The Big Beautiful Bill: A Warning to Harvard?

On July 3, the Republican-dominated House of Representatives passed President Trump’s “One Big Beautiful Bill” in a 218-214 vote. The extensive legislative package has cemented 2017 Tax Cuts and Jobs Act while pulling federal funding from healthcare, social programs, and higher education.

Passing the OBBB is a major step toward the Trump administration’s broader agenda of expansionary fiscal policy, immigration control, and increased defense spending. For many observers, the bill amounts to a sustained financial assault on American universities—especially Harvard. The bill is projected to remove $349 billion in educational funding, compounding nearly $3 billion already stripped from Harvard through terminated medical research grants and cancelled federal contracts. Beyond elite institutions, the OBBB jeopardizes access to loan programs used by millions of college students nationwide. 

The bill narrowly passed in the Senate after significant internal Republican dissent, forcing Vice President JD Vance to cast the tie-breaking vote. The bill’s enactment followed weeks of political gridlock among Republicans in the House and Senate who challenged its terms and demanded greater concessions in exchange for their support. Key to the deliberations were concerns regarding the increasing national budget deficit, projected to amass $3.3 trillion over the next decade.

A core part of the legislation is the permanent extension of national tax rates and brackets, first introduced during President Trump’s first term. The bill is projected to reduce total federal tax revenue by $4 trillion between 2025 and 2034 on a conventional basis. When factoring in predicted economic growth, revenue loss falls to $3.1 trillion—a 22% offset. America’s gross domestic product is expected to rise by 1.2% over the same period, but this growth would recoup just 19% of the tax cuts’ total cost. 

Although businesses saw immediate gains in Trump’s first term, the cuts failed to pay for themselves and substantially increased the federal deficit. 

The OBBB further proposes increased government spending, with a large portion redirected to the U.S. immigration detention system. The new law immediately allocates $45 billion to the Department of Homeland Security to continue immigration detention efforts. As a result, the change boosts Immigration and Customs Enforcement’s annual detention budget by roughly $11.25 billion, with allocated funds intended specifically for family detentions.

Democrats have overwhelmingly opposed the bill, criticizing tax cuts favoring the wealthy in conjunction with significant reductions to social welfare programs, notably Medicaid and the Supplemental Nutrition Assistance Program.

Medicaid was created in 1965 as part of President Lyndon B. Johnson’s War on Poverty to provide healthcare coverage to low-income Americans. Today, it insures over 71 million people, including children, elderly adults, and people with disabilities. Under the OBBB, that safety net could shrink dramatically. The Congressional Budget Office estimates that roughly 12 million people could lose coverage due to new eligibility rules. Starting in December 2026, adults 19 to 55 who are considered “able-bodied” and do not have dependents or disabilities will be required to work, volunteer, or attend school for at least 80 hours per month to keep their benefits.

Also established in 1964 under Johnson, the Supplemental Nutrition Assistance Program is the nation’s largest anti-hunger initiative, providing monthly food assistance to more than 42.1 million Americans. Starting in 2028, states will be required to shoulder more of the financial burden to ensure food security. Full federal funding will be available only to those with a payment error rate below 6%—the percentage of SNAP payments that are overpaid or underpaid due to administrative mistakes, not fraud. Similar to its Medicaid provision, the OBBB raises the work requirement age for “able-bodied” adults without dependents from 54 to 64. 

As for elite universities, the bill increases endowment tax rates for wealthy private institutions like Harvard from 1.4% to as high as 8%. This follows months of legal disputes between the University and the federal government over existing funding cuts, including $2.6 billion of 350 Harvard Medical School research grants, halting studies on cancer, HIV, Parkinson’s, and pandemic preparedness. The OBBB seals these restrictions—and Trump’s rhetoric against research institutions—into law. “I am considering taking three billion dollars of Grant Money away from a very antisemetic Harvard, and giving it to TRADE SCHOOLS all across our land,” Trump wrote on Truth Social in May, justifying his administration’s targeting of elite universities. 

Beyond financial limitations for universities at large, the OBBB affects overall access to higher education by extending repayment timelines and removing deferment options for economic hardship—changes that place a heavier burden on low-income borrowers. The bill also replaces GRAD PLUS loans, which previously allowed graduate and professional students to borrow up to the full cost of attendance, with fixed annual borrowing caps—$50,000 for professional degrees and $20,500 for other graduate programs, aligning with lifetime limits already in place for federal student aid. Moreover, it limits Parent PLUS loans to $20,000 per year ending the current policy that allowed borrowing beyond covered aid. 

Federal grant and aid calculations also face changes: eligibility for Pell grants will be restricted to students enrolled at least half-time, and applicants whose Student Aid Index exceeds double the maximum grant amount will be excluded. Instead of basing federal aid on a college’s actual cost of attendance, the OBBB uses a standardized “national median program cost.” The National Association of Student Financial Aid Administrators has noted that this shift will disproportionately affect students at higher-cost private and flagship public universities, such as Harvard, where institutional aid may not be able to counteract the loss of federal support.

The OBBB arrives amid growing concerns over academic censorship and ideological scrutiny, issues in which Harvard has become a central figure. Supporters argue the measures address inefficiencies and accountability in education, while critics say they may disproportionately affect institutions that have voiced opposition to the administration’s policies. Many in the academic community see the administration’s stance towards Harvard as a larger strategy to redefine elite education by undermining its institutional power. 

Harvard concluded fiscal year 2024 with a $45 million operating surplus on $6.5 billion in revenue, but that margin—less than 1%—was narrower than in prior years, reflecting a 9% increase in expenses. Over half of that spending went toward compensation, including new faculty hires and rising healthcare costs. Investments in infrastructure, AI capabilities, and campus expansion in Allston also contributed to a spending surge. Meanwhile, Harvard’s $53.2 billion endowment remains the University’s financial backbone, providing $2.4—or 37%—of operating revenue through endowment distributions. Still, 80% of those funds are restricted, limiting their flexibility in the face of federal cutbacks. 

The OBBB’s increase on endowment tax would amount to hundreds of millions in additional costs for Harvard. With nearly half of its revenue derived from philanthropy and endowment returns, Harvard’s financial model depends on maintaining those streams to support core functions—financial aid, research, and faculty support. In FY2024 alone, the University distributed over $749 million in financial aid, including $250 million for undergraduates. That aid is directly threatened by reduced federal funding and new limitations to loan programs and grant eligibility. 

Compounding these financial pressures is the administration’s rhetoric. Since returning to office, President Trump has repeatedly singled out Harvard as emblematic of what he views as academic failure. Posting on Truth Social, “Harvard is a JOKE, teaches Hate and Stupidity, and should no longer receive Federal Funds.” 

The first provisions of the legislation, including tax exemption on tips and overtime, go into effect during the 2025 tax year and will expire in 2028. Most American universities begin their fiscal year on July 1, meaning these changes could influence budget planning and financial aid policy ahead of the 2025-2026 academic year. 

Nashla Turcios ’28 (nashlaturcios@college.harvard.edu) writes News for the Harvard Independent.