WASHINGTON, D.C. — The U.S. Department of Education on Friday issued its first formal guidance to colleges and financial aid administrators following the passage of the One Big Beautiful Bill Act (OBBB), a sweeping legislative package aimed at reforming higher education financing, accountability, and workforce alignment.
Signed into law two weeks ago by President Donald Trump, the OBBB represents one of the most significant changes to federal student aid in a generation. In a newly released “Dear Colleague Letter,” the Department outlined how institutions should begin implementing several immediate provisions, ranging from income-driven repayment reforms to new restrictions on underperforming academic programs.
“President Trump’s One Big Beautiful Bill is a historic win for students, families, and taxpayers,” said Acting Under Secretary James Bergeron. “The OBBB delivers for student borrowers in a big way – simplifying the student loan repayment system, funding the $10.5 billion shortfall in Pell Grant funding left by the previous administration, supporting short-term career-focused programs that train workers for in-demand jobs, and holding colleges accountable by eliminating student loan eligibility for programs that leave students worse off than if they had never enrolled.”
The guidance includes updates that directly affect how schools process and communicate federal aid, including:
- Income-Based Repayment Overhaul: Streamlining repayment options into a simplified plan structure.
- Parent Borrower Options: Offering new repayment flexibility for parents who borrowed on behalf of students.
- Loan Limits for Part-Time Students: Adjusting borrowing caps to better reflect enrollment intensity and actual cost.
- Rollbacks of Biden-Era Rules: Modifying or rescinding Obama- and Biden-era borrower defense and closed school discharge regulations deemed overly expansive.
Other components of the OBBB — such as the creation of the Repayment Assistance Plan and the Workforce Pell Grant program, which expands aid to short-term credential programs aligned with labor market needs — will be phased in starting next year. Additional regulatory guidance and rulemaking procedures are expected in the coming months.
The law also aims to restore solvency to the Pell Grant program after years of shortfalls and targets federal funds toward outcomes-based accountability in higher education.
The Department emphasized that Friday’s announcement represents only the initial phase of implementation and pledged continued communication and technical assistance as further elements of the law come into effect.
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