The new settlement law’s loan cap and Medicaid cuts are likely to raise costs for students across the country, experts say.
How will Trump’s new spending bill affect student loans?
President Donald Trump’s newly passed spending bill is set to overhaul the federal student loan system.
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WASHINGTON – Vashti Trujillo wanted to complete his master’s degree. But she is worried that President Donald Trump may have put it out of reach.
The president’s massive tax and spending laws are set to cut down the federal student loan program, where a 21-year-old junior at Colorado State University Pueblo, is likely to have to pay one. Education experts also predict that there will be legislation that will strain the budgets of many public universities, such as those that Trujillo will be present. That’s because the law could drive state legislatures to reroute state legislatures from higher education to safety net programs such as Medicaid. This could dramatically reduce the spending law.
“This bill attacks every angle of a student’s life,” she said.
Trujillo, who has a doubling major in mechatronics engineering and data analysis, is wondering among many US college students whether Trump’s first signing legislative achievements in his second term could raise their costs.
Anxiety doesn’t just hit students. It is ubiquitous in university administrators. Federal funding is declining. The supply of students paying tuition fees is beginning to fall over the long term. And the Trump administration’s immigration enforcement policy has shaken the prospect of going to international students, the population that many American universities need to survive.
Trump’s massive spending scale stabilizes several funding flows for higher education programs, including Pergrant, but it almost takes away money when even the wealthiest universities are already financially burdened.
Over the next few years, the new student loan repayment program created by law will raise bills for millions of borrowers. I feel that universities need to shift more support to graduate students and from undergraduate students. Meanwhile, many state legislatures could be deprived of their support for higher education.
Still, the Trump administration in Congress and Republicans are confident that the new budget law will strengthen university oversight and ultimately lower student prices.
“By establishing loan restrictions, the bill closes open spigots for family grants that create college costs and burdens,” Education Secretary Linda McMahon posted on X after the Senate passed the measure. “This bill simplifies and streamlines student loan repayments for millions of borrowers.”
Nathan Grow, a professor of economics at Carlton College, called the spending law “a harbinger of future challenges.”
“Whether public or private, universities and universities rely heavily on federal funding that has gone far beyond that,” he said.
Ending Grade Plus, Capping Parent Plus
They aren’t coming anytime soon, but major changes to the student loan system will begin to affect borrowers in 2026.
Parents will soon face new restrictions on how much they can borrow with federal loans to fund their children’s education. (The new cap is $20,000 per student per year, with a total limit of $65,000.
Since July 1, 2026, there will only be two repayment programs for those taking out new loans, but the current borrower’s plans will be in sunset in 2028.
There are also new caps for graduate students’ borrowing. And for decades, the GRAD PLUS program has helped students pursue careers in medicine, law and other training-intensive careers, is unavailable for new students. According to the American Association of Medical Colleges, about half of all medical students receive loans with graduates each year, and is based almost entirely on attendance costs.
Kim Cook, CEO of the National College Attainment Network, a university access group, said the losses for graduate students could ultimately have a trickle-down effect on the university’s large financial aid budget.
But for the time being, Cook said many university counselors will be focusing on resolving widespread confusion over what the law is doing and what it doesn’t affect. She said students don’t necessarily understand all of the forms of financial aid remaining.
“Federal student aid still exists,” she said. “Pell’s grants still exist.”
That confusion alone can prevent some students from going to college at all, she said.
Medicaid, SNAP is tied to university costs
Without a doubt, the most controversial element of the new law is the reduction in major safety net programs.
The roughly $1 trillion fund cut to Medicaid comes into effect in 2028, when the Congressional Budget Office expels millions of Americans from health insurance. Over 20 million Americans lose some or all of their benefits through supplemental nutrition assistance programs or SNAP.
The ripple effects of Medicaid and food stamp regulations reverberate across public universities and universities. Without federal funds, state legislatures will be forced to fill the gap. Savings will be needed elsewhere as lawmakers are balanced in budgets.
When that happens, funding for higher education is often the first in the chopping block, said Tom Hanish, vice president of government relations for the state Association of Higher Education Executive Officers.
“The nation will have to make really difficult choices,” he said. “And historically, what we saw is that higher education comes at the brunt of when they have to make difficult choices.”
In Colorado, state lawmakers have already changed university money demands to help compensate for federal fund cuts. However, Trujillo, a student at CSU Pueblo, doesn’t have much time between multiple jobs to worry about it.
She was her first family to attend college. Through Pell grants, scholarships, and state and institutional financial aid, she has so far managed to avoid eliminating public or private student loans. She knows that a master’s degree will likely lead to a higher salary in engineering, but the idea that she may have to resort to private lenders makes her nervous.
“I’m very scared of personal loans,” she said. “I’ve heard of horror stories.”
Zachary Schermele is an education reporter for USA Today. You can contact him by email at zschermele@usatoday.com. Follow him on X at @Zachschermele and follow Bluesky at @Zachschermele.bsky.social.
