4% tax on their endowments. Under the One Big Beautiful Bill Act, the following changes will occur:

• The 1.4% tax will remain intact for institutions with endowments of $500,000 – $750,000 per student

• Institutions with endowments of $750,000 – $1.25 million per student will begin to pay a 7% tax

• Institutions with endowments of $1.25 million – $2 million per student will begin to pay a 14% tax

• Institutions with endowments of at least $2 million per student will begin to pay a 21% tax

When it comes to Pell Grants, the situation for their millions of recipients is dire. H.R. 1 contains provisions that would:

• Raise the number of course hours required to receive the maximum Pell Grant amount via a full-time student designation from 24 credits to 30 per academic year

• Eliminate Pell Grants entirely for anyone attending college less than half-time, requiring at least 7.5 credits per semester (effectively 9 credits – as many of us know, most college classes are at least 3) or 15 per academic year

Unfortunately, it doesn't end there. H.R. 1 would take a powerful swing at the federal government's student loan borrowing and repayment programs:

• Federal subsidized loans for undergraduates and Direct PLUS loans for graduate students would be eliminated beginning on July 1, 2026

• Restrictions would be placed on how much parents can borrow through Parent PLUS loans and when they can do so – only if their dependent student has already taken out the maximum in unsubsidized loans

• An overall lifetime limit of $200,000 would be set for single borrowers across all federal loan types

• Three income-driven repayment programs, ICR, PAYE, and SAVE, that provide borrowers with affordable payments and student loan forgiveness after following a 20-25-year repayment plan would be repealed; existing members would likely make higher payments when automatically moved to a newly modified income-based repayment (IBR) plan

• A new income-driven repayment plan, the Repayment Assistance Plan (RAP), would require higher monthly payments from lower-income borrowers along with 30 years of repayment before student loan forgiveness, and would be the only federal option for new borrowers seeking such plans

 Okay, but who does this affect? Why are endowments, Pell Grants, and student loans even important? 

Strong endowments, Pell Grants, and student loan programs are keys to the promises and powers of American colleges and universities. For centuries, U.S. colleges and universities have driven opportunities for the nation to lead the world in producing scientific discoveries that save lives, innovating technologies that advance humankind, and creating opportunities for economic mobility for all kinds of Americans. Our nation cannot afford to suffer the losses of these benefits at the hands of the One Big Beautiful Bill Act.

Let's start with endowments. These aren't simply bank accounts with billions of dollars usable for any function; they are groups of university investments and donor-specific accounts designated for specific purposes, like undergraduate financial aid, scientific research, and specialized faculty positions. By maintaining stable, well-funded endowments, universities are able to support innovation and economic developments that benefit all Americans -- not just the ones they teach or employ.

Take Yale as an example. In the 2023-24 academic year, Yale delivered $564 million in financial aid to 53% of its undergraduate students. Just one year under the increased 21% endowment tax they'd be subject to would hit them with a $690 million loss, reducing the revenue available for crucial need-based scholarships and making college less accessible to low- and middle-income students.

Research conducted at Yale, used to develop treatments like the first insulin pump and ongoing clinical trials that are extending cancer patients' lifespans, empowers America's global leadership in medicine and scientific innovation. In 2024, the school made investments of $150 million into artificial intelligence work and $250 million into developing future healthcare leaders, and had an $8 billion impact on the economy. An increased endowment tax will extensively bar Yale and other universities' abilities to make these kinds of investments into the nation's health, security, and prosperity, leading the U.S. to fall behind other countries and putting its citizens' continued well-being at risk.

At the individual level, the Center for American Progress estimates that the changes to Pell Grant eligibility in H.R. 1 could lead 3 million students to see their aid reduced, and another 1.2 million to see it fully lost. Students who enroll less than half-time or full-time are often doing so because they're working long hours to get by while juggling other responsibilities like caring for their families. Upping their course loads to retain eligibility isn't typically a realistic option, leaving many with no affordable options for their education.

On a similar note, the changes to student loans and repayment programs would likely leave many families with no option but to rely more on private student loans. These tend to have fewer protections for consumers and more limited repayment options, adding an increased level of uncertainty to funding one's college education that would deter many from seeking degrees.

 What should the Senate do? 

The Senate must reject the inclusion of endowment tax increases, reductions in Pell Grant eligibility, and restrictive changes to federal student loans and repayment options in the One Big Beautiful Bill Act. Such action is necessary to safeguard the institutions that strengthen America's health, economy, security, and society. 

The Senate must also recognize that mass firings across the Department of Education render it highly unlikely to implement these changes by H.R. 1's deadlines. Educational institutions and those who interact with them will shoulder the burden of issues that result from this dynamic, rather than the government that created them.

American colleges and universities embody some of the best of America's civic promise: they positively impact all U.S. citizens' lives every day, in ways that go both acknowledged and unseen, and tell us that we all belong in the work of democracy. By taking this action to protect higher education, the Senate can perpetuate these ideals and their benefits for generations to come.

Our Sources

Swagel, Phillip L., CONGRESSIONAL BUDGET OFFICE, U.S. Congress, Bilal Habib, and Rebecca Heller. “Preliminary Analysis of the Distributional Effects of the One Big Beautiful Bill Act.” Report. Letter, May 20, 2025. https://www.cbo.gov/system/files/2025-05/61422-Reconciliation-Distributional-Analysis.pdf. 

Budget, Committee for a Responsible Federal. “Breaking Down the One Big Beautiful Bill-2025-06-04.” Committee for a Responsible Federal Budget, June 5, 2025. https://www.crfb.org/blogs/breaking-down-one-big-beautiful-bill. 

Whitford, Emma. “House GOP Tax Bill Targets College Endowments, Royalties and Support From Private Foundations.” Forbes, May 13, 2025. https://www.forbes.com/sites/emmawhitford/2025/05/13/house-gop-tax-bill-targets-college-endowments-royalties-and-support-from-private-foundations/.

Unglesbee, Ben. “The Reconciliation Bill Cleared the House. Here’s How It Would Change Higher Ed.” Higher Ed Dive, May 22, 2025. https://www.highereddive.com/news/house-reconciliation-bill-passes-higher-ed-endowment-tax-student-loans-pell-grants-risk-sharing/748901/.

Minsky, Adam S. “House Votes to Repeal Student Loan Forgiveness and Repayment Plans — 4 Takeaways.” Forbes, May 22, 2025. https://www.forbes.com/sites/adamminsky/2025/05/22/house-votes-to-repeal-student-loan-forgiveness-and-repayment-plans---4-takeaways/.

“Yale Announces 2024-25 Term Bill, Reaffirms Financial Aid Commitments,” Yale News, October 6, 2024, https://news.yale.edu/2024/01/31/yale-announces-2024-25-term-bill-reaffirms-financial-aid-commitments.

Yale University. “Yale’s Impact on America,” May 23, 2025. https://www.yale.edu/yales-impact-america.

Partridge, Sara. “Congressional Republicans’ Proposed Budget Reconciliation Bill Imperils 4.4 Million Pell Grant Recipients.” Center for American Progress. May 13, 2025. https://www.americanprogress.org/article/congressional-republicans-proposed-budget-reconciliation-bill-imperils-4-4-million-pell-grant-recipients/.

Weissman, Sara. “Community Colleges Fear Proposed Changes to Pell.” Inside Higher Ed | Higher Education News, Events and Jobs, June 2, 2025. https://www.insidehighered.com/news/institutions/community-colleges/2025/06/02/community-colleges-fear-proposed-changes-pell.