Trump isn’t cutting Pell Grants, after all − but other changes could complicate financial aid for some students

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Jennifer L. Steele, American University

(THE CONVERSATION) As an education researcher who has studied the economic returns of higher education, I know that college degrees remain cost-effective investments for most students.

But college tuition has risen at roughly twice the rate of inflation during the past two decades, and federal student debt climbed 500%to US$1.6 trillion during that same period.

The Biden administration sought to address this problem with plans that accelerated student loan forgiveness for lower-income borrowers with small balances, allowing debt cancellation after 10 years of repayment, instead of 20 or 25.

However, the courts blocked those efforts, and the Trump administration has taken a sharply different approach.

Guided by evidence that higher borrowing limits contribute to tuition increases, the tax breaks and spending cuts bill that President Donald Trump signed into law in July 2025 brings changes to the federal financial aid system that prospective higher education students should understand.

The Pell Grant – a need-based higher education grant from the U.S. Department of Education that, unlike a loan, does not need to be repaid – lies at the heart of the federal financial aid system.

While the Trump administration is slightly expanding people’s eligibility for Pell Grants, the new policies also aim to reduce the national student loan spiral by reducing limits on how much some students can borrow for their educations.

Rising college costs and government involvement

The average annual cost of tuition, fees, room and board for a student at a four-year college in the U.S. in the 2022-23 school year was $30,884, according to the latest available Department of Education data.

But the cost of tuition alone varies dramatically between in-state rates for public colleges, which receive state funding, and private nonprofit colleges, which do not.

While the average annual tuition was $9,750 per year for in-state students at public four-year colleges in 2022-23, it reached $38,421 at private nonprofit colleges, even if a student lived at home and did not pay for room and board.

These prices are roughly two to 200 times those of 42 other countries across six continents that have high-quality education data – not including seven countries, including Sweden and Saudi Arabia, that essentially have free tuition.

While many countries around the world subsidize tuition directly, the U.S. government focuses assistance toward individual students based on their financial need.

It does this through a combination of federal grants, loans and subsidies for campus jobs, all administered by the Department of Education.

In 2019-20, about 40% of the nation’s 17 million undergraduates received federal grants – mostly Pell Grants, according to the latest federal data.

Meanwhile, 34% of undergraduates and 39% of the country’s 3 million graduate students received federal loans during this same time period.

Roughly 5% of undergraduates received subsidized on-campus jobs through federal work study in the 2019-20 school year.

Changes ahead for Pell Grants

The U.S. government first awarded Pell Grants to students in 1973. They are designed to make college affordable for families, as determined by their income, family size and savings.

Historically, Pell Grants have focused just on undergraduates.

In 2022-23, about 75% of Pell funds went to students from families earning less than $40,000 per year.

Still, a family of four earning as much as $92,000 a year in 2024 would also qualify for a small Pell Grant in some circumstances.

A version of the Trump administration’s budget proposal for October 2025 through September 2026 called for reducing the maximum federal Pell Grant award to $5,710 a year from $7,395.

This caused some observers to worry that the Trump administration would try to scale back federal Pell Grants, which offer $740 to $7,395 per year to students in the 2025-26 school year.

Instead, the budget bill shores up overall Pell Grant funding and holds grant amounts level with those of previous years. It also creates a new type of Pell Grant to support workers seeking short-term retraining in a particular industry.

The budget bill also introduces another new grant called the Workforce Pell Grant. Starting July 1, 2026, this program will make small Pell Grants available for students pursuing career training programs of eight to 15 weeks toward recognized credentials in “in-demand industry sectors or occupations,” even if students already have bachelor’s degrees.

Controversially, a new House of Representatives appropriations bill proposes to rename the Workforce Pell Grants as “Trump Grants.”

But whether or not Congress approves the renaming, the grants will for the first time make Pell funds available to people who need short-term training to stay current in the labor market.

This is particularly important as long-term unemployment rises among the college-educated, driven by federal layoffs as well as the growth of artificial intelligence.

The role played by federal student loans

Despite some of their advantages, Pell Grants cover only about a quarter of the total cost of college attendance. As a result, 83% of Pell Grant recipients also receive other forms of aid – mostly through federal direct loans, which must be repaid.

The average undergraduate direct loan borrower graduated with about $26,000 in federal debt in 2019-20.

Assuming the 6.08% interest rate on federal loans at that time, it would have cost a graduate $290 a month to repay the loans under the standard 10-year payment plan.

Even so, about 10% of student loan borrowers default, meaning they stop paying on their loans entirely.

Loan default rates are higher among students who attended less-selective colleges and those who did not finish their degrees.

Under existing rules that are not changing under the Trump administration, undergraduates will still be able to borrow up to roughly $10,000 per year in federal direct loans, depending on how far along they are in school.

Graduate students, meanwhile, will still be able to borrow up to $20,500 per year.

New limits for part-time and graduate students

One important change following the Trump budget bill’s passage is that the Department of Education will pro-rate, or reduce, Pell Grant limits for students enrolled part time.

This means tuition at some higher-priced colleges may become unaffordable for part-time students.

This change will force some students to choose between enrolling part time in a low-tuition program or full time in a higher-tuition program.

The other change to federal borrowing limits pertains to graduate students.

The budget bill lowers the lifetime borrowing limit for graduate study from $138,500 to $100,000.

For students pursuing professional degrees such as law and medicine, the limit rises to $200,000.

But the law does away with a program for graduate students called PLUS Loans that now serves about 11% of graduate students, including about 40% of students seeking professional doctorates.

These changes may make it more expensive for graduate students to receive a degree, which could steer them toward lower-priced programs.

The effect for prospective students

As prospective students weigh their options, they should remember that most facets of federal financial aid remain unchanged.

Key changes aim at limiting high debt levels, specifically for part-time and graduate students and those attending high-tuition colleges when lower-priced institutions are readily available.

These changes may reroute some students from private to in-state colleges and from part-time to full-time study. Faced with increased price competition, some colleges may feel pressure to scale back costs through cuts to programs, services and amenities. For prospective students, such moves could reduce colleges’ luxuries but improve their affordability in the long run.

This article is republished from The Conversation under a Creative Commons license. Read the original article here: https://theconversation.com/trump-isnt-cutting-pell-grants-after-all-but-other-changes-could-complicate-financial-aid-for-some-students-265136.