Small Business Owner Exclusion for Financial Aid Restored

The small business owner exclusion is back.

The One Big Beautiful Bill Act (OBBBA) reversed a change made in the FAFSA simplification act, by reinstating the small business owner exclusion as part of the federal financial aid formula on the FAFSA.

Beginning with any new FAFSA’s completed for the 2026-27 school year, the value of small businesses with 100 or fewer employees are once again exempt from financial aid eligibility calculations.

The OBBBA contained a couple other notable policy changes.

Degree program earning requirements

Beginning July 1, 2026, colleges and universities will need to ensure that median earnings of graduates by undergrad program exceed median earnings of high school graduates, and median earnings of graduate degree programs exceed those who hold an undergraduate degree.

If this doesn’t happen for a specific program, the institution will lose its eligibility to offer federal student loans for students in that program.

Endowment tax

The bill also increased the amount of tax collected for colleges and universities with 3,000 or more students. Tax rates vary based on the size of the endowment, with the highest being an 8 percent tax for endowments over $2 million.