Important Update: One Big Beautiful Bill Act

Key federal financial aid changes effective July 1, 2026

Office of Financial Aid and Scholarships

 

The One Big Beautiful Bill Act, which makes significant changes to federal financial aid programs, was signed into law on July 4, 2025.

 

Federal Student Aid OB3 Updates

 

Federal Student Aid OB3 Definitions

 

Federal Student Aid Announcements

 

Direct Loan Program


  • Graduate PLUS Loan Program Elimination

    The Graduate PLUS Loan Program will be discontinued for new borrowers.

    • Future or new graduate student borrowers will not have Grad PLUS loans to rely on to cover the gaps between Unsubsidized Direct Loans and the full cost of attendance, which may increase reliance on private loans or other financing. 
    • Grad PLUS loans will be included in the new aggregate lifetime limit, unless the borrower qualifies for the interim exception. 

    Interim Exception: If a borrower has a Federal Direct Loan disbursed before July 1, 2026, while enrolled in a program of study, the pre-OB3 loan limits continue to apply for 3 academic years or the remainder of their expected time to credential, whichever is less. The exception is lost if a student withdraws or ceases enrollment.

  • Schedule of Reduction (SOR)

    Annual loan limits will be reduced for students who are not enrolled full time. 

  • Lifetime Loan Limits

    Annual loan limits for undergraduate Direct Subsidized and Unsubsidized Loans remain unchanged.

    • Students can still borrow the same amounts they could before the bill.  
    • The new lifetime loan limits for all subsidized and unsubsidized federal student loans are $257,500, excluding Parent PLUS.
    Borrower Type Undergraduate
    (no change)    		 Graduate Professional Parent
    Annual $5,500-$12,500 $20,500 $50,000 $20,000
    Aggregate $31,000-$57,500 $100,000
    (not including UG)    		 $200,000
    (not including UG)    		 $65,000
    Lifetime Limit $257,500* N/A
  • Graduate/Professional Annual & Aggregate Loan Limits

    Under the previous law, graduate and professional students could borrow up to the full cost of attendance with a Graduate PLUS loan, often well above these new caps. The total debt a borrower may now accrue across their entire graduate and/or professional career is capped. For professional students, the aggregate amount does not include amounts borrowed as an undergraduate. Students who are both graduate and professional students at some point in their educational careers may only borrow up to $200,000 in total for graduate and professional school.

    • Graduate Students: $20,500 annually; $100,000 aggregate
    • Professional Students: $50,000 annually; $200,000 aggregate

    Interim Exception: If a borrower has a Federal Direct Loan disbursed before July 1, 2026, while enrolled in a program of study, the pre-OB3 loan limits continue to apply for 3 academic years or the remainder of their expected time to credential, whichever is less. The exception is lost if a student withdraws or ceases enrollment.

  • Parent PLUS Annual & Aggregate Loan Limits

    All parents (combined) may borrow $20,000 per year, per dependent student, and a $65,000 aggregate limit per dependent student (without regard to amounts forgiven, repaid, canceled, or discharged). This is a significant change from the prior rules. Before this bill, parents could borrow up to the full cost of attendance, minus other aid.  
     
    Interim Exception:  If the student or parent borrower has a Federal Direct Loan disbursed before July 1, 2026, while the dependent student is enrolled in a program of study, the parent can continue to borrow under the pre-OB3 loan limits for 3 academic years for the remainder of their dependent student’s expected time to credential, whichever is less. The exception is lost if a student withdraws or ceases enrollment.  

    Point for Consideration: Students and families should consider financial needs annually and over the full number of years of expected enrollment when considering Parent Plus Loan borrowing. Please consult with your financial aid counselor.  

 

Loan Repayment

  • New Repayment Plans

    The bill establishes two types of repayment options:

    • Repayment Assistance Plan (R.A.P.):
      • If married filing separately, spouse’s AGI and number of dependents are not included in the payment calculation
      • $10 minimum payment
      • Monthly payment is 1-10% of income based on AGI
      • $50 off monthly payment (base payment) per dependent
      • 30-year repayment period
      • Eliminates negative amortization
      • No cap on monthly payment, even if it’s higher than the Tiered Standard Plan would be
      • If a borrower makes an on-time payment that reduces their principal by less than $50, ED will make a payment to the principal, up to the amount paid, minus what was applied to the principal or $50, whichever is less.
    • Tiered Standard Plan:
      • The bill creates a new tiered standard plan with 4 fixed terms of 10, 15, 20, or 25 years based on the amount borrowed (or outstanding balance if in repayment).
  • Borrower Considerations

    Borrowers should consider the following as they navigate their loan and repayment options:

    • All loans must be paid under the same repayment plan, so borrowers with loans made before July 1, 2026 who take out additional loans on or after July 1, 2026, will only have the R.A.P. and the Tiered Standard Plan as options.
    • If a borrower takes no action by July 1, 2028, all eligible loans will be automatically moved to R.A.P., and any loans not eligible for R.A.P. will be placed into the Tiered Standard Plan.

    Pre-OB3 Borrowers:

    • After all pre-OB3 borrowers move out of all other pre-OB3 Income-Driven Repayment plans or Standard plans, the pre-OB3 plans will be discontinued.
    • Borrowers with no new loans made on or after July 1, 2026, are eligible to enroll in the pre-OB3 Standard, Graduated, Extended, or IBR repayment plans, and may also opt in to the new Repayment Assistance Plan (R.A.P.) Borrowers may also switch between, enter or remain on existing Income-Driven Repayment plans until July 1, 2028.
    • Borrowers enrolled in Income-Contingent (ICR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE) plans must transition to new repayment plans by July 1, 2028. If no selection is made by that date, they will be moved into the R.A.P. automatically. 
  • Parent PLUS and Consolidation Loans

    Parent PLUS:

    • All new Parent PLUS loans from July 1, 2026 on must be repaid under the Tiered Standard Plan and are not eligible for the new Repayment Assistance Plan (R.A.P.).
    • If a borrower chooses R.A.P., but has a loan that is not eligible for R.A.P. (like Parent PLUS and certain consolidated loans) they must repay the ineligible loan(s) separately. 

    Consolidation Loans:

    • Consolidation loans made on or after July 1, 2026, are only eligible for the R.A.P. or a Tiered Standard Plan.  
    • Only Direct Loans made before July 1, 2026, may be repaid under the pre-OB3 PAYE, IBR, and ICR plans.
  • Rehabilitation

    Borrowers can rehabilitate a defaulted loan twice, instead of once as currently allowed. The borrower's payment under their rehabilitation will be similar to their payment under their future repayment plan.

  • Deferment

    The economic hardship and unemployment deferments will be sunset. Borrowers will still have access to a general forbearance of up to 9 months within a 24-month period. Critical deferments for cancer treatment, military service, and time spent in school remain.

    Borrowers with loans made on or before July 1, 2027, are still able to use these deferment options under the pre-OB3 rules. Once all borrower’s loans made prior to that date are paid in full, these options will cease to exist.

  • Forbearance

    Loans made on or after July 1, 2027, are eligible for forbearance for up to nine months in any two-year period.

    The pre-OB3 rules allow for a forbearance up to 12 months at a time, with a cumulative limit of three years.

 

Pell Grant

  • Pell Shortfall

    To address an impeding Pell Grant shortfall, the OBBBA provides $10 billion in mandatory funding to shore up the program for the next two years. The maximum Pell yearly amount will remain at $7,395 for the 2026-2027 academic year.
     

  • Eligibility

    Students who meet the following criteria will no longer be eligible for the Pell Grant:

    • Students receiving scholarships that meet or exceed their full cost of attendance.
    • Students whose Student Aid Index (SAI) is at least twice the Pell Grant maximum award of $7,395 (14,790). 

    Students who have questions about the Pell Grant should contact their financial aid counselor.   

 

Frequently Asked Questions

  • Which professional degree programs are eligible for the new borrowing limits?

    According to the Higher Education Act of 1965, a professional degree signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor's degree; is generally at the doctoral level, and requires at least six academic years of postsecondary education coursework for completion, including at least two years of post-baccalaureate level coursework; generally requires professional licensure to begin practice; and includes a four-digit program CIP code in the same intermediate group as the following fields:

    • Pharmacy (Pharm.D.)
    • Dentistry (D.D.S. or D.M.D.)
    • Veterinary Medicine (D.V.M.)
    • Chiropractic (D.C. or D.C.M.)
    • Law (L.L.B. or J.D.)
    • Medicine (M.D.)
    • Optometry (O.D.)
    • Osteopathic Medicine (D.O.)
    • Podiatry (D.P.M., D.P., or Pod.D.)
    • Theology (M.Div., or M.H.L.)
    • Clinical Psychology (Psy.D. or Ph.D.)

    Examples of professional degrees include but are not limited to the above.

  • Were changes made to the Pell Grant enrollment requirement?

    Provisions for changing the definition of full-time enrollment and eliminating eligibility for less-than-half time enrollment for the Pell Grant were not included in the final legislation. 

  • Were there changes to the federal undergraduate lending programs?

    Elimination of the subsidized loan program was not included in the final legislation.