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  • 07/10/2025 1:58 PM | Cheryl Casagrande (Administrator)

    EdSource

    College & Careers

    Trump’s law reshapes federal loans and Pell Grants, impacting California students

    The law sunsets a loan program for graduate students and makes short-term workforce training eligible for Pell Grants.

    Amy DiPierro And Michael Burke

    Published

    July 8, 2025

    Republish

    How the “Big Beautiful Bill” could impact California kids

    July 10, 2025 - Hundreds of thousands of children could lose federally-funded food stamps and health care under the new law.

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    News in brief


    Top Takeaways
    • The law blocks graduate students from taking out new Grad PLUS loans and caps Parent PLUS loans starting in 2026.
    • To maintain access to federal student loans, academic programs must soon show alumni earn more than peers without the same degree. 
    • The law expands Pell Grants to short-term workforce training and nixes an earlier proposal that likely would have reduced aid to many Pell recipients.

    The domestic policy law signed by President Donald Trump will have major implications on how students in California and across the country pay for college, with analysts describing it as the most consequential federal higher education legislation in decades.

    Related Reading

    What Trump’s budget and tax law means for California students

    July 7, 2025

    The most significant changes will impact access to federal loans and borrower repayment plans. The law also amends Pell Grant eligibility standards, expands qualified expenses for 529 college savings accounts, and is expected to raise the endowment tax on a few private universities, including Stanford. 

    Republican lawmakers say their suite of higher education policies aims to make college more affordable and reel in student debt while broadening access to career and technical education. Critics warn the package’s financial aid measures will do just the opposite, making higher education more expensive for low- and moderate-income students.

    “This is the biggest set of changes to higher education policy in America since at least 1992,” said Robert Kelchen, a professor of higher education at the University of Tennessee, noting that the Higher Education Act hasn’t been reauthorized since 2008. “In this reconciliation bill, there are effectively pieces of legislation that congressional Republicans have been working on for years.”

    The Grad PLUS program will stop accepting new borrowers

    The federal Grad PLUS program, loans which make it possible for graduate students to borrow up to the cost of attendance minus other financial aid, will stop accepting borrowers this time next year. Current borrowers, however, will be grandfathered in and allowed to continue accessing those loans.

    Graduate students will still have access to direct unsubsidized federal loans, but the bill caps those at $50,000 per year for students in professional programs, such as those studying to become lawyers or doctors, and most other graduate degrees at $20,500 per year. 

    The changes will reduce access to graduate school, particularly for low-income students who don’t have other funding options, said Melanie Storey, president and CEO of the National Association of Student Financial Aid Administrators, a nonprofit membership organization representing financial aid professionals at colleges across the country. “Very capable students who come from more modest backgrounds may be unwilling to pursue graduate or professional education.”

    Some of those students may borrow from private lenders, but those loans “won’t come with the same kinds of terms and conditions and protections that a federal loan has,” she added.

    The University of Southern California may be hit particularly hard by the loss of those PLUS loans. “They have so many graduate programs, and they have a lot of students who do not get financial aid,” Kelchen said.

    The Grad PLUS program disbursed about $2 billion to students at California colleges and universities in the 2023-24 school year, federal data shows.

    Lower caps on Parent PLUS loans will limit borrowing

    Under the federal Parent PLUS loan program, parents used to have the ability to borrow up to the total cost of a student’s college education. A new cap starting July 2026 will limit borrowers to $20,000 per year and a lifetime maximum of $65,000 per student. Supporters argue that borrowing limits will slow rising tuition. 

    Parent PLUS loans have been “the loans of last resort” for students whose parents don’t qualify for private loans because of their credit, Kelchen said, so reducing the borrowing limit may hit students with substantial financial need the hardest. A brief by the Education Trust characterized them as “a double-edged sword for Black borrowers” in particular, who tend to have fewer resources to pay for college due to long-standing inequities in wealth and income.

    Capping the Parent PLUS program will likely either “discourage students from attending college or limit their choices,” Storey said. 

    Institutions will need to get creative to ensure low-income and first-generation students can continue enrolling, said Emmanual Guillory, senior director of government relations at the American Council on Education. 

    “It’s hard to say that institutions will just find a way to make up the difference and will offer more institutional aid for low-income students to help them be able to cover the cost,” he said.

    Former students’ earnings will determine loan access

    The reconciliation bill puts postsecondary programs to a new test: In order to access federal student loans, alumni must earn more than peers who didn’t study for the same degree. 

    Congressional Republicans say the idea is to hold colleges and universities accountable for what alumni ultimately earn when they join the workforce. Loosely, for a given field of study, an undergraduate degree program can continue accessing federal loans if the median earnings of former students exceed the median earnings of high school graduates in the same state. Graduate programs maintain access to federal loans by comparing former students to similarly situated bachelor’s degree holders.

    “It’s a really significant step towards the kind of focus on educational outcomes that we have seen both Republicans and Democrats talk about in recent years,” said Clare McCann, policy director at the Postsecondary Education & Economics Research Center. But McCann said it’s problematic that the measure doesn’t apply a similar standard to undergraduate certificate programs

    An analysis by Preston Cooper, a senior fellow at the right-leaning American Enterprise Institute, found that many associate degree programs could lose access to student loans, although associate degree students may be less likely to finance their educations in the first place. 

    “The promise of a lot of these programs is that you shouldn’t have to borrow,” Cooper said. “I kind of think that if these programs do have earnings outcomes that are so low, we probably shouldn’t be giving students loans for those programs, because it’s very unlikely that they’ll be able to repay their loans in full.”

    SAVE, other repayment plans will close to new borrowers

    The repayment terms will also change, reducing the number of plan choices to just two: a standard repayment plan and the Repayment Assistance Plan, which ties payment size to the borrower’s income. Supporters argue that doing so simplifies the options available to borrowers while putting them on a path to repay loan balances in full. 

    Most existing income-driven plans will later close to new borrowers, including the popular Saving on a Valuable Education (SAVE) plan, a Biden administration initiative aimed at lowering monthly payments. In California, about 600,000 borrowers are enrolled in the SAVE plan, according to the Student Borrower Protection Center.

    “For most borrowers, their payments will be drastically more expensive on a monthly and annual basis,” said Aissa Canchola Bañez, policy director of the Student Borrower Protection Center. 

    Loan deferments for economic hardship will be eliminated, and new limits will be placed on forbearance.

    Lawmakers nixed a Pell proposal that worried colleges

    The version of the reconciliation bill passed by the U.S. House of Representatives would have increased academic credit requirements per semester to be considered a part-time or full-time student under the Pell Grant program. That proposal sparked concern among officials at California State University and the University of California that tens of thousands of their students would receive less money from Pell — or would lose eligibility altogether because they don’t take enough classes each term. 

    The universities may now breathe a sigh of relief: The final law makes more incremental adjustments to Pell, such as making students who receive full scholarships from other sources ineligible for Pell.

    Students can use Pell for short-term workforce training

    Starting in July 2026, Pell Grant recipients will be able to spend their awards on educational programs that last more than eight but less than 15 weeks at accredited institutions. Supporters of extending Pell to shorter programs say doing so will make educational programs more accessible to adult students who are already in the workforce.

    Kelchen said workforce Pell Grants have gained traction among a broad spectrum of policymakers due to frustration regarding the value of a college degree. “The goal is, by trying to encourage short-term credentials, you get people in through [an educational program] fast and back out into the economy,” he said. 

    But some are skeptical about the return on investment of weeks-long credential programs. Wesley Whistle, a project director who monitors higher education policy at the left-leaning think tank New America, said student earnings after completing short-term certificate programs “aren’t good on average” and that even when they do boost earnings, the positive effect “tends to fade after a year or two.” Researchers with the Institute of Education Sciences reported similar findings.

    Families with 529 plans will have more spending options

    The law also makes several changes to 529 plans, investment accounts typically used to save money for college, in which earnings are tax-deferred and withdrawals for qualified educational expenses are tax-exempt. The new law, starting in 2026, adds items including tutoring, standardized testing fees and some educational therapies to the list of qualified expenses while students are in K-12. After high school, the law also allows funds to be used for some professional credentials, not just college. 

    Researchers at the Brookings Institution have found that 529 plans mainly benefit wealthy families while costing the federal government billions in tax revenue. “Low-income people don’t have enough money to be able to save in this way,” McCann said.

    In California, the state’s 529 plan — ScholarShare 529 — managed more than $15.6 billion in more than 439,000 accounts as of June 2024. 

    A few selective universities will see an endowment tax hike 

    Critics, including the American Council on Education, have also warned that another provision of the law — increasing the endowment tax at a relatively small number of private universities from 1.4% to as much as 8% — could indirectly reduce the institutional financial aid available to their students. However, proponents argue that elite colleges hoard wealth while charging students exorbitant tuition. Based on their current endowment-to-student ratios, Stanford University and the California Institute of Technology would likely be among the universities to see a tax increase, while the University of Southern California, with its much larger student body, would probably be exempt.


  • 07/10/2025 1:54 PM | Cheryl Casagrande (Administrator)

    EdSource

    Federal Education Policy

    What Trump’s budget and tax law means for California students

    Betty Márquez RosalesJohn FensterwaldVani SanganeriaZaidee StavelyLasherica ThorntonAnd Diana Lambert

    Published

    July 7, 2025

    How the “Big Beautiful Bill” could impact California kids

    July 10, 2025 - Hundreds of thousands of children could lose federally-funded food stamps and health care under the new law.

    Subscribe and view more

    News in brief

    Top Takeaways
    • Cuts to social safety net programs for the United States’ poorest will partly offset the $4.5 trillion in tax cuts weighted toward the wealthy.
    • $170 billion to immigration enforcement likely to harm student mental health, research shows.
    • Up to 151,000 children could lose health care in California, though advocates say the number is likely higher, as cuts may impact school-based health services.

    Hundreds of thousands of California’s low-income children and their families will likely see federally funded food support and health care shrink or vanish in the coming years under the mammoth budget and tax law that President Donald Trump rammed through a divided Congress and signed last week.

    Education cuts to come

    The $12 billion in cuts to K-12 schools and colleges that Trump proposed in May and the related $6.2 billion in federal funding that he ordered withheld from schools last week are not connected to the tax and budget bill that Congress just passed. They are the next target of Trump’s plan to hollow out funding for public education.

    The $12 billion cut — about 15% of what the U.S. Department of Education last appropriated for schools and universities — would take effect on Oct. 1, the start of the 2026 federal fiscal year. Trump’s plan would kill funding for educating migrant children and English learners, and end grants to attract candidates to become teachers, while maintaining current funding levels for Title I aid for poor children and students with disabilities.

    Because the forthcoming budget bill will require 60 votes in the Senate to pass, unlike the simple majority that Trump squeezed by last week with the budget and tax bill, opponents are optimistic they’ll be able to blunt some of the proposed cuts. They also believe they’ll get courts to reinstate the $6.2 billion that Trump withheld as of July 1. Congress already appropriated that money for states last February, in effect, to tide them over, since their fiscal year starts earlier, on July 1.

    “The bill will put young people and families at significant risk,” said Dave Gordon, Sacramento County superintendent of schools. “There’s nothing good about any of that. It’s cruel and it’s mean-spirited.”

    Immigrant families are bracing for ramped-up immigration enforcement as those efforts are now infused with an additional $170 billion. Those billions will be pulled in part from the $1 trillion in cuts to Medicaid — known as Medi-Cal in California — and $186 billion cut from the Supplemental Nutrition Assistance Program, which provides monthly payments for food to about 5 million Californians, including nearly 2 million under 18.

    State legislators did not set aside funds to account for cuts before approving the state budget, potentially leaving school districts to “absorb the shortfall,” as Visalia Unified stated it is prepared to do.

    Each district is facing a different reality. Some might have enough reserves to maintain current programming, while small and rural districts often heavily rely on federal dollars just to maintain basic educational infrastructure and services, said Fresno County’s schools Superintendent Michele Cantwell-Copher.

    Reduced spending on the poorest Americans will partly offset the $4.5 trillion in tax cuts weighted toward the wealthy, along with other features like a small increase in the $2,000 child tax credit. But the remaining $3 trillion will add to the federal deficit and be piled onto a record national debt to become a burden for the next generation of Americans. The higher interest payments on the debt they’ll pay as a portion of the federal budget will crowd out new spending options, including education and child care.

    What follows is a summary of what’s in the 2026 budget law, which will be phased in over several years, and its implications for families and children.

    Cuts to food assistance

    Around $186 billion is cut from the Supplemental Nutrition Assistance Program, or SNAP, also known as CalFresh in California, where over 55% of participants are families with children.

    An estimated 735,000 people are expected to lose their benefits, mainly because of new work requirements, according to the governor’s office.

    Related Reading

    Trump’s law reshapes federal loans and Pell Grants, impacting California students

    July 8, 2025

    “Work requirements do not increase employment, it increases the red tape for vulnerable populations, causing more strain on hospitals with uninsured patients,” said Clarissa Doutherd, executive director of Parent Voices Oakland and a commissioner with First 5 Alameda County.

    The bill extends work requirements to a greater number of people, including those aged 55 to 64 and parents whose children are 14 or older.

    “Schools don’t exist in a vacuum. Cutbacks that impact the health and welfare of families create additional challenges for student support and academic success,” said Troy Flint, chief communications officer with the California School Boards Association.

    Since SNAP participation also determines eligibility for school lunch programs, a drop in enrollment could cut federal meal subsidies and raise state costs for meeting all students’ daily nutritional needs.

    Under the newly signed bill, states will also be required to front a greater amount of the program’s cost.

    States may need to cover between 5% and 15% of the benefits cost starting in 2028 if they have an error rate over 6% for recipients. This is a threshold that data from the U.S. Department of Agriculture shows only eight states met last year. California was not one of those states.

    It remains unclear what impact the cuts will have on schools, but the state has not provided any additional funding to backfill the cuts.

    Medi-Cal cuts

    Over half of all children in California are enrolled in Medi-Cal, as Medicaid is called in the state. An analysis of the House bill found that up to 151,000 children in California would lose health care coverage, largely due to changes in work requirements and eligibility.

    Mike Odeh, senior director of health policy at Children Now, said the number will likely be higher. The final bill exempts parents of children age 13 and under from meeting work requirements. Odeh said families with children over the age of 14 who do not report monthly work hours will likely lose coverage.

    PODCAST

    How the “Big Beautiful Bill” could impact California kids

    July 10, 2025

    Medicaid is the fourth-largest federal funding source for K-12 schools nationwide, providing roughly $7.5 billion in school-based health services every year. California is one of 25 states that bill Medi-Cal for school-based health services, including vision and hearing screenings, nursing services, school counseling services and environmental support for special education students.

    If local clinics shut down as a result of Medicaid cuts, more kids are likely to turn to school-based health services for care, Odeh said. “So there will be less resources available for school-based medical services as there’s also more demand for them,” Odeh added.

    Medi-Cal billing is also a core source of sustainable funding for nearly 300 school-based health centers statewide, offering services such as mental health counseling, primary care and speech or occupational therapy.

    School-based health centers are funded by a combination of grant funding and Medi-Cal reimbursements, with no state-funded grants to rely on, according to a spokesperson from the California School-Based Health Alliance.

    The bill also cuts the provider tax, a key source of funding for rural community hospitals, and prohibits the use of Medicaid dollars toward reproductive care at Planned Parenthood clinics, two main sites of health care used by young people in ruralhigh-poverty communities.

    In recent years, California has expanded efforts to include school-based mental health support in Medi-Cal reimbursement, including support for mental health clinicians, wellness coaches and peer support programs that were initially funded by the Children and Youth Behavioral Health Initiative. Newly hired school-based mental health providers may lose a critical portion of funding when some students are no longer eligible to have those services reimbursed by Medi-Cal, according to the California School-Based Health Alliance.

    “We know that kids who are enrolled in Medicaid do better in school,” said Odeh. “They miss fewer school days, they’re more likely to graduate high school and less likely to drop out, they’re more likely to go to college and have fewer emergency room visits and hospitalizations as adults.”

    School choice for states that want it

    The budget law will establish the first big federally funded program granting tax credits to underwrite private school tuition. If it proves popular, the program would potentially divert billions of dollars in federal tax revenue that opponents argue would be better spent supporting public schools.

    All but the wealthiest parents would be eligible to receive up to $1,700 in direct tax credits to defray tuition to private schools or potentially use it for homeschooling. Other taxpayers could receive the same tax credit by donating to “Scholarship Granting Organizations,” which would award scholarships to attend private or religious schools in states that take on the program and manage the scholarships. The number and size of the scholarships would depend on the number of Americans who make tax-deductible contributions and the states that offer the program.

    That’s the catch: Congress included an opt-in provision, and California is one of 20 states that currently don’t have a private school choice program. Gov. Gavin Newsom has shown no interest in signing up, and a state Senate committee in March killed a bill that proposed a statewide education savings account. Teachers unions are unalterably opposed, charging that it will primarily subsidize parents who already send their kids to private schools.

    Lance Christensen, a longtime advocate of school choice and a former candidate for state superintendent of public construction, criticized Newsom and state leaders for locking California out of a program “providing billions of dollars in K-12 scholarships to poor and middle-class families in other states so their kids can get an education tailored for their needs.”

    California proponents of school choice, however, are hopeful that the federal tax credits could enhance passage of their own Children’s Educational Opportunity Act, establishing a state-controlled Education Savings Account. Supporters are collecting signatures to place the initiative on the 2026 statewide ballot. It would provide parents with $17,000 — the equivalent of public school funding per student — to enroll their children in a private school or cover expenses such as tutoring or special education services.

    Billions to Immigration and Customs Enforcement

    The massive infusion to Immigration and Customs Enforcement, known as ICE, will likely increase anxiety among immigrant families, lead to more absences from schools and harm children’s mental health, according to research.

    “The children of immigrants, any time they’re away from their families, we hear examples that they’re worried at school about what might happen to their parents. That’s a huge mental toll that we’re asking every one of these kids that is an immigrant or lives in a mixed-status family to carry with them every day, 24 hours a day,” said Xilonin Cruz-Gonzalez, deputy director of Californians Together and co-chair of the National Newcomer Network.

    The funding is aimed at expanding detention centers to hold adults and families with children while their immigration cases are pending, and increasing the number of ICE agents.

    Immigration raids in California increased significantly toward the end of the latest school year, causing upheaval and fear among students whose family members — and sometimes themselves — were detained or deported.

    ICE’s methods in the state have included arresting U.S. citizensdetaining toddlers and elementary school students, and arresting immigrants with active legal asylum cases at their scheduled court appointments.

    “We already see families keeping their kids home from school and keeping their kids home from summer activities because they’re fearful to leave their houses,” Cruz-Gonzalez said.


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