Five big changes coming to higher education July 1

“Since the start of President Donald Trump’s second term, the White House and Congress have worked aggressively to overhaul federal student financial aid. On July 1, many of those efforts will come to fruition. Student borrowers will begin to see different options for loan repayments and forgiveness, while current students will face new limits on how much they can borrow in the first place. Low-income people will have more funding available to pursue career and technical training. These moves have cheerleaders, critics and skeptics. The Hechinger Report checked in with experts around the country to find out what they’re wondering and watching for as it all unfolds. What’s changing Workforce Pell Scrapping the SAVE loan program Public Service Loan Forgiveness Graduate student loan limits Parent loan limits Workforce Pell Change in higher education rarely moves so quickly that it’s hard to keep up. But one new federal policy that takes effect July 1 has states and providers scrambling. At stake are hundreds of millions of taxpayer dollars and a continued supply of workers in essential jobs. After years of unsuccessful bipartisan support, federal Pell Grants will be available for the first time to help lower-income students pay not just for associate and bachelor’s degrees, but for short-term training that leads to certificates or certifications for in-demand roles , including nursing assistants, phlebotomists, EMTs and child care providers, and in many trades — truck driving, welding, car repair and HVAC. This new option, widely nicknamed short-term or Workforce Pell, has a lot of rules. It applies to programs as short as eight weeks but requires providers to show that at least 70 percent of students successfully finish and get jobs within six months that pay enough to justify the cost. Ernie Gomez teaches students about Heating, Ventilation, and Air Conditioning during a class at his Level5HVAC construction trade school in Homestead, Florida. HVAC programs are among those that may be eligible for Workforce Pell. Credit: Joe Raedle/Getty Images Related: Interested in more news about colleges and universities? Subscribe to our free biweekly higher education newsletter . Enforcing these conditions is largely left to states, which have had less than a year to prepare. Some are further along than others. Meanwhile, a survey shows that fewer than half of people who could most benefit from these non-degree programs are aware of them, let alone that they may now qualify for government grants to cover the cost. Even once they do know, there are nearly 1.9 million such programs to choose from, according to the Counting Credentials project. They’re offered by 134,491 different providers, from public community colleges to private, for-profit schools. Of those, anywhere from several hundred to a few thousand will meet the eligibility criteria for short-term Pell Grants, according to the most specific available projection from the U.S. Department of Education. Whether the programs pay off will be the most critical question to answer. One study finds that only about 12 percent of more than 23,000 non-degree credentials analyzed left their students earning at least 10 percent more than they made before enrolling. Another shows that graduates from non-degree programs at community colleges in Texas saw wage gains of about 4 percent; those in fields like transportation and engineering technologies benefited the most, while their counterparts in business and marketing and information sciences saw zero increase in earnings. Most states still have a long way to go to establishing eligibility rules to protect prospective students from wasting their time — and federal money — on poor programs. — Jon Marcus Scrapping the SAVE loan program What happens when more than 7 million people who owe money on their federal student loans are forced to find new repayment plans in the span of a few months? We’re about to find out. The federal SAVE — Saving on a Valuable Education — program is being phased out by the Trump administration, leaving its 7.5 million participants to transfer their student debt to one of at least three other plans starting July 1. Most SAVE borrowers will need to switch by September. Those who miss the deadline will automatically be enrolled in a standard federal repayment plan that could cost significantly more. “The key thing is making sure people understand that they really do need to take action,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group representing loan servicers. “There’s nothing stopping people from acting now.” The SAVE program, enacted by the Biden administration in 2023, limited federal loan repayment to 5 percent of an undergraduate borrower’s disposable income and made it easier to seek forgiveness for loans. The Trump administration ended the program to settle lawsuits by Republican officials in 18 states, who argued that SAVE’s provisions went beyond what Congress had intended in authorizing income-driven repayment plans. While the Department of Education will offer a new income-driven plan, the terms will be less forgiving than the SAVE program’s. The lowest-income borrowers will no longer be able to skip some payments, and debt will be allowed to be canceled only after a minimum of 30 years, in contrast with the SAVE plan’s 10-year minimum. Going forward, as many as eight plans will be options, but not all will be available to every borrower, and some will expire in 2028. Depending on which new plan a SAVE borrower chooses, monthly payments could rise by hundreds of dollars, said Natalia Abrams, president and founder of the Student Debt Crisis Center, an advocacy group for student borrowers. “I would say this is by far the most confusing time for the student borrower landscape,” she said, noting that more than 700 people attended her organization’s most recent workshop about the coming changes. “I don’t think we’ve gotten clear guidance on it.” Confusion and worry have been common among SAVE borrowers who reached out to Lane Thompson, Oregon’s student loan ombudsperson. Many wondered about the timeline for the changes, she said, and many feel stressed about the effects on their living expenses amid inflationary pressures. The latest rules also follow years of loan pauses, lawsuits and other measures that have affected federal student loan rules. “I’m definitely seeing people who are very confused,” Thompson said. “People are kind of exhausted by all the change.” Related: Fake student loan debt offers proliferate as federal government rolls back enforcement SAVE borrowers will start receiving letters from the Department of Education around July 1, although some might arrive later as the department staggers implementation. The letters will open a 90-day window for borrowers to find a new repayment plan. The government’s loan simulator can help borrowers make decisions. Borrowers will need to choose a plan that fits their repayment goals, said Sarah Sattelmeyer, project director for education, opportunity and mobility at the left-leaning think tank New America. Some people will want the lowest possible monthly payments, while others might want to pay off their loans as quickly as possible, Sattelmeyer said. It’s important to research and speak to loan servicers to find the best option, she said. “Borrowers are having to take in a very large amount of information and decide what’s the best move for them,” Sattelmeyer said. “Different plans meet different borrowers’ goals, and it’s based on personal circumstances.” — Matt Krupnick Public Service Loan Forgiveness The federal Public Service Loan Forgiveness program has had a relatively clear message to student borrowers since 2007: Work in a government or nonprofit job for enough time, and your debt will eventually be canceled. But a new caveat from the Trump administration has created chaos for hundreds of thousands of borrowers whose public service jobs may no longer qualify. Starting July 1, employers with what the administration deems a “ substantial illegal purpose ” — such as helping immigrants or providing transgender care — could be excluded from the program. The administration has not specified which employers would meet that definition, only saying it expects fewer than 10 employers per year to be affected. Advocacy groups worry that the Trump administration might target state governments such as California, Illinois or New York, institutions such as Harvard University or other groups it disagrees with. Related: 5 big questions to help you understand the current state of student loans “I’m trying to minimize the panic here,” said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, who has spoken with borrowers who have already quit the public service jobs the program was meant to encourage them to take. “But I would be worried if I worked for an employer that has already been singled out by this administration.” The Public Service Loan Forgiveness program allows borrowers to request their remaining debt be canceled if they have made 10 years of payments while working for a qualifying employer. Those employers include public schools and government agencies as well as nonprofit organizations such as hospitals, universities and food banks. Several lawsuits could affect the program’s future. One, filed in Massachusetts by 14 parties including the cities of Boston, Chicago and San Francisco, labor unions and nonprofits, argues that the administration has no right to alter a congressionally approved program. That complaint has a hearing scheduled for June 3. A second lawsuit has been brought by a coalition of 23 state attorneys general. Borrowers should wait to see how the legal challenges proceed before making major decisions, said Winston Berkman-Breen, legal director of Protect Borrowers, which represents some of the 14 plaintiffs. “No one should change their life plans or give up their dream job for this,” he said. “We think it would be premature for someone to make such an important decision on their job or where they live based on this rule.” Regardless of the lawsuits’ outcomes, it’s not yet clear whether any changes could be enforced or how many people would be affected, Mayotte said. “If an employer does fall under scrutiny, the employer will have the opportunity to defend themselves,” she said. “I think the number of borrowers affected, if this makes it through the courts, will not be broad at all.” — Matt Krupnick Graduate student loan limits Grad PLUS loans, officially named Direct PLUS loans, allowed graduate students to borrow up to the full cost of attendance. They are being phased out . Instead, students enrolled in 11 fields categorized as professional, such as doctors and lawyers, are limited to $50,000 per year and a lifetime total of $200,000. All other graduate programs, such as nursing, teaching and social work, will have a lower cap of $20,500 per year and $100,000 in total. Two dozen states filed a lawsuit in May challenging the definition of “professional” that created these lower loan limits. Student borrowers already enrolled in a program won’t be affected by the changes. Education Department officials say the restrictions will help protect incoming students from ballooning debt that they can’t repay and will pressure institutions to lower costs. Opponents worry that the caps will make a degree less accessible to low-income students, restricting economic mobility for those who would benefit most. About 28 percent of graduate students would surpass the borrowing caps if they were in place today, according to an analysis by the Federal Reserve Bank of Philadelphia. Some fields of study could be deeply affected. Today, close to 80 percent of dentistry, 21 percent of registered nursing and 58 percent of medical students borrow more than the new limits, according to a recent report by the PEER Center at American University. Related: Student loan borrowers misled by colleges were about to get relief. Trump fired the people poised to help Policymakers across the political spectrum expect growth in private student loans, which have fewer protections than federal ones. Critics note that low-income students, whose families disproportionately have lower credit scores, could face higher interest rates in the private market. More than a third of students who borrow over the new limit have credit scores that will make it difficult to get approved for a private loan. “Knowing how many people are going to struggle to access private loans on their own, I think it is safe to assume there will be a notable impact on enrollment,” said Clare McCann, one of the co-authors of the PEER report. “Some of these people will choose not to go, and unfortunately, that’s even going to be true in a lot of the fields where the return on investment is very strong.” Supporters of the caps say student debt and unrepaid loans, which cost the federal government billions of dollars, will decrease. “Before, you could have a really overpriced graduate program that students would just take out these ridiculous student loans for and not be able to repay them,” said Andrew Gillen, research fellow at the Cato Institute’s Center for Educational Freedom. “These overpriced programs are not going to be able to convince a private financial institution to give loans to their students.” Gillen and others hope that nonprofits and colleges will step in to cosign loans for students with low credit scores who can’t get private loans on their own. Still, some policymakers who believe in loan limits say it’s unclear whether private companies will risk lending to people with poor credit, even if they attend a high-quality school. They were frustrated with the final law and had advocated for pegging the limits to a graduate’s ability to pay back the loan. — Meredith Kolodner Parent loan limits Parent PLUS loans, which previously allowed parents to borrow up to the cost of a child’s attendance, will be capped at $20,000 per year and a lifetime total of $65,000 per dependent student. These borrowers will also no longer have access to the limited income-driven repayment plans that previously existed. Originally aimed at affluent families who needed a quick cash infusion, Parent PLUS loans have increasingly been used by middle- and low-income families to bridge the financial gap as federal financial aid no longer covered the cost of attending college. About 56 percent of Parent PLUS borrowers qualify for Pell Grants, which are aimed at low-income families. There has been agreement across the political spectrum for years that Parent PLUS loans landed families in unmanageable debt. After 10 years, the average borrower has barely paid off half of what they owe, and with a 9 percent interest rate, the amount owed can climb to thousands of dollars beyond what was borrowed. Congress created the new caps to keep families from spiraling into debt and steer them toward more affordable options. The motivation was not to stop government waste — the program has traditionally made a profit for the government with a 16 percent return most recently, according to a study by the Brookings Institution . The impact of the caps will vary by income level. About 18 percent of borrowers from families making less than $50,000 now borrow above the new annual cap and 9 percent borrow more than the lifetime limit, according to an analysis by the Urban Institute. For borrowers from families who make more than $200,000, those numbers are 57 percent and 46 percent, respectively. Critics of Parent PLUS loans note that low- and middle-income families who struggle to repay their loans tend to borrow well below the limit, making the caps less effective for them. “For families with strong financial profiles and good credit, this shift may yield access to lower-cost options than Parent PLUS loans,” wrote the authors of the Brookings report. “However, for families with weaker credit or limited collateral, private market underwriting may result in reduced access to loan funds and substantially higher borrowing costs, potentially exacerbating existing inequalities in college financing.” Instead of across-the-board loan limits, critics argue that Parent PLUS loan approval should take into account the ability to pay, include an income-based repayment option and hold colleges accountable for high default rates. — Meredith Kolodner Contact editor Sarah Butryomowicz at butrymowicz@hechingerreport.org or on Signal: @sbutry.04. This story about student loans was produced by The Hechinger Report , a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger newsletter . The post Five big changes coming to higher education July 1 appeared first on The Hechinger Report .

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