The One Big Beautiful Bill Act (OBBBA) and Financial Aid
Important Updates You Need to Know
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, resulting in changes to federal student aid programs. Some of these changes went into effect immediately, while others will go into effect next year and beyond. Click here for details
This page provides information about changes affecting recipients of federal student aid, including borrowers. We will continue to update this page when new information and guidance becomes available from the U.S. Department of Education.
FAFSA Changes and Pell Eligibility
The following changes are effective July 1, 2026, starting with the award year 2026-2027
Financial assets that are counted when students and parents fill out the 2026–27 Free Application for Federal Student Aid (FAFSA) form will now better reflect a family’s financial need.
The law reinstates the exemption of family farm and family-owned small business assets from the Student Aid Index (SAI) calculation and expands this asset exemptions to family-owned commercial fisheries, with an effective date of July 1, 2026:
- The net worth of a family-owned business with 100 or fewer full-time (or full-time equivalent) employees
- The net worth of a farm where the family resides
- The net worth of a commercial fishing business and related expenses, owned and controlled by a family.
Requires that foreign income be included in the AGI used to calculate Pell Grant eligibility.
Students who receive grants or scholarships from non-federal sources covering their entire COA are ineligible to receive a Pell Grant, even if otherwise eligible for the program.
Prevents students from receiving Pell Grants if their SAI exceeds twice the maximum Pell Grant award.
Federal Direct Loan Program Changes
The following are effective July 1, 2026
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).
Legacy Provision: The student must remain continuously enrolled in the same program of study at the same institution as they were enrolled as of June 30, 2026, AND either the parent borrower must have had a Parent PLUS Loan disbursed for that same program before July 1, 2026, OR the student must have had a Direct Loan (subsidized or unsubsidized) disbursed for that same program before July 1, 2026.
- If the above requirements are met, the new Parent PLUS Loan limits do not apply while the student is completing their program, for up to 3 years, provided the student remains continuously enrolled (i.e., does not withdraw or otherwise cease enrollment outside of scheduled breaks or non-required terms, such as summer).
Parents of current students who do not currently meet these criteria can still qualify for this limited exception to the new loan limits if the parent borrows a Parent PLUS Loan prior to July 1, 2026, OR the student borrows a Direct Loan (subsidized or unsubsidized) prior to July 1, 2026.
Eliminates the Graduate PLUS loan program effective July 1, 2026.
Legacy Provision: If a borrower has a Federal Direct Loan made before July 1, 2026, and while enrolled in the same program of study at the same institution as they were enrolled as of June 30, 2026, the borrower can continue to borrow from the program for 3 academic years or the remainder of their expected time to credential, whichever is less.
Caps the annual loan limits at $20,500 for graduate students and $50,000 for professional students. The aggregate limit is capped at $100,000 for graduate students and $200,000 for professional students, and does not include amounts borrowed as an undergraduate. (Borrowers 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).
Legacy Provision: If a borrower has a Federal Direct Loan made before July 1, 2026, while enrolled in a program of study, the current loan limits continue to apply” for 3 academic years or the remainder of their expected time to credential, whichever is less.
The term "professional student" means a student enrolled in a program of study that, upon completion of the program, awards a professional degree as defined under section 668.2 of title 34, Code of Federal Regulations (as in effect on the date of enactment of the OBBBA).
A professional degree is a degree that 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 postbaccalaureate 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.), and Clinical Psychology (Psy.D. or Ph.D.).
$257,500 lifetime borrowing limit on all federal student loans, excluding Parent PLUS and Graduate PLUS loans.
Legacy Provision: If a borrower has a Federal Direct Loan made before July 1, 2026, while enrolled in a credentialed program, the borrower can continue to borrow under current loan limits for 3 academic years or the remainder of their expected time to credential, whichever is less.
Requires institutions to prorate annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.
Student and Parent Loan Repayment Plans
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 income-based repayment plan, 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.
Note: 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 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 Income Based (IBR) repayment plans, and may also opt in to the new RAP. Current borrowers may also switch between, enter or remain on existing IDR plans until July 1, 2028.
Note: Current borrowers enrolled in ICR, PAYE, or 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 RAP automatically.
Creation of new 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, even if it’s higher than the standard repayment 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.
Note: After all current borrowers move out of all other current IDR or Standards plans, they will be sunset.
Removes the requirement for borrowers to demonstrate a partial financial hardship. Retains cancellation for balances of loans repaid under IBR at 25 years, or 20 years for new borrowers. Allows for covered income contingent loans to be repaid under IBR.
Creation of 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).
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 IDR 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 ICR before July 1, 2026, to become eligible for IBR.
If the borrower takes no action by that date, all eligible loans will be automatically moved to RAP, and any loans not eligible for RAP will be placed into IBR.
All new Parent PLUS loans from July 1, 2026 on must be repaid under the standard repayment plan, they 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.
For borrowers who had borrowed Parent PLUS before July 1, 2026, and subsequently borrowed from the program on or after July 1, 2026, repayment for all loans must be under the same repayment plan, of which the only eligible plan for Parent PLUS borrowers is the standard plan.
The following are effective July 1, 2027
Borrowers can rehabilitate a defaulted loan twice, instead of once as currently allowed. The minimum rehab payment for Direct Loans changes to $10.
Sunsets the economic hardship and unemployment deferments.
Note: 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.
Note: Current rules allow for a forbearance up to 12 months at a time, with a cumulative limit of three years.