Overview of the law
The One Big Beautiful Bill Act (OB3) is a federal budget reconciliation package approved by Congress on July 4, 2025, to ensure continued funding for many federal expenditures. While the legislation includes a broad range of topics, policies, and funding changes, this page focuses specifically on the impacts to Federal Student Aid beginning with the 2026-27 academic year, beginning July 1, 2026.
The law introduces several changes that may affect prospective, undergraduate, graduate, and professional students, including updates to federal student loans, repayment options, and financial aid eligibility. The sections below provide an overview of some highlighted changes and what they may mean for students and families.
Note: Guidance from the U.S. Department of Education is still evolving, and this page will be updated as additional information becomes available.
Changes to Pell Grant eligibility
Beginning with the 2026-27 academic year, students will not be able to receive the Pell Grant in the following situations:
Students whose scholarships fully cover their cost of attendance
Students who are eligible for the Pell Grant will not receive the Pell Grant if the student receives non-federal grants or scholarships that meet or exceed their full cost of attendance.
Examples:
- If a student's cost of attendance is $12,000 and they receive $6,000 in Pell Grant funding plus a $6,000 institutional grant, the student may no longer qualify for the Pell Grant because their total aid meets the full cost of attendance.
- If a student's cost of attendance is $13,000 and they receive a $13,000 outside scholarship, the student would not qualify for a Pell Grant.
- If a student's cost of attendance is $13,000 and they receive $6,000 in Pell Grant funding plus a $6,999 scholarship, the student could still qualify because the scholarship amount does not fully cover the cost of attendance.
Student Aid Index (SAI) eligibility changes
Students with a Student Aid Index (SAI) equal to or greater than twice the maximum Pell Grant award may no longer qualify for Pell Grant funding. Using the current maximum Pell Grant award of $7,395, students with an SAI of $14,790 or higher would not be eligible for a Pell Grant. This change does not apply to students who qualify under the federal Pell Grant Special Rule for dependents of certain deceased service members and public safety officers.
Federal student loan changes
Beginning with the 2026-27 academic year, several changes to the Federal Direct Loan Program may impact student borrowers, particularly graduate and professional students and parents of dependent undergraduate students.
If you are planning to borrow federal student loans to help pay for college beginning in 2026-27 or later, we encourage you to review these updates carefully.
The new federal student loan lifetime borrowing limit of $257,500 will take effect beginning with the 2026-27 academic year. The limit applies to the combined total of all federal student loans borrowed for undergraduate, graduate, and professional study, including:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Grad PLUS loans
The cap is based on the total outstanding principal balance of a student's federal loans.
Beginning July 1, 2026, Grad PLUS loans will no longer be available for new borrowers. Currently, Grad PLUS loans allow graduate and professional students to borrow up to the full cost of attendance for their program of study.
Grad students who borrowed Grad PLUS loans before July 1, 2026, will be grandfathered into the program and may continue receiving Grad PLUS funding for up to three additional academic years under a federal "legacy" or grandfathering provision, provided they remain enrolled in the same program of study at the same institution.
Students who change majors or begin a new program of study after July 1, 2026, will no longer be eligible for Grad PLUS loans under this provision.
New borrowing loan limits
Non-professional graduate programs
- $20,500 annually
- $100,000 aggregate
Legacy provision
Students who borrowed a Federal Direct Loan before July 1, 2026, benefit from a "legacy" provision that allows them to borrow based on previous loan limits for up to three academic years, or until the end of their academic program, whichever comes first.To qualify, students must remain enrolled in the same program of study at the same institution. Students may continue to borrow under existing regulations, including Grad PLUS Loans, up to the cost of attendance for a maximum of three additional years, provided they meet both of the following conditions:
- remain enrolled in the same program of study for the 2026-27 academic year as they were before July 1, 2026
- previously borrowed a federal student loan for that program before July 1, 2026
Beginning July 1, 2026, new federal limits will apply to the Parent PLUS Loans.
Parents may borrow:
- up to $20,000 per year per dependent student, and
- up to $65,000 total over the student's lifetime
These limits apply to all parents borrowing on behalf of the same student. For example, if two parents both borrow Parent PLUS Loans for one student, their combined borrowing cannot exceed the annual limit of lifetime limit.
This is a change from current federal rules, which allow parents to borrow up to the student's full cost of attendance.
Legacy provision
Students or parents who have borrowed a federal student loan before July 1, 2026, may continue borrowing under previous federal loan limits, for up to three academic years or until the student completes their current academic program, whichever comes first. To qualify, students must remain enrolled in the same program of study at the same institution.While there are no changes to the annual amount in which undergraduate students can borrow, eligibility for part-time students will be prorated based on their enrollment status according to the student's academic level (freshman, sophomore, etc.).
An undergraduate student is typically expected to enroll in 12 or more credit hours per semester for a total of 24 credit hours for an academic year. A student enrolled full time (12+ credit hours) for the fall semester would be eligible for 50% of their annual federal loan limit for that semester.
The table below outlines the percent of annual loan eligibility based on the student's enrolled credit hours:
Credit hours Percent of annual loan eligibility 12+ 50.00% 11 45.83% 10 41.67% 9 37.50% 8 33.33% 7 29.17% 6 25.00% 5-1 0% Dropping or withdrawing from a course may reduce a student's federal loan eligibility. Students should check with an academic advisor or the Financial Aid Office before making changes to their class schedule.
Beginning July 1, 2026, new federal student loan repayment rules and repayment plan options will take effect for many borrowers.
Student Repayment Plans
- A new new and simplified Repayment Assistance Plan (RAP) with monthly payments ranging from 1% to 10% of discretionary income.
- Elimination of the Saving on a Valuable Education (SAVE) repayment plan.
- Extended loan forgiveness periods of up to 30 years.
- New minimum monthly payments requirements.
- All loans must be repaid on the same plan, so if you borrow before and after July 1, 2026, you will be limited to the standard or RAP plans.
Borrowers who take out federal student loans both before and after July 1, 2026, may be limited to either the standard repayment plan or the new RAP plan for all federal loans.
Borrowers who do not take out new federal loans after July 1, 2026, will be eligible to enroll in the current Standard, Graduated, Extended, or current Income Based (IBR) repayment plan.
Parent PLUS Repayment Plans
Changes for Parent PLUS borrowers apply to alll current and future borrowers. Under the new law:- the only repayment option will be a tiered standard repayment plan
- Parent PLUS Loans will no longer qualify for loan foregiveness or cancellation options
Legacy provision
Parents or students who borrowed a Federal Direct Loan before July 1, 2026, may continue borrowing under previous federal loan limits for up to three academic years or until the student completes their current academic program, whichever comes first. To qualify, the student must remain in the same program of study at the same insitution.
Loan repayment updates
Two new repayment plans will be available for new federal student loans first disbursed on or after July 1, 2026:
- New Standard Repayment Plan – Fixed monthly payments over 10,15, 20, or 25 years based on the total amount borrowed.
- Repayment Assistance Plan (RAP) – An income-based repayment plan that limits monthly payments to 1% to 10% of your adjusted gross income (AGI), with possible loan forgiveness after 30 years.
Please note: borrowers who enroll in RAP cannot switch back to the standard repayment plan.
Yes. Current borrowers who do not take out new federal student loans after July 1, 2026, may temporarily remain on existing income-driven repayment plans, including:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Saving on a Valuable Education (SAVE)
However, borrowers must transition to a new repayment plan by July 1, 2028. If a borrower does not select a new repayment plan by that date, their loan servicer will automatically place them into the Repayment Assistance Plan (RAP).
Consolidation loans are only eligible for the Repayment Assistance Plan (RAP), or standard repayment plan.
Borrowers currently enrolled in an income-driven repayment (IDR) plan have until July 1, 2028, to select a standard repayment plan, an Income-Based Repayment (IBR) plan, or the Repayment Assistance Plan (RAP).
No. New Parent PLUS loans issued on or after July 1, 2026, must be repaid under the standard repayment plan and are not eligible for the Repayment Assistance Plan (RAP).
Loans that are not eligible for the Repayment Assistance Play (RAP), such as Parent PLUS loans, must be repaid separately under a standard repayment plan.
All loans must be repaid under the same repayment plan, and for Parent PLUS loan borrowers, the only eligible plan is the standard repayment plan.
Yes. Economic hardship and unemployment deferments will be eliminated for federal student loans first disbursed on or after of July 1, 2027. However, borrowers may still qualify for forbearance for up to nine months within a two-year period.
FAQs
The One Big Beautiful Bill Act (OB3) was signed into law July 4, 2025, and includes significant reform to federal student aid programs beginning with the 2026-27 academic year.
The law includes updates to:
- eligibility and amounts for Pell Grants
- new limits for federal student loans
- loan adjustments for students enrolled less than full time
- new income-driven repayment option
Most changes under the law take effect starting with the 2026-27 academic year.
No. If you are currently receiving aid or repaying federal student loans, your grants and loans remain under their present terms for now. Most changes, including new loan limits and repayment options, will apply beginning with the 2026-27 academic year.
The new law requires annual loan amounts to be prorated in direct proportion to your enrollment status. Therefore, if you are not enrolled full time, your loan amounts will be adjusted based upon the number of credit hours enrolled per semester. You must still be enrolled at least half time status to qualify for federal student loans. This requirement has not changed.
Any Pell-eligible student who receives non-federal grants and scholarships that meet or exceeds their cost of attendance will not receive the Pell Grant for the academic year in which their grants or scholarships meet or exceed the cost of attendance.
Grad PLUS Loans will be phased out beginning July 1, 2026. New graduate and professional students will no longer be eligible to borrow Grad PLUS Loans after that date.
If you borrowed federal Direct Loans before July 1, 2026, you may continue borrowing Grad PLUS Loans for up to three consecutive academic years, provided you remain remain enrolled in the same program of study.
This page will be updated as new details become available. Students and families are also encouraged to monitor updates from the U.S. Department of Education.