Important Updates: One Big Beautiful Bill Act

Beginning July 1, 2026, the Federal Graduate PLUS Loan program - which currently allows graduate students to borrow up to the full cost of attendance for their program of study - will be discontinued for new borrowers.

Legacy Provision: If a student has an Unsubsidized or Graduate PLUS Loan disbursed before July 1, 2026, while enrolled in a credentialed program of study, the student can continue to borrow from the Unsubsidized or Graduate PLUS Loan program for 3 academic years from the start of their program or until the end of their program of study, whichever comes first. Students must remain continuously enrolled in the same credentialed program at the same institution to retain legacy borrowing eligibility. A withdrawal, a lapse in enrollment, or change in program/degree level may terminate the legacy provision. 

Students who have not received a Direct Unsubsidized Loan disbursement before July 1, 2026 will be subject to the following new Direct Unsubsidized Loan limits:

• Graduate Students: 
  • $20,500 annual borrowing
  • $100,000 aggregate graduate borrowing limit
  • $257,500 overall federal student loan lifetime limit*
• Professional Students: 
  • $50,000 annual borrowing
  • $200,000 aggregate professional borrowing limit
  • $257,500 overall federal student loan lifetime limit*

*The lifetime limit includes all federal loans that the student may have borrowed including undergraduate, graduate (including Graduate PLUS), professional, and applicable consolidation loans. The lifetime limit also includes loans that may have been cancelled, forgiven, etc. Parent PLUS loans borrowed by a parent on behalf of a dependent student are excluded from the student borrower's lifetime limit.

Borrowers who receive federal loans as both graduate and professional students are subject to a combined aggregate borrowing limit of $200,000 for graduate and professional study. Any prior federal loans borrowed for graduate or professional education count toward this combined limit.

Legacy Provision: If a student has a Direct Unsubsidized Loan disbursed before July 1, 2026, while enrolled in a credentialed program of study, the student can continue to borrow under the current loan limits for 3 academic years from the start of their program or until the end of their program of study, whichever comes first. Students must remain continuously enrolled in the same credentialed program at the same institution to retain legacy borrowing eligibility. A withdrawal, a lapse in enrollment, or change in program/degree level may terminate the legacy provision.

Beginning July 1, 2026, parents will only be permitted to borrow up to $20,000 per year per dependent student and a $65,000 aggregate limit per dependent student. These limits apply to all parents of a student, so the maximum amount a student may receive in a year is $20,000, and across all years is $65,000, regardless of whether one or more parents are borrowing on their behalf. This is a change from current law, which allows parents to borrow up to the full cost of attendance per child. 

Legacy Provision:  If a student has a Parent PLUS Loan disbursed before July 1, 2026, while the dependent student is enrolled in a credentialed program of study, the parent can continue to borrow from the Parent PLUS Loan program for 3 academic years from the start of their program or until their dependent student reaches the end of their program of study, whichever comes first. Students must remain continuously enrolled in the same credentialed program at the same institution to retain legacy borrowing eligibility. A withdrawal, a lapse in enrollment, or change in program/degree level may terminate the legacy provision. 

New borrowers enrolled less than full-time (12 credit hours) will only be able to borrow loan amounts in direct proportion to their enrollment status. This means that students who take less than 12 credit hours will have their loan reduced based on how many credits they take. For example, if a student is enrolled 3/4 time for fall and spring, they will only receive 75% of the normal yearly loan limit. 

The loan proration applies to everyone:

• Undergraduate students (excludes Parent PLUS loans borrowed on behalf of a dependent student)
• Graduate students
• Professional students
• Students who qualify for legacy loan limits will also be included under this rule

A student's enrollment will be checked before each loan disbursement. If a student drops below full-time after receiving a loan payment, that payment may not change. However, future loan payments could be reduced.

There has been no change in the minimum hour requirement for federal student loans. Students must still be enrolled half-time to be eligible. Half-time is 6 hours for undergrad students and 5 hours for graduate and professional students. 

Further guidance from the U.S. Department of Education is expected regarding loan proration.

The bill provides approximately $10 billion in mandatory funding to address the impending Pell Grant Shortfall. This will shore up the base funding for the program for the next two years.

For the 2026-27 academic year, the maximum Pell amount will remain $7,395 per year. 

The bill contains two eligibility changes:

1. Students receiving scholarships that meet or exceed their full cost of attendance will not be eligible for Pell Grant
2. Students whose Student Aid Index (SAI) is at least two times the current Pell Grant maximum of $7,395 will not be eligible for the Pell Grant. As of FY25, that equates to an SAI of $14,790

The bill creates a new Income-Based Repayment (IBR) plan called the Repayment Assistance Plan (RAP). 

• 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
• 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.

After all current borrowers move out of all other current Income-Driven Repayment plans or Standard plans, the current plans will be sunset.

The bill creates a new standard plan with 4 fixed terms of 10, 15, 20, or 25 years based on the amount borrowed (or outstanding balance if in repayment).

The bill removes the requirement for borrowers to demonstrate a partial financial hardship. It also retains cancellation for balances of loans repaid under IBR at 25 years, or 20 years for new borrowers, and allows for covered income contingent loans to be repaid under IBR.

Borrowers with new loans made on or after July 1, 2026 can be repaid using only two plans: a new Standard Repayment Plan and the new IBR plan, the RAP. If a borrower with new loans made on or after July 1, 2026 does not select a plan, they will be assigned to the new Standard Repayment Plan.

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 RAP and the new Standard Repayment Plan as options.

Current borrowers with no new loans made on or after July 1, 2026, are eligible to enroll in the current Standard, Graduated, Extended, or current IBR repayment plans, and may also opt in to the new RAP. Current borrowers may also switch between, enter or remain on existing Income-Driven Repayment plans until July 1, 2028.

Current borrowers enrolled in Income-Contingent (ICR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE) plans must transition to a different repayment plan (current IBR, current standard plans, or RAP) by July 1, 2028. If no selection is made by that date, they will be moved into the RAP automatically. 

All new Parent PLUS loans from July 1, 2026 on must be repaid under the standard repayment plan and are not eligible for RAP. If a borrower chooses RAP, but has a loan that is not eligible for RAP (like Parent PLUS and certain consolidated loans) they must repay the ineligible loan(s) separately. 

Consolidation loans made on or after July 1, 2026, are only eligible for the RAP or standard repayment plans.  

A consolidation loan (subsidized or unsubsidized) taken out by a borrower before July 1, 2026, is treated like any other eligible loan. Borrowers currently in an Income-Driven Repayment plan have until July 1, 2028, to select a standard plan, IBR, or RAP.

If the consolidation loan was used to pay off a Parent PLUS loan, it must enter repayment under Income-Contingent Repayment plan before July 1, 2028, to become eligible for IBR.

If the borrower takes no action by July 1, 2028, all eligible loans will be automatically moved to RAP, and any loans not eligible for RAP will be placed into IBR.

Borrowers can rehabilitate a defaulted loan twice, instead of once as currently allowed. The minimum rehabilitation payment for Direct Loans changes to $10.

The bill sunsets the economic hardship and unemployment deferments. 

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

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

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