One Big Beautiful Bill Act

   

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Impact of 鈥淥ne Big Beautiful Bill Act鈥 on FAFSA & Financial Aid Eligibility

 

The (H.R. 1), signed into law on July 4, 2025, introduces significant changes to Pell Grants, federal student loans, repayment plans, and the 2026鈥2027 FAFSA application. These updates will take effect on or after July 1, 2026.

The Office of Student Financial Aid Services is actively monitoring the legislation and its implementation timeline. This resource will be updated regularly as additional guidance becomes available from the U.S. Department of Education.

Pell Grant Eligibility

(Effective July 1, 2026, beginning with the 2026鈥2027 academic year.)

  • Students with a Student Aid Index (SAI) exceeding twice the maximum Pell Grant amount will not qualify for a Pell Grant. For example, the maximum Pell Grant for 2025鈥2026 is $7,395. Therefore, a student with an SAI of $14,790 or higher would not be eligible for a Federal Pell Grant.
     
  • Students who receive grants and scholarships from non-federal sources that fully cover their cost of attendance will not be eligible for a Federal Pell Grant.
     
  • Beginning with the 2026鈥2027 FAFSA, foreign income must be included in the Adjusted Gross Income (AGI) used to determine Pell Grant eligibility. This income will be automatically incorporated into the AGI calculation during the eligibility determination process.

Federal Direct Loan Program

Parent PLUS Annual & Aggregate Loan Limits

  • Federal Parent PLUS Loan borrowers will be subject to new borrowing limits. Parents of undergraduate dependent students 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: If a borrower has a Parent PLUS loan made before July 1, 2026, while the dependent student is enrolled in a credentialed program, the parent can continue to borrow under current loan limits (up to the cost of attendance) for three academic years or the remainder of their dependent student鈥檚 expected time to credential, whichever is less.

Graduate PLUS Loan Program

  • This program is ending, effective July 1, 2026, and will no longer be available to new borrowers.
  • Legacy Provision: If a borrower has a Grad PLUS loan made before July 1, 2026, while enrolled in a credentialed program, 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.

Graduate & Professional Annual & Aggregate Loan Limits

  • The annual loan limits will be capped 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 Direct Unsubsidized 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.
  • Federal Loan Program Lifetime Loan Limits
    • $257,500 lifetime borrowing limit on all federal student loans, excluding borrowed Parent PLUS loan amounts (in the case of a dependent student who had Parent PLUS borrowed on their behalf for education expenses).
    • 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.
  • Federal Loan Proration
    • Students enrolled less than full-time will have their federal loans prorated to match their enrollment.
    • For example: A student who is enrolled in 6 credits in Fall and 6 credits in Spring is enrolled 50% each term. Their loans will be prorated to 50% of their annual eligibility. If the student is eligible for $7,500 ($3,750 per term) at full-time for the two semesters combined, then their prorated amount will be reduced to $3,750 ($1,875 per term) to reflect their half-time enrollment.
       

Loan Repayment Options

Loan repayment options will change effective July 1, 2026:

New Borrowers (as of July 1, 2026)

  • 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.
  • 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.

Repayment Plan/Current Borrowers

  • 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.
  • 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.

Repayment Assistance Plan (RAP)

  • Created a new IBR plan called the Repayment Assistance Plan (RAP). If married filing separately, spouse鈥檚 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鈥檚 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.

Standard Repayment Plan

  • Fixed payment terms of 10, 15, 20, or 25 years will be available, depending on the total amount borrowed (or outstanding balance if in repayment).

Parent PLUS Loans

  • 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.

Loan Rehabilitation Terms

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

Loan Deferment Options

  • Economic hardship and unemployment deferments will no longer be available for new loans. 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鈥檚 loans made prior to that date are paid in full, these options will cease to exist.

Loan Forbearance

  • Loans made on or after July 1, 2027, are eligible for forbearance for up to nine months in any two-year period. Current rules allow for a forbearance up to 12 months at a time, with a cumulative limit of three years.
     

2026-2027 FAFSA Changes

FAFSA will exclude the following assets from the Student Aid Index (SAI) calculation:

  • The net worth of a family-owned business with 100 or fewer full-time (or full-time equivalent) employees.
  • The net worth of a farms on which the family resides.
  • The net worth of a commercial fishing business and related expenses, owned and controlled by a family.