Update: This blog was updated on 2/26/2026 to reflect Senate action to delay consideration of the Understanding the True Cost of College Act.
By Mark Huelsman and Aissa Canchola Bañez | February 25, 2026
Last summer, Congress enacted the largest cuts to students’ ability to afford and finance higher education in recent memory through the so-called “One Big Beautiful Bill Act” (OBBBA). The effects of the new law, which cuts access to federal loans for graduate students and parents, makes loan repayment more expensive, and decimates social safety net programs, are already being felt through state budget cuts, higher college prices and a greater reliance on riskier, more expensive, private student loans.
But they didn’t stop there. Right before the holidays, the House Education and Workforce Committee advanced what appeared to be a benign financial aid transparency bill known as the College Financial Aid Transparency Act, which supporters claim “ensures colleges cannot mislead students on financial aid offers,” but which in many ways could make the impacts of OBBBA even worse, and make paying for college more confusing and unaffordable for students and families.
To be clear, lack of financial transparency in higher education is a real problem: college costs and financial aid offers are notoriously opaque, and schools often obfuscate both the components that make up both students’ cost of attendance (COA), and the types and terms of financial aid that students receive. Too often, schools use financial aid as a marketing tool rather than a way to truly lower costs, sometimes by lumping grants and loans together, failing to disclose certain costs that students will need to pay, or using misleading terms, all to make students feel like their finances are handled.
Unfortunately, the House bill fundamentally fails at increasing price transparency—as New America’s Rachel Fishman recently clearly laid out—and would allow schools extreme latitude to package private student loans and alternate products like Income-Share Agreements alongside other aid in their financial aid award letters. Allowing the packaging of federal, private, and even state and institutional loans together in financial aid offers will just add to the confusion students and families experience as they try to understand their college costs and could even lead to students taking on private loans mistakenly.
Unfortunately, the Senate may be headed down the same path.
This week, the Senate Health, Education, Labor, and Pensions (HELP) Committee came dangerously close to debating a parallel proposal—the Understanding the True Cost of College Act—a long-standing and commonsense bipartisan bill that aims to provide greater transparency on financial aid offers, by standardizing offer letters and requiring schools to clearly define the different types of aid students receive, including grants, loans, and other aid. The bill, in its original form, would essentially treat financial aid offers as regulated consumer disclosures, rather than a means for schools to obscure, and often artificially deflate, their costs.
Unfortunately, the Senate was poised to propose changes to the bill that align with the House bill and would allow schools to include information on private loans in financial aid offers, with few guardrails and little information on the terms and conditions of those loans, all while preventing the U.S. Department of Education in engaging in oversight when schools get it wrong. In theory, students could simply check “yes” in wanting to learn more about how to finance college, only to see private loans packaged right alongside the federal supports to which they are entitled.
Private student loans are fundamentally different from federal loans. First, eligibility for federal student loans is clearly defined, as are the interest rates and fees. By contrast, students often do not know whether they can qualify for a private loan and on what terms (including whether they will need a co-signer). Second, the fees, repayment structure, and other conditions of private student loans are often a black box, and can easily turn out to be predatory. Third, private student loans do not come with the same student loan safety net as federal loans, including access to Income-Driven Repayment, Public Service Loan Forgiveness, and other programs that are designed to keep borrowers from falling behind. Finally, it remains unclear how schools could even package private student loans in a way that comports with federal guidance around exclusive and preferred lender lists, which aim to keep schools from steering students into loans that are self-serving for the school or a raw deal for the student.
What is clear, is that these changes would amount to a huge giveaway to the private lending industry that has been waiting to cash in on massive federal student loan cuts within the OBBBA.
After significant pushback from advocates, the Senate HELP Committee delayed debate on this bill, but the fight is far from over as the bill may come up for consideration in a future markup.
If Congress succeeds in enacting these changes, financial aid award letters could be turned into free advertising and recruitment for private student lenders.
Sadly, we saw this coming. As policymakers were debating the OBBBA, we sounded the alarms on how the elimination of the Graduate PLUS loan program and new lending limits will force students and families into the private market. Now that the OBBBA is law, the private lending industry appears to have been very busy. According to the most recent lobbying disclosures, Sallie Mae spent some significant lobbying time trying to get the College Financial Aid Transparency Act across the finish line.
Opening the door further to private lenders could not come at a worse time.
Students are already feeling the squeeze of the massive cuts from OBBBA, which promises to be a bonanza for the private student loan industry. Even without the free advertising provided by these proposals, these companies are openly eager to take advantage of new limits on federal loans by peddling private student loans to make up the gap, which will cost the typical borrower tens of thousands of dollars in interest on the private market. Historically, despite making up less than 10 percent of the student loan market, private student loans make up an outsized portion of consumer complaints submitted to state and federal regulators, including from cosigners who are unable to receive accurate information or access documentation on a loan. As the Trump Administration continues its hostile takeover of the CFPB, the private student loan industry has little standing in its way now that its watchdog has been completely sidelined.
Making matters even worse, just last week, the Congressional Budget Office reported that the Pell Grant program is facing a cumulative shortfall of nearly $17 billion, putting the program at risk of deep cuts, which would further drive families into predatory debt. In fact, right-wing lawmakers have a ready-made list of draconian cuts to federal student aid, including Pell Grants, that were proposed in the House just last year, including eliminating eligibility for students attending less-than-half-time, cutting award amounts for students who take fewer than 15 credits per semester, and eliminating subsidized loans entirely. All told, over 4 million students would have seen their Pell Grants cut had House Republicans ultimately prevailed. At a time when the purchasing power of the Pell Grant is already its lowest in recorded history—barely covering one-quarter of the cost of attending public college—more cuts could be a death knell for the ability to afford college. A far better solution would be to make Pell Grant funding fully mandatory and substantially increase awards, which would insulate the program from annual budget shenanigans and devastating cuts.
As it stands, higher education is far too expensive, and our system of financial aid is neither sufficient nor transparent. Too often, students cannot reasonably compare prices across schools, can severely overestimate their financial aid, and even think their unmet need is covered only to find out they have large and unpayable student loans when their bill comes due. The current system also does little to serve overworked financial aid administrators, who often have to spend time walking students through the basics of their aid letters rather than helping those who could gain more aid from appealing their aid offer, or who may be eligible for other public benefits like SNAP or Medicaid.
The OBBBA is only going to exacerbate the challenges students face as they try to pay for a college education by putting financial aid out of reach and reducing access to other benefits. Proposals like the College Financial Aid Transparency Act and others like it will make matters worse—serving up desperate students to shady lenders on a silver platter, and driving up costs for millions of families.
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Aissa Canchola Bañez is the Policy Director at Protect Borrowers. Previously, Aissa led outreach and engagement efforts for the Office for Students and Young Consumers at the Consumer Financial Protection Bureau and served in senior policy roles in the U.S. House of Representatives and U.S. Senate.
Mark Huelsman is a Senior Fellow at Protect Borrowers and the Director of Policy & Advocacy at The Hope Center for Student Basic Needs.