TL;DR

• The One Big Beautiful Bill (“OBBB”) eliminates graduate PLUS loans and imposes lifetime borrowing caps of $100,000 to $200,000 depending on the degree type.
• It expands the endowment excise tax using a tiered system based on endowment per student, now including international students; Columbia remains exempt for now.
• Federal loan eligibility may be denied to programs where graduate earnings fall below thresholds tied to Census benchmarks.
• Income-based repayment plans are replaced with a new Repayment Assistance Program; interest begins accruing immediately, and PSLF eligibility is narrowed.
• Programs that rely on federal loans, serve primarily domestic students, and lack strong private lending alternatives face the highest financial risk.

A little over a week ago, President Trump signed the One, Big, Beautiful Bill (“OBBB”) into law. You can read the full legislation here.

To be clear: the Stand Columbia Society is politically neutral. The Stand Columbia Society therefore focuses its discussion on the OBBB insofar as its impacts Columbia. Today’s issue will break down some of those impacts. Here is the headline: While Columbia narrowly escaped the endowment tax, limits to graduate loan programs could have an extremely negative impact on Columbia’s graduate programs which rely on these loans.

Endowment tax

As has been abundantly telegraphed, the OBBB enshrines an endowment excise tax. Section 70415 prescribes an escalating rate of endowment tax on earnings based on rising tiers of “student adjusted endowment” which is defined as total endowment value divided by total students (previously, it had excluded international students).

Columbia’s student adjusted endowment is approximately $410,000, which means it is exempt from the endowment tax for now.

Expanding 529 plan scope

Section 70414 expands the scope of 529 plans, which in some cases allow state tax deductions. Previously limited to tuition and fees and limited other expenses, the law now allows 529 plans to be used for a broader scope of “books, supplies, and equipment” as well as testing fees and continuing education fees.

Title IV loan limits

Section 81001 significantly modifies how Title IV loans are disbursed. First, a bit of history. Federal student loans were first offered in 1958 under the National Defense Education Act to certain categories of students studying science and engineering. The Higher Education Act of 1965 dramatically expanded availability.

The issue is that for certain categories of loans, including the Federal Direct PLUS Loan, the federal government generally allows graduate students to borrow up to the cost of attendance. This phenomenon began in 2006, when Congress removed then-existing loan caps.

The government is the lender, and the school bears no credit risk. In other words, the schools receive the federal loan funding upfront, while the government and its loan servicers are on the hook to collect repayment. Critics point out that it created a “moral hazard” where schools could (1) raise the “cost of attendance” with impunity, and (2) offer degrees that were unlikely to generate the incremental earnings sufficient to repay the loan, without (3) being forced to bear any credit or outcomes-based risk—something known as the Bennett Hypothesis. Professor Sandra Black, who until recently was with our Department of Economics and of SIPA before returning to UT Austin, has published on this phenomenon. Her 2023 paper documented this moral hazard, i.e. for students who “were more exposed to the expansion in access to credit [before the 2006 law that uncapped loans], federal borrowing and prices increased.” The papers goes further, suggested that the findings confirmed the “Bennett Hypothesis”, where increases in credit “did significantly increase prices” without corresponding improvements in access or equity.

This created situations like a certain Occupy Wall Street participant who took out $35,000 in student loans to get a Master’s degree in puppetry, and then, upon being unable to secure a job sufficient to pay his loans, went to protest at Occupy Wall Street. As mentioned, Columbia was vilified in a 2021 WSJ article (“Financially Hobbled for Life: The Elite Master’s Degrees That Don’t Pay Off”) that profiled film studies graduates with a median debt of $181,000 (and in one case, $364,000 in debt) to prepare them for jobs that pay a fraction of that amount.

The OBBB takes a huge swing in this direction. In brief, it:

• Eliminates all subsidized interest accrual, meaning interest will start accruing immediately, versus deferred until graduation.
• Eliminates Federal Direct PLUS Loans (“up to cost of attendance”) for graduate students
• Places caps on other loans:
  • For graduate students: $20,500 per year, and $100,000 for life
  • For professional students: $50,000 per year, and $200,000 for life
  • For parents borrowing on behalf of their children: $20,000 per year, and $65,000 for life.
  • Lifetime cap of $257,500 under all forms of loans.
• Professional students are defined under 34 CFR 688.2 as a degree required to “[begin] practice in a given profession” and typically also requires professional licensure. These degrees include medical (including dentistry and nursing), law, or—interestingly enough—theology.

We have previously estimated $800 million of the $1.5 billion of net tuition revenue to come from international students. Of the remaining $700 million, about half ($354 million) is funded by some form of federal student aid, and $309 million of that $354 million funded by Federal Direct Loans (which include PLUS).

To make things more data and fact-based, we constructed a risk scoring model based on three factors that we think make the school more or less susceptible to risk:

• International student body share < 50%. 1 point if true, 0 points if false, on the logic that international students usually pay full-fare and are not dependent on loans. We found this data from OPIR.
• Not professional degree. 1 point if true, 0 points if false, on the higher student loan limits for professional degrees.
• No robust private loan market. 1 point if true, 0 points if false, given that the private sector can step in to “backfill” certain loan types, but that private lenders are “choosy” about their programs (e.g. will specifically underwrite MBA and Law loans, taking into account their expected earnings power and track record of repayment.)
• Lastly, we manually flagged undergraduate and GSAS PhD program as “minimal risk” as the changes do not affect undergraduate programs, and GSAS PhDs are fully funded (e.g. 100% tuition remission plus stipend) and do not rely on loans.

The most at-risk schools scored 3 out of 3. The least at risk schools scored 0 out of 3. Here are the results.

Low earning outcomes

Section 84001 is also important. It allows the Secretary of Education to deny student loan eligibility for degrees with “low earning outcomes.” The outcomes are defined by comparing median earnings of graduates to working adults in a Census-defined field and area. This provision appears designed to eliminate federal support for degrees that do not lead to meaningful financial returns, with a focus on protecting students from investing in programs that leave them with unaffordable debt or minimal income gains.

Tightening repayment requirements

Section 82001 puts in place significant changes in repayment structures. It does a few things. First, it eliminates the existing income-contingent repayment schemes (IBR) and replaces it with a new Repayment Assistance Program (RAP). Borrowers can either make fixed monthly payments or base it on a percentage of their income. It also tightens the criteria for economic hardship and unemployment deferments. Finally, it subjects Public Service Loan Forgiveness (PSLF) to participation in the RAP.

Expanding Pell Grants

Section 83001 expands Pell Grant access to shorter programs (8 weeks, half of the current semester-long requirement) specifically to “workforce training”, which could include “coding boot camps” and other such programs. As Pell Grants face a funding shortfall, this could further strain availability.

How to think of all this

OBBB dramatically reshapes student financing: taxing endowments, ending in-school interest deferral, capping borrowing, limiting repayment options, tying aid to program outcome, and expanding access to savings tools and workforce training. The net effect is that it clearly tightens access to traditional higher education.

In the months ahead, Columbia—like all major universities—will need to reassess its financial model, especially in graduate programs historically reliant on uncapped federal aid. Whether through restructuring, new private financing channels, or strategic program shifts, the implications of the OBBB will be profoundly and quickly felt.

News Roundup

– July 12, 2025. The Washington Post reports that in a dramatic escalation of federal pressure on elite universities, President Trump is wielding college accreditation as a political tool—calling it his “secret weapon” to remake higher education. Recent moves by the Departments of Education and HHS to target Columbia and Harvard have coincided with unusual scrutiny of their accrediting agencies. The administration has delayed key oversight meetings, sidelined committee leadership, and hinted at replacing “radical left accreditors” with ideologically aligned alternatives.

– July 11, 2025. The WSJ reports that Columbia is in advanced negotiations with the Trump administration over a potential $200 million civil-rights settlement, aiming to resolve allegations related to antisemitism, racial preferences, and foreign gift transparency. The proposed deal would restore some portion of the $400 million in federal funding suspended earlier this year and includes payouts to affected students and faculty. The NYT suggests a deal could come as early as next week.

– July 11, 2025. The Jewish News Syndicate (JNS) reports that Jewish alumni and students are voicing strong concerns that Columbia’s reported $200 million settlement with the Trump administration falls short of true accountability. While the deal would restore most of the $400 million in frozen federal funding and include compensation for discrimination victims, critics say it omits critical governance reforms—such as a consent decree and structural oversight—that are essential for lasting change. Current students argue the agreement risks sending a message of leniency toward antisemitism and administrative dysfunction.

– July 11, 2025. In a story offering yet more detail, the Washington Free Beacon reports Columbia University is nearing a landmark agreement with the Trump administration to recover most of the $400 million in suspended federal funding, in exchange for civil rights reforms and increased transparency. The draft deal would require Columbia to compensate victims of discrimination, disclose hiring and admissions data, and report foreign gifts, particularly from Qatar. However, it omits more sweeping reforms initially sought by the White House, such as a consent decree, University Senate overhaul, or changes to presidential search procedures. Critics warn the deal may lack the enforcement teeth needed for true institutional change, while supporters see it as a precedent-setting framework for peer institutions.

– July 10, 2025. The Spectator reports that Assistant Professor of Business Shai Davidai has left Columbia in what the University describes as a “mutual agreement.” Known for his outspoken pro-Israel advocacy following the October 7 attacks, Davidai became a polarizing figure on campus, drawing both national support and intense criticism. He was twice barred from the Morningside campus and investigated for alleged harassment, though Columbia ultimately closed the case without findings or sanctions. His departure comes amid ongoing debates over free expression, campus discipline, and the limits of faculty conduct in an era of heightened political activism.

– July 10, 2025. CBS News reports that Columbia trustee Dr. Shoshana Shendelman has publicly urged the University’s Board to accept the Trump administration’s demands on antisemitism and Title VI compliance, citing institutional failures that have triggered massive legal, financial, and reputational fallout. The letter came after subpoenaed texts were made public, revealed a desire to remove her and replace her “somebody from the middle east or who is Arab”—which somehow missed the fact that she is of Iranian origin, which, last we checked, is in the Middle East. The co-chairs of the Trustees have formally apologized to Shendelman in a letter last week, which the article also quotes, and reaffirmed their commitment to fighting antisemitism regardless of federal action.

– July 10, 2025. The Free Press reports that Israeli researcher Shay Laps has filed a lawsuit alleging antisemitic discrimination, sabotage, and retaliation during his time at Stanford University’s prestigious diabetes lab. Hired with strong credentials and a Nobel recommender, Laps claims his research was tampered with, his samples spiked, and a fake Title IX investigation used to push him out after October 7, 2023. Though Stanford dismissed his allegations as unsubstantiated, a university report acknowledged a “pernicious” climate of antisemitism, particularly in the sciences.

– July 10, 2025. The WSJ reports that Harvard is exploring the creation of a major new center for conservative and classically liberal scholarship—possibly modeled after Stanford’s Hoover Institution. With a projected launch cost of $500 million to $1 billion, the initiative aims to promote viewpoint diversity and intellectual debate as part of a broader strategy to defuse federal accusations of ideological bias and civil rights violations. While Harvard frames the proposal as nonpartisan, the administration views it as insufficient to resolve ongoing disputes over governance, funding, and academic autonomy. The move signals a potentially significant shift in how elite institutions respond to external demands for intellectual pluralism.

– July 9, 2025. The NYT reports the Trump administration has escalated its standoff with Harvard, issuing subpoenas for international student records and formally challenging the university’s accreditation. Federal agencies allege Harvard failed to address antisemitic harassment and violated civil rights law, while negotiations over a broader settlement remain stalled. The Department of Education is pressuring Harvard’s accreditor to act, invoking Trump’s executive order to leverage accreditation as a tool of reform. Harvard has pushed back, calling the actions unwarranted and retaliatory, and a federal lawsuit over the loss of billions in funding is pending.

– July 7, 2025. The NYT reports that Barnard College has reached a settlement with Jewish and Israeli students, pledging “zero tolerance” for antisemitism and instituting a series of reforms to strengthen campus protections. As part of the agreement, Barnard will restrict masked demonstrations, prohibit meetings with Columbia University Apartheid Divest or any of its spinoffs and successors, establish a new Title VI coordinator with reporting powers, and implement antisemitism-specific training for students and staff. The college also pledged not to use its endowment for political purposes, such as BDS-aligned actions.