How a Legal Scholar Thinks OBBBA Will Change Higher Ed

The One Big Beautiful Bill Act ushered in a raft of policy reforms on July 1 that will change how students pay for college and how degrees are valued. Future graduate students will likely be more reliant on private lenders to fund their education and find themselves tied to standard repayment plans, and institutions with programs that don’t pass an earnings test could lose access to federal loans.

But a lot is still left to be determined. Sector observers will be watching to see how the Education Department, with half the staff and a mounting number of interagency agreements, implements the new policies. They also expect inevitable legal challenges to the hastily finalized rules. Already, one court ruling has at least temporarily altered the department’s plans to put in place graduate loan limits.

One such observer is Peter Lake, the director of the Center for Excellence in Higher Education Policy and Law at Stetson University. Taken together, the policies in the One Big Beautiful Bill, he says, will have a more profound impact on higher ed than any other piece of legislation in the last several decades, because they centralize more power under the federal government. This, combined with what he calls the “edupocalypse” of generative artificial intelligence and declining public trust, could force a new form of university in the future. But the sky isn’t falling, he says. Institutions in the future will be more ambitious and rooted in just-in-time education over a student’s lifetime where they’ll keep their skills sharp for new jobs but also invest in their personal growth. His faith in America’s ability to meet the challenge is immovable.

This conversation has been edited for length and clarity.

Q: The One Big Beautiful Bill affects colleges in multiple ways, from student loans and endowment taxes to Pell expansion and an accountability metric based on students’ earnings. Is there one that stands out to you as having the most profound long-term impact on higher ed?

A: It’s hard to pick, but I think the accountability measures will probably have some of the biggest impacts. The numbers and the loan-repayment issues can always be jockeyed around with in future funding bills. This has been a long time coming to get to a place where we’ve got this kind of action [on accountability], and I think it will set the tone for how to measure outcomes and the success of higher ed institutions probably for at least a generation.

Q: Under the new accountability measures, programs will have to show that their students earn at least more than an adult with only a high school diploma in order to remain eligible for federal student loans. That’s a philosophical shift, or at least codifying a philosophical perspective, on what higher ed is meant to do for students, right?

A: Completely. You see the focus really shifting to earnings and whether there’s value added [for students] going to a program, or whether it’s value neutral or negative. And you see it reflected in the accountability metrics. You see it in the funding mechanisms as well—the concern that students might be racking up astronomical debt that they would never have a chance to pay off. That has been a persistent issue, because we know that loan default remains a major policy problem.

Q: Lawmakers said they were trying to address the affordability problem in higher ed with these policy changes. Do you think this will actually lower the cost of college?

A: I think that the jury’s out as to what will happen. One of the concerns that I have is that some students will be driven to private loan markets, which are not well formed at this time. And there could be significant interest challenges and repayment issues. And then you can’t ignore, too, that the One Big Beautiful Bill cuts a lot of safety net programs, causing state shortfalls. Many higher ed students—at all ages—suffer from anxieties with respect to food and housing. I had to actually feed one of my law school classes at night because they weren’t eating. I was wondering why people weren’t participating, and they all said, “We’re hungry.” It was a combination of a fairly brutal schedule and the fact that a lot of them were making really difficult choices between fuel, food and housing. So it isn’t a direct issue for higher education, but indirectly I do worry that by cutting some of the safety programs and then perhaps forcing some people to a private loan market, that you might go backwards in some ways.

Q: Which of the new policies are most vulnerable to legal challenges?

A: Well, we’ve already had a test on professional programs. But I think down the road the accountability measures will get tested as well. The chatter inside the Beltway is “How do you gather the data to measure this? Was the department within its authority to consider what it did consider in terms of evidence during the negotiated rule-making process?” The [rule-making] committee had a certain tone and texture to it that didn’t necessarily jive with some folks’ feeling of what that committee should have looked like. So, these things can turn into technical legal arguments down the road.

But I could also see where there’s an instinct to hold fire until there’s some implementation of the accountability measures to see what the department does. One thing that seems apparent to me is that a lot of schools will be fine. The vast majority of higher education should be able to climb up the hill. There’ll be certain sectors that’ll be hit harder than others. The one set of people I know are waiting to see what happens before they shoot, and they’re talking about it actively, is the theological sector.

Another thing I’ve wondered—what if everybody does pass the test? We had this big maneuver, and it didn’t really move the ball. Is college truly affordable? And then you start asking harder questions like, “OK, there’s value added, but is it enough value added? And are we really getting what we hoped to get out of this?”

Fundamentally, this is questioning the pre-eminence of the classic liberal arts four-year degree at elite private colleges. The pressure on the conversation comes from the other side of the Big Beautiful Bill, which is the loan limits and loan-repayment systems that will be out there. It’s not moving generally toward what I would call debtor-friendly directions. Meanwhile, it puts tremendous pressure on the federal budget if we create more people who can’t repay their loans. And because we’re extending the length of payment for so long, you could have the illusion of outcome value, but people are stuck in something that’s equivalent to debtors’ prison their whole life. That puts pressure on the housing market, on hospitality, the tax base. It even creates looming pressure on Social Security. It’s all kind of connected in some way. And so that’s the real question—are we really hitting this on the head by talking about value added, or are we really looking at something more fundamental?

Q: How might the impact of this piece of legislation differ from those in the past?

A: One thing that truly distinguishes the Big Beautiful Bill from any point in Higher Ed [Act] reauthorization or other bills in the past is we’re now seeing the federal government asserting more centralized control over American higher education in a way that’s ahistorical. It’s been creeping, but we have definitely tipped to a model that’s more familiar to other countries, where they have more control at a national level.

Q: And it sounds like a more centralized system isn’t necessarily a bad thing in your opinion?

A: Well, it does seem like it’s kind of inevitable, given what’s happened with higher education since the first reauthorization [of the Higher Education Act] decades ago. This industry has matured into an enormous industry with very large organizations. In some states, the state school budget is the dominant budget line in the entire budget. Schools like Harvard have resources that outstrip some European countries. And higher education, whether it wanted this to happen, has become a major geopolitical player. I’m a double Harvard guy, so I can speak to this—Harvard is kind of like Benetton: It’s a global business that has a charming storefront in Cambridge. And when you get to that point where you’re such a huge political influencer and have such an impact on the economy, where an entire generation of people are essentially indebted without having any particular skill or hope to turn that debt into something meaningful, it starts calling for national-level reform. And it also makes you a target in political warfare. You can no longer say, “Oh, we’re just little higher ed doing our little old thing.” We’re big business impacting politics and national and local finances. And then you look at the Pew results, where a huge number of Americans say they lost trust in the field. Any industry that loses the trust of its consumers is going to find itself heavily regulated.

Q: Is there any part of the One Big Beautiful Bill that you think is overhyped or anything we aren’t talking about enough?

A: Everything about a reconciliation bill gets political and politicized, but I would say Congress is still being quite generous with Pell Grants. At first, we thought they would make massive cuts to the program. Congress has responded and made a commitment to the field, and I think there’s an indication that if there’s a shortfall, which there may well be, that they may re-fund that gap. This isn’t “the sky is falling” on all federal support for higher education. It is a shift. That probably is the one thing that gets a little lost in the dialogue. I like the fact that our federal government is turning toward the sector, not away from it. It may not be everything is to everybody’s taste, but I think the worst-case scenario would be just withdrawal and apathy. What would happen if the federal government just said, “We’re done. We have to spend money on other things”? That would be catastrophic.

Q: How do you think higher ed is going to look differently in five years?

A: I think One Big Beautiful Bill will be one of the influences that factors into what I’ve been calling “edupocalypse.” I see poly-crises—things that are playing off each other simultaneously, that are combining like a hurricane, wind and wave phenomenon to knock houses down, i.e., program closures, declining enrollment, political dis-favoritism, which, frankly, has straddled multiple administrations. I remind people that if you think President Trump is adversarial to higher ed, well, President Obama and Biden all had their complaints about higher ed, too. I remember April 4, 2011, very vividly. That was the Title IX Dear Colleague letter. That was just one step in a progression that was trans-political.

Q: But this time feels different from previous points because the administration is more adversarial, less open to dialogue with the sector.

A: When I was first brought in the business in the ’90s, I was taken to Dupont Circle [where all the higher ed advocacy groups and associations have offices], and my mentor said, “This is where higher education policy is made.” And now the locus has shifted to others outside Dupont Circle. And that’s one of the features of edupocalypse. It’s not business as usual in the way that we usually think of it. One of the big things we’re dealing with is trying to cope with the fact that what we think of as the rule of law has shifted. So people will say, “Well, it’s just an executive order,” or “It’s the Pam Bondi memo of July 25 and it’s not the law, it’s just an interpretation.” But I remind people that John Austin, the legal philosopher, said that what makes the law the law is the command of the sovereign, backed by a threat. If you can’t afford to fight the sovereign, it is the law in a really important way. It drives your behavior. I think people are having trouble with transposing 20th-century legal strategies, tactics and thinking to the 21st century.

At the same time, I do actually think there’s a renaissance brewing. I think we’re being forced in about a once-in-1,000-year pivot point to re-examine the purpose of higher education and what it really means in a society that desperately needs more educated people to solve the problems that are out there. We’re starting to realize that what we inherited from the Middle Ages isn’t really working on a lot of different levels. The One Big Beautiful Bill is one step, kind of like putting a dog in space around Earth to a much larger and more ambitious space program where people walk on other planets.

Q: So it sounds like what you’re saying is the edupocalypse is upon us, we’ve seen the first horseman, but there’s also the possibility that a renaissance is coming.

A: Well, you can always have the Dark Ages, right? This has happened before. It’s the fall of the Roman Empire, the loss of most human knowledge and the decentralization of control and guidance and structure and all of that.

But what emerged from the fires was the idea of higher education, really born through the Catholic Church. It was based on the resurrection of ideas from ancient Greek thinking that created a kind of curriculum that we all still use today. It was an excellent model for the preservation of human knowledge against all destructive forces.

But now that we have digital power the way we do, and the speed of transition of global culture, we need higher education systems that are more adaptable in real time to learning needs and outcomes. I see the university of the future as a learning center that never ends. This idea that you go to school for a while and graduate and barely ever communicate with your school again, except to give money, makes no sense to me. I notice more older Americans are returning to learn. And I think that’s exactly where our ultimate strength lies—this is a commitment to lifelong evolution and growth, as people see it and need it. Some of that will be to get a job, because we have to eat and pay our health-care premiums, but some of it we just do enrich our lives. That’s always been a key feature of good higher learning.

I have a tremendous faith in Americans to get this right in the long run. We have a natural history of fumbling a little bit on our way to great moments. We did manage after World War II to create the envy system of the entire world. I think we can continue to hold that spot and even accelerate it as time goes by.