July 21, 2025
In this blog, JFF outlines five ways the tax and spending reform bill, signed into law on July 4, 2025, will touch nearly every corner of the learn-and-work ecosystem.
On July 4, President Trump signed into law the One Big Beautiful Bill Act, his signature tax and spending reform bill passed by simple majorities of the House and Senate through the use of the budget reconciliation process. With a mix of tax cuts and sweeping reforms to Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and federal financial aid programs, among other provisions, the bill will touch nearly every corner of the learn-and-work ecosystem.
Here are five ways Jobs for the Future (JFF) policy experts believe the bill will dramatically change economic opportunity for workers and learners in the United States:
The bill makes sweeping changes to the nation’s social safety net, tightening eligibility for Medicaid and SNAP by including stricter work requirements and more frequent income verification. According to the Congressional Budget Office, 11.8 million Americans will lose Medicaid coverage, and over 2 million people will lose SNAP benefits. For the 40 million Americans who rely on SNAP, average monthly benefits will drop by $100. The impact will be particularly harsh for Americans without a four-year degree (85% of adult SNAP and Medicaid recipients), as well as workers with criminal records, who already face barriers to employment and higher rates of food insecurity.
The bill expands existing SNAP work requirements for “able-bodied” adults without dependents. Currently, adults aged 18-54 without children can qualify for SNAP benefits for three months within a three-year period, provided they work at least 80 hours per month (or meet other qualifications such as enrollment in an educational program). The bill raises the age limit to 64 and redefines a dependent child as under age 14 instead of under 18. The new SNAP work requirements will be phased in now through 2029, depending on how states decide how to supplement the program without federal support.
In addition, for the first time ever federal law imposes work requirements on Medicaid recipients. Starting December 31, 2026 (after the midterm elections), adults ages 19-64 without dependents must meet monthly benchmarks to retain coverage. Some exemptions apply, but the overall shift marks a fundamental departure from how Medicaid has operated.
These reforms were adopted with the intent to increase labor force participation. They likely won’t. Research consistently finds that work requirements for SNAP and Medicaid do not lead to greater employment or higher earnings. In reality, most people receiving these benefits are already working or face barriers to employment such as caregiving responsibilities, illness or disability, or school.
A better solution would be investment in what works to strengthen pathways out of poverty and into quality jobs: work supports in systems that facilitate co-enrollment across workforce, education, and welfare programs, and career pathways models that lead to long-term economic stability and advancement.
The bill dramatically shifts the financial burden of public assistance onto states. The largest pressure point is Medicaid, which on average accounts for around 30% of total state spending. According to the National Academy for State Health Policy, under this new law, federal Medicaid support will be reduced between 10%-21% in the 40 states that expanded Medicaid coverage through the Affordable Care Act. At the same time, states are expected to invest in new infrastructure to verify work requirements for Medicaid. In recent years, states that have attempted to set up this type of verification have incurred significant costs. Georgia, for example, spent $55 million over two years to launch a work verification system. Kentucky ultimately abandoned a similar plan after projecting more than $200 million in administrative costs.
These added expenses come with a significant opportunity cost. Every dollar that goes toward enforcing work requirements is a dollar not going to expand access to skills training, work supports, career navigation. In short, the bill may reduce federal spending, but states will face higher costs—and have fewer resources to invest in the systems that help people get ahead.
Until now, the Parent PLUS and Grad PLUS programs have allowed students to borrow up to the full cost of attendance for undergraduate and graduate programs. That flexibility ends with the 2026-27 school year.
Under the bill:
The bill also replaced many income-driven repayment plans with the Repayment Assistance Plan, eliminated deferral, and reduced maximum forbearance periods from twelve to nine months. Under the new Repayment Assistance Plan, students will likely be required to pay a higher portion of their monthly income and make a greater number of payments before they are eligible for forgiveness. These changes will save federal dollars but increase lifetime payments for most students in income-driven plans.
Stricter loan limits and less generous repayment plans will lead many students to seek financing options in the private market.
The available private loans are likely to be fixed-payment loans with fewer protections for low-wage borrowers, and most will charge comparatively higher interest rates for students without a strong credit history. And they may not be accessible for students with poor credit history or without family to cosign their loans.
The private market could offer outcomes-based student financing products, like income share agreements and outcomes-based loans, which have the potential to be both broadly accessible and affordable (by including protections that are conceptually similar to those in the federal loan program). If Congress wants the private market to step up and fill the vacuum left by the shrunken federal loan program, it should clarify and strengthen the consumer protections governing outcomes-based financing products.
As policymakers look for different ways to assess value in postsecondary education programs and credentials, earnings outcomes have risen to the top as a key indicator of value. In 2024, a new Gainful Employment rule went into effect linking programmatic eligibility for federal Direct Loans to earnings outcomes for completers. While the rule primarily applies to undergraduate non-degree certificate programs, a new provision under the bill would implement a similar earnings metric for all undergraduate degree programs and graduate degree and certificate programs.
Essentially, the Department of Education will look at cohorts of associate and bachelor’s degree completers to determine whether their program has earnings outcomes that exceed the median earnings of a high school graduate in that state or region. Programs that fail to meet that threshold in two out of three years will lose access to Direct Loans for their students. Similarly, there will be an earnings metric for graduate degrees and certificates, but the earnings comparison will be to those who have a bachelor’s degree. Under the new law, students won’t be able to access federal Direct Loans for programs that fall short of the high school earnings metric. They could still use their Pell Grant.
The next few years will show whether this metric pushes higher education toward greater value—or narrows access. The new earnings accountability metric for degree programs will go into effect on July 1, 2026, but it will take years for enough data to be available to see any punitive action against programs. Key questions are: Will institutions continue offering programs that are unlikely to meet the earnings threshold? Or will they offer those programs without access to federal Direct Loans? What role will the private lending market have? Expect these decisions before the four-year penalty mark.
One of the more promising provisions includes a permanent change to the Pell Grant program—expanding eligibility to students enrolled in quality short-term education and training programs. Known as “Workforce Pell,” this change will make it more affordable and accessible for people to complete workforce-oriented short-term training. Pell Grants have been limited to students enrolled in programs offered by institutions of higher education that were at least 600 clock hours and 15 weeks. The bill lowers that threshold to 150 clock hours and 8 weeks.
For a program to be eligible for Workforce Pell, it must meet certain quality standards set forth in the bill. These metrics will look at completion rates, placement rates, earnings, overall cost, and whether the program is in demand, meets employers’ hiring requirements, can articulate for additional academic credit, or leads to a stackable credential.
Done right, Workforce Pell could be transformative. Programs like Virginia’s Fast Forward program have already shown that short-term credentials—when well-designed—can lead to meaningful wage gains for learners without a college degree.
However, the greater potential lies in reshaping traditional approaches to postsecondary education.
Anne Kress, president of Northern Virginia Community College and champion of Fast Forward-style short-term credentials, predicts the adoption of Workforce Pell will lead to the growth of career pathways built from stackable credentials with market value. “Community colleges should seize the moment to live our student-centered missions by redesigning the career and technical education degree from the ground up—meaningful credential by meaningful credential,” she says.
It will be up to the Department of Education and state governors to determine whether a program can meet standards for approval. Expect that in the coming months, the department will hold negotiated rulemaking to hammer out the details on defining standards outlined in the bill and implementing these changes. Workforce Pell is slated for implementation on July 1, 2026. That is a very ambitious timeline. For more information, see JFF’s FAQ.
The bill erects and reinforces more barriers to economic mobility than it removes. To be clear, people can’t focus on their work, education, or economic futures when they are sick, hungry, or stressed about mounting debt.
At JFF, we will continue to champion No Dead End style reforms that uphold choice-filled pathways, skills-first approaches to learning and work, and robust supports to drive access to quality jobs for all. Join us by signing the No Dead Ends pledge today.
The July 2025 budget reconciliation bill passed by Congress expands Pell Grant eligibility for learners and workers. JFF’s analysis identifies what to expect next.
JFF’s Financing the Future initiative reimagines the way we finance education and skills development.
Our country’s education and workforce systems have not kept pace with the changing needs of learners and workers or the evolving conditions of the labor market. It’s time to put an end to dead ends at school, at work, and in life.