New Law Guts Grad School Funding, Triggering University Cash Crisis and OpenAI Taps Rival Google for AI Chips, Signaling New War for Compute

New Law Guts Grad School Funding, Triggering University Cash Crisis

News Trigger: The "One Big Beautiful Bill Act" (OBBBA), signed into law on July 4, 2025, is actively reshaping American higher education finance.1

Core Insight: The law’s elimination of a key federal loan program creates an immediate, multi-billion-dollar revenue crisis for universities and threatens to lock a generation of students out of professional careers. The Why & So What: For nearly two decades, universities used the unlimited federal Grad PLUS loan program as a "cash cow," raising graduate and professional tuition with impunity because students could always borrow more to cover the cost.3 In the 2023-2024 academic year alone, this program funneled approximately $14 billion to institutions.4 The OBBBA turns off this spigot. It completely eliminates the Grad PLUS program and places a new $65,000 cap on Parent PLUS loans.1

Quantified Impact: The policy will disproportionately hit institutions that rely on high-cost master's and professional degrees for revenue.3 More critically, it makes financing degrees in high-need fields like medicine nearly impossible for students without independent wealth. The median cost of a medical degree can exceed $390,000, while the new lifetime borrowing cap for professional students is just $200,000.6 This will likely worsen physician shortages and disproportionately harm low-income and minority students, who rely most heavily on federal aid.1 While the Congressional Budget Office estimates this change will save the federal budget $40.6 billion by 2034, the immediate effect is a seismic shock to university financial models and student access.4


OpenAI Taps Rival Google for AI Chips, Signaling New War for Compute

News Trigger: In a landmark deal reported in late June 2025, AI leader OpenAI began renting custom AI chips from its chief rival, Google, to power its services.9

Core Insight: The move reveals that the insatiable demand for AI computing power is fracturing Big Tech alliances, forcing a strategic realignment to secure resources and challenging Nvidia’s market dominance. The Why & So What: OpenAI’s shift was driven by necessity. Its compute needs are outstripping the capacity of its primary partner, Microsoft Azure, and the cost of running models at scale is immense.12 Google’s Tensor Processing Units (TPUs) offer a more cost-effective and power-efficient alternative for "inference"—the process of generating answers—which accounts for nearly half of OpenAI's estimated $40 billion annual compute budget.14 The deal allows OpenAI to diversify its infrastructure, reducing its strategic dependence on the Microsoft-Nvidia duopoly.10

Quantified Impact: This partnership validates Google's TPU architecture as a viable competitor to Nvidia's GPUs, intensifying competition in the AI chip market projected to exceed $164 billion by 2029.17 It signals a new era where access to compute is a primary strategic driver, forcing massive capital expenditures—Microsoft has committed $80 billion for FY25, while Google spent over $17 billion in Q1 alone.18 While Microsoft loses exclusivity, it retains deep integration and IP rights with OpenAI, evolving the partnership rather than ending it.20


References

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https://www.insidehighered.com/news/government/politicselections/2025/07/04/big-beautiful-bill-means-big-changes-higher-ed

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law; brings tax relief, Medicaid cuts, accessed July 6, 2025,

https://timesofindia.indiatimes.com/world/us/promises-made-promises-keptdonald-trump-signs-big-beautiful-bill-into-law/articleshow/122257720.cms

3. Can Graduate Programs Survive Federal Loan Caps? - Inside Higher Ed, accessed

July 6, 2025,

https://www.insidehighered.com/news/admissions/graduate/2025/06/26/cangraduate-programs-survive-federal-loan-caps

4. Grad Students Face Loss of Major Loan Under 'Big Beautiful Bill' - Bloomberg

Government, accessed July 6, 2025, https://news.bgov.com/social-justice/gradstudents-face-loss-of-major-loan-under-big-beautiful-bill

5. What Student Loan Borrowers Need to Know About the "Big Beautiful Bill" - ELFI,

accessed July 6, 2025, https://www.elfi.com/what-student-loan-borrowersneed-to-know-about-the-big-beautiful-bill/

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accessed July 6, 2025, https://www.independent.co.uk/news/world/americas/uspolitics/big-beautiful-bill-grad-student-loans-b2782291.html

7. Proposed changes to federal student loans could worsen the doctor shortage |

AAMC, accessed July 6, 2025, https://www.aamc.org/news/proposed-changesfederal-student-loans-could-worsen-doctor-shortage

8. What to Know About Parent PLUS Loans: 5 Startling Statistics ..., accessed July 6,

2025, https://www.bestcolleges.com/research/parent-plus-loans-statistics/

9. OpenAI 'Rents Google Chips' For AI Inference | Silicon UK Tech, accessed July 6,

2025, https://www.silicon.co.uk/cloud/ai/openai-google-tpu-620028

10. Google Cloud signs deal with OpenAI, ending Microsoft's exclusive role -

Revolgy, accessed July 6, 2025, https://www.revolgy.com/insights/blog/googlecloud-signs-deal-with-openai-ending-microsofts-exclusive-role

11. OpenAI Partners with Google for Cloud Services, Diversifying Resources -

AInvest, accessed July 6, 2025, https://www.ainvest.com/news/openai-partnersgoogle-cloud-services-diversifying-resources-2506/

12. OpenAI Partners with Google Cloud Amid Soaring AI Demand, Reshaping Ties

with Microsoft, accessed July 6, 2025, https://cloudwars.com/cloud/openaipartners-with-google-cloud-amid-soaring-ai-demand-reshaping-ties-withmicrosoft/

13. Google Cloud's OpenAI Deal 'A Win For TPU Chips,' Microsoft Partner Says - CRN,

accessed July 6, 2025, https://www.crn.com/news/ai/2025/google-cloud-sopenai-deal-a-win-for-tpu-chips-microsoft-partner-says

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14. NVIDIA's Dominance Challenged as Largest AI Lab Adopts Google TPUs |

TechPowerUp, accessed July 6, 2025,

https://www.techpowerup.com/338477/nvidias-dominance-challenged-aslargest-ai-lab-adopts-google-tpus

15. GPU and TPU Comparative Analysis Report | by ByteBridge - Medium, accessed

July 6, 2025, https://bytebridge.medium.com/gpu-and-tpu-comparativeanalysis-report-a5268e4f0d2a

16. OpenAI Powers Up with Google TPUs Amidst Nvidia Dominance! | AI News -

OpenTools, accessed July 6, 2025, https://opentools.ai/news/openai-powers-upwith-google-tpus-amidst-nvidia-dominance

17. Global Artificial Intelligence Chip Market Report 2025 - The Business Research

Company, accessed July 6, 2025,

https://www.thebusinessresearchcompany.com/report/artificial-intelligencechip-global-market-report

18. AI and Job Cuts: Behind Microsoft's Latest Announcement - AI Magazine,

accessed July 6, 2025, https://aimagazine.com/articles/what-9-000-microsoftredundancies-say-about-the-tech-sector

19. Document - SEC.gov, accessed July 6, 2025,

https://www.sec.gov/Archives/edgar/data/1652044/000165204425000040/goo

gexhibit991q12025.htm

20. Microsoft and OpenAI Strengthen Strategic Partnership Through 2030 - CDO

Magazine, accessed July 6, 2025, https://www.cdomagazine.tech/aiml/microsoftand-openai-strengthen-strategic-partnership-through-2030

21. Microsoft and OpenAI evolve partnership to drive the next phase of AI, accessed

July 6, 2025, https://blogs.microsoft.com/blog/2025/01/21/microsoft-andopenai-evolve-partnership-to-drive-the-next-phase-of-ai/

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