As Congress negotiates the 2025 federal budget, the implications for higher education are far-reaching. From
student aid cuts to research slowdowns and shifting priorities around workforce development, the debate in
Washington is more than a fiscal exercise — it’s a realignment of values that will shape the future of colleges and
universities across the country. This post breaks down the key proposals, what’s at stake, and how institutional
leaders can prepare.
1. Pell Grants and Student Aid at Risk
This year’s House budget proposal would roll back several cornerstones of federal student support. The bill
eliminates eligibility for students taking fewer than half-time courses and raises the credit threshold for
full-time Pell status from 24 to 30 credits annually¹. Worse, it proposes reducing the maximum Pell Grant from
$7,395 to $5,710² — a cut of $1,685 per student. The CBO estimates this would reduce total Pell spending by billions
over the next decade³.
Federal Supplemental Educational Opportunity Grants (SEOG) would be eliminated under the current draft², and
Work-Study funding would be significantly reduced, disproportionately affecting low-income and first-generation
students⁴. For regional public colleges and community colleges in particular, this could have a severe impact on
enrollment and student persistence.
2. Research Funding Freeze Threatens Innovation
The budget also includes freezes and staffing cuts to major research agencies. The Trump Administration’s
directives earlier this year have already triggered layoffs affecting over 1,000 staff at NIH and a 10% cut at NSF⁵.
The proposed budget caps NIH indirect cost reimbursements at 15%, which many institutions argue is unsustainable⁶.
As a result, universities are reporting rescinded graduate admissions offers, delayed lab projects, and hiring
freezes. “The impact this is having on universities and students is chaos,” one administrator told The Guardian⁵. If
enacted, these measures would slow America’s research engine for years to come.
3. Workforce Pell Momentum — With Risks
Amid the cuts, there is bipartisan support for extending Pell eligibility to short-term, workforce-aligned
credential programs⁷. These initiatives, which target sectors such as healthcare, logistics, and skilled trades, are
positioned as faster and cheaper pathways to career entry — and a lifeline for non-traditional learners.
But concerns remain. Without stronger federal oversight, there is a risk that predatory programs will flood the
market, dilute quality, and undermine student return on investment (ROI) ⁷. Institutions would be wise to pair new
credentials with local employer partnerships and transparent outcome data.
4. Accountability and “Skin in the Game” Policies Expanding
Beyond cuts, the budget also includes enhanced oversight of institutions receiving federal aid. Proposals include
tying Pell and loan eligibility to student outcomes, such as completion rates and default levels. Lawmakers are also
exploring “skin in the game” provisions that would require institutions to repay a portion of a student’s loan if
the borrower defaults on it.⁹
These ideas align with the broader Congressional trend of shifting financial risk from the federal government to
institutions — especially for programs with poor ROI. Schools will need to strengthen data systems, boost student
support services, and prepare for stricter compliance reporting.
How to prepare?
Model Scenarios Now: Prepare for reductions in aid and research support. Stress-test your budget using the template
below.
|
Item |
2026-27 |
2027-28 |
2028-29 |
|
|
Estimated Lost Federal Funds |
A |
A |
A |
A |
|
Estimated Change in Unrestricted Net Assets without Lost Federal Funds |
B |
B |
B |
B |
|
Estimated Total Change in Unrestricted Net Assets |
C |
C = (B – A) |
C = (B – A) |
C = (B – A) |
|
Estimated Opening Total Unrestricted Assets |
D |
E |
F |
G |
|
If Item C Is Negative |
C |
C |
C |
C |
|
Estimated Closing Total Unrestricted Assets |
E |
F |
G |
H |
|
If Item C Is Negative |
C |
C |
C |
C |
|
Estimated Years Remaining Before Financial Distress |
I |
F/ C |
G/ C |
H/ C |
|
If Item I is negative and between the range of 0 and – 5, then the college will be in a state of |
||||
|
If Items C and E are negative then change sign of I to negative, regardless of the I score, the |
||||
References:
¹ Vox. “The big, beautiful bill is bad news for student loans.” May 2025. https://www.vox.com/policy/415793
² Washington Post. “Most Pell Grant recipients to get less money under Trump budget bill, CBO finds.” May 17, 2025.
https://www.washingtonpost.com/education/2025/05/17/pell-grant-cuts-house-budget-bill
³ Investopedia. “Millions of College Students Could Have Their Federal Aid Slashed Under Budget Proposals.” June
2025. https://www.investopedia.com/college-students-could-lose-grants-11752596
⁴ National Association of Student Financial Aid Administrators (NASFAA). “House Budget Proposal Includes Deep Cuts
to Student Aid.” June 2025.
⁵ The Guardian. “Chaos on campuses as schools warn Trump cuts could harm US ‘for decades.’” March 8, 2025. https://www.theguardian.com/us-news/2025/mar/08/trump-universities-higher-education-cuts
⁶ Science Magazine. “NIH indirect cost cuts spark alarm in university research circles.” April 2025.
⁷ Chronicle of Higher Education. “Short-Term Pell Expansion Advances in House with Workforce Focus.” June 2025.
⁸ Inside Higher Ed. “Accountability Provisions Gain Steam in Higher Ed Budget Talks.” May 2025.
⁹ Bloomberg Government. “Congress Revisits ‘Skin in the Game’ Loan Policies for Colleges.” April 2025.