This edition was written by Tara Watson and Sasha Snyder.
💡 New from us: How the One Big Beautiful Bill Act will affect student loan programs, families with children, and recession resilience.
The One Big Beautiful Bill Act (OBBBA) introduces a new Income Driven Repayment (IDR) plan for student borrowers looking to finance their undergraduate education with federal loans. The plan extends the loan forgiveness timeline (currently 10-25 years) to 30 years. Sarah Reber and Sarah Calame argue that the new forgiveness timeline will be particularly punitive for low-balance undergraduate borrowers. Students who borrow only a modest amount tend to be low-income and often do not complete a college degree—making long-term repayment especially burdensome. Reber and Calame suggest that shortening the forgiveness timeline for this group would be a well-targeted and cost-efficient addition to the new IDR plan.
OBBBA also imposes new borrowing limits on the Parent PLUS program and eliminates the Grad PLUS program. CESO hosted a panel discussion to assess the implications of these changes. The panelists agreed that the new Parent PLUS loan limits fail to address the underlying affordability problem faced by many undergraduates. Sarah Turner highlighted the mis-targeted nature of the policy, noting that families least likely to struggle with repayment will be disproportionately penalized. The panelists were more divided on the elimination of Grad PLUS loans. Justin Draeger cited evidence that graduate students receive an outsized share of loan forgiveness, suggesting this imbalance may have influenced the decision to end the program.
Beyond the restructuring of federal student loan programs, OBBBA also makes substantial changes to child policy. Although there is cross-party consensus on strengthening government support for families with children, Joshua Gotbaum and Sarah Calame show that the interventions outlined in OBBBA will fall short of helping all children, particularly those of low-income families. Though imperfect, OBBBA’s moves to increase the maximum Child Tax Credit and to implement a new type of child savings (“Trump Accounts”) may help to support families with children. However, the plan’s more substantive measures—like its scaling back of access to the Supplemental Nutrition Assistance Program (SNAP) and Medicaid—will undercut any potential improvements to these families' circumstances.
The adjustments made to SNAP under OBBBA will not only reduce government support for low-income families with children, but will also weaken another key function of the program: its role as a national automatic stabilizer. Lauren Bauer and Diane Whitmore Schanzenbach explain how SNAP provides relief to families in periods of economic downturn and helps stabilize demand in local economies when employment or household income falls. Due to stricter work requirements, OBBBA makes it more difficult to qualify for SNAP, especially for participants who may be laid off in a potential recession.
📖 What we’re reading
What strategies have proven effective in increasing bachelor’s degree attainment among low-income students? Though college education remains a channel through which children born into low-income households can achieve greater economic opportunity, numerous barriers prevent such students from enrolling in and eventually graduating from high-quality institutions. Andrew Barr and Benjamin Castelman show that intensive advising, with a significant emphasis on college choice, generates increased rates of degree attainment. Without such advising, low-income students often lack the information necessary to make optimal choices in their college search and selection process. This study adds to the existing body of research on the effectiveness of various strategies for supporting students in accessing and completing college, as outlined in this report by Sarah Reber.
How can we characterize the long-run career trajectories of individuals employed in minimum wage jobs? A long-run analysis of the earnings of minimum wage workers by Sari Pekkala Kerr, William Kerr, and Louis Maiden finds that over time, these workers become indistinguishable from their peers who earn modestly more initially. For young workers, the minimum wage job is typically a “launching pad,” and they go on to see steep growth in earnings over the course of their careers. Older workers who earn the minimum wage are typically experiencing a temporary dip in earnings; they also go on to earn more in later periods. These findings suggest that the minimum wage is truly a minimum level of earnings for most individuals and that they typically earn higher amounts over the course of their careers. The authors thus suggest that policy changes to these levels across states may have limited long-run impacts on career trajectories.
Should moms be paid to stay home?Jonathan Gruber, Tuomas Kosonen, and Kristiina Huttunen study the impacts of the Finnish Home Care Allowance (HCA) for mothers who stay home with children under the age of three. They find that the HCA led to significant declines in children’s performance on early cognitive development tests, reduced long-term academic attainment, and increased youth crime. The authors speculate that these negative effects from subsidizing home care could be due to the comparatively low quality of this care relative to the publicly provided formal day care available in Finland. Additionally, because mothers are paid to stay home, their attachment to the labor market may weaken, and they may make less in their later careers—potentially contributing to the negative long-term outcomes experienced by their children.
📊 Top chart: Roughly half of U.S. families will be worse off due to the One Big Beautiful Bill Act.
Changes imposed by the One Big Beautiful Bill Act (OBBBA) will benefit those already at the top of the income distribution, while those in the bottom three quintiles of earners will see a net loss in income after taxes and transfers by 2033. Joshua Gotbaum and Sarah Calame review how families with children are treated by the act and conclude that, due to cuts in eligibility for SNAP and Medicaid, OBBBA will end up hurting the very families that its other provisions aim to support.
➡️ Worth a click
Check out this new AI-powered conversational tool, which uses USAFacts content and government-sourced data to produce nonpartisan analysis.
Understand the consequences of the Trump administration’s family separation policy through this comprehensive analysis by the American Immigration Council.
Evaluate the efficacy of various social policies through this report by the Niskanen Center.
About the Center for Economic Security and Opportunity at Brookings
The Center for Economic Security and Opportunity (CESO) produces data-driven, nonpartisan analysis to address the United States’ most challenging social policy questions. In a noisy and polarized world, the Center is a trustworthy source for the information and tools policymakers need to build an economy that works for everyone.
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