Financial Aid Changes Related to the 2025 Budget Reconciliation Bill

The One Big Beautiful Bill Act was signed into law on July 4, 2025. The bill contains many significant changes to federal student aid programs and policies. Most of these changes are summarized below. 

Elimination of Graduate PLUS Loan Program

Effective July 1, 2026, the Federal Direct PLUS Loan for Graduate Students (Grad PLUS) is eliminated. Students who have borrowed a Federal Direct Loan prior to July 1, 2026 and remain continuously enrolled can continue to receive Grad PLUS Loans until the student completes his or her major/program, changes his or her major/program, or for 3 additional years (whichever comes first).

Revised Annual & Aggregate Limits for Unsubsidized Loans to Graduate/Professional Students

Effective July 1, 2026, the annual loan limits under the Federal Direct Unsubsidized Loan will be $20,500 for graduate students and $50,000 for professional students. Additional federal guidance about the definition of a "professional student" is expected, but we anticipate "professional" will include students enrolled in Law, Pharmacy (P3/P4), and OTD.

Aggregate borrowing limits will be $100,000 for graduate students and $200,000 for professional students. These aggregate limits do not include Federal Direct Subsidized or Unsubsidized Loans borrowed as an undergraduate student. 

Students who have borrowed Federal Direct Loan(s) prior to July 1, 2026 will continue to borrow under current loan limits until the student completes his or her major/program, changes his or her major/program, or for 3 additional years (whichever comes first).

New Annual & Aggregate borrowing limits under the Parent PLUS Loan Program

Effective July 1, 2026 parent borrower(s) may borrow up to $20,000 per student, per year from the Federal Direct PLUS Loan for Parents (Parent PLUS). If there are multiple parent borrowers, the combined total may not exceed $20,000. The aggregate limit parent(s) may borrow per dependent student will be $65,000. 

For students who have received Federal Direct Subsidized/Unsubsidized or Parent PLUS Loan(s) prior to July 1, 2026, a parent may continue to borrow for that student under current rules until the student completes his or her major/program, changes his or her major/program, or for 3 additional years (whichever comes first). 

New Lifetime Loan Limit for Federal Loan Programs

Effective July 1, 2026 there is a lifetime maximum limit on all federal student loan programs of $257,500. Parent PLUS Loans taken on behalf of a student are not included in the student's lifetime maximum limit. 

Borrowers with a Federal Direct loan disbursed prior to July 1, 2026 will continue to borrow under existing loan limits for the remainder of their program or for 3 additional years (whichever is less). 

Loan Pro-ration for Less Than Full-Time Enrollment

Annual loan limits for students enrolled less than full time must be pro-rated in direct proportion to the student's percent of full-time status. For example, if full-time status for an academic year requires enrollment in 24 credit hours, a student enrolled in 12 credit hours would have an annual loan limit equal to 50% of the full-time annual limit. 

Federal Student Loan Repayment Plan Changes

Borrowers with new loans disbursed after July 1, 2026 must choose between the new Standard Repayment Plan (default) or the Repayment Assistance Plan. The Standard Repayment Plan will have a repayment term of 10, 15, 20 or 25 years, depending on the outstanding balance.

The Repayment Assistance Plan (RAP) is an income-based repayment plan, with the payment amount ranging from $10 (minimum) up to 10% of the borrower's Adjusted Gross Income. If a borrower's required monthly payment does not cover the accrued interest due for that month, the uncovered interest is waived. If a borrower's required monthly payment does not reduce the principle balance of the loan by $50, the federal government will make up the difference, ensuring that the borrower's principle balance is reduced by $50 for each month that the borrower is repaying as required. Parent PLUS Loans are not eligible for the RAP and must be repaid under the new Standard Repayment Plan. 

Borrowers with existing loans who do not borrow a new loan after July 1, 2026 may borrow from the current Standard, Graduated, Extended, or Income-Based Repayment (IBR) plans or may borrow from the Repayment Assistance Plan (RAP). Current borrowers enrolled in the Income-Contingent Repayment (ICR), the Pay As You Earn (PAYE) or the Saving on a Valuable Education (SAVE) Plans must transition to the current standard plans, the Income-Based Repayment (IBR) plan or the Repayment Assistance Plan (RAP) by July 1, 2028. 

The provision that borrowers qualify for financial hardship to enroll in the Income-Based Repayment (IBR) Plan is eliminated, effective July 1, 2026. 

FAFSA Asset Exemptions

Effective with the 2026-27 award year, the value of family farms, small businesses, and family-owned commercial fisheries are exempt from being reported as assets on the FAFSA. 

New Federal Pell Grant Restrictions

Effective for the 2026-27 award year, those with a Student Aid Index (SAI) that is greater than twice the amount of the maximum Pell Grant are ineligible to receive a Pell Grant.

Students receiving scholarships and grants from non-federal sources that cover their entire cost of attendance are not eligible for a Federal Pell Grant.