Passage of One Big Beautiful Bill Act and proposed federal budget cuts  

from UH News

This message was shared with the students, faculty and staff of the 10-campus University of Hawaiʻi system on July 21, 2025.

Aloha UH ʻohana,

I write to share important updates from Washington, D.C. that are expected to affect our campuses and higher education nationwide.

On July 4, President Trump signed into law the One Big Beautiful Bill Act, a reconciliation package passed by Congress that makes certain tax and spending changes, some of which are permanent.

Separately, Congress is reviewing the President’s proposed federal budget for the fiscal year that begins on October 1. Unlike a single reconciliation package, this process is more complex, requiring passing 12 individual appropriations bills to fund government operations.

One Big Beautiful Bill Act

As I briefed the Board of Regents earlier this month, some of the key provisions in the new law that will impact higher education, many of which will go into effect on July 1, 2026, include:

• Students receiving non-federal scholarships covering their full cost of attendance will lose Pell eligibility for that term, which will still count toward their 12-semester Pell limit. We are evaluating how this affects our Hawaiʻi Promise Scholarship program.
• Colleges will be held accountable for graduates’ earnings. Programs with graduates earning less than the average high school graduate could lose eligibility for federal student loans.
• Grad PLUS loans are eliminated, and Parent PLUS loans are capped at $65,000 per student, which may reduce graduate enrollment and disproportionately affect historically underrepresented groups.
• New annual loan caps of $20,500 for graduate students and $50,000 for professional students may fall below the full cost of attendance, limiting access to advanced degrees.
• Future borrowers will have only two repayment plan options, which may lead students increasingly toward private loans.

There is also the possibility that the new law could reduce state funding for higher education if states shift resources to offset federal cuts to Medicaid and Supplemental Nutrition Assistance Program (SNAP). The full impact of these changes remains to be seen along with the impact on our students and their families who rely on SNAP, formerly known as food stamps.

On a positive note, the final law did not include some of the most concerning proposed changes, such as eliminating Pell Grants for less-than-half-time students, reducing awards for students taking less than 15 credits, or ending subsidized undergraduate loans. It also expands Pell eligibility to qualifying short-term programs of 150–600 hours over 8–15 weeks.

More extensive analyses are available from the Association of Public Land Grant Universities (APLU) and the National Association of Student Financial Aid Administrators (NASFA).

Federal guidance is expected in the coming months. On Friday, the U.S. Department of Education issued a “Dear Colleague Letter” outlining how some of the higher education provisions of the Big Beautiful Act will be implemented.

Proposed Federal Budget

The President’s proposed FY 2026 budget under review includes significant cuts to research funding:

• National Science Foundation: 55% proposed cut ($9B to ~$4B)
• National Institute for Health: 40% proposed cut ($47B to ~$27B)
• Dept. Of Energy Office of Science: 14% proposed cut ($8.2B to ~$7.1B)
• NASA Science: 48% proposed cut ($7.5B to ~$3.9B)
• NOAA: 26% proposed cut ($6.1B to ~$4.5B)

The federal budget process is far from complete, and as with Pell and the One Big Beautiful Bill, proposals often change before final approval. Congress has not passed all 12 appropriations bills on time since 1996, relying instead on continuing resolutions or omnibus bills each year. Although the outcome remains uncertain, first indications from mark ups of several appropriations bills suggest that Congress has taken a different approach to the President’s Budget. Both House and Senate appropriators have restored or slightly reduced the budget of several agencies including, NSF, NOAA and NASA to federal Fiscal Year 2025.

We are also monitoring the administration’s proposed 15% cap on indirect cost reimbursements for research grants, which would significantly reduce funding from current rates of 40–55%. The Joint Associations Group on Indirect Costs representing major industry organizations, such as the Association of Public and Land-grant Universities and the American Council on Education, is currently engaged with the federal government to establish a more efficient and fair model for indirect cost reimbursements. This proposal is still under negotiation.

Supreme Court allows federal worker layoffs

A recent Supreme Court ruling could also have significant implications for higher education. The court lifted a lower-court injunction, allowing the Trump administration to proceed with mass federal worker layoffs at the U.S. Department of Education under an executive order, without ruling on their ultimate legality. This expansion of presidential authority over federal employment could disrupt essential services such as student aid, research oversight, and agency support if key personnel are displaced.

Looking Ahead

We continue to work closely with Hawaiʻi’s congressional delegation, Gov. Green, the Legislature, the state attorney general, and national higher education associations to advocate for UH and higher education. I remain in regular consultation with the UH Presidential Advisory Council on Federal Policy and our leadership teams to guide our response and plan for potential budget impacts.

I will keep you updated as new developments emerge.

With aloha,
Wendy Hensel
President, University of Hawaiʻi

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