The U.S. Department of Education is implementing major legislative changes to Title IV aid under the One Big Beautiful Bill Act (OBBBA), with most provisions taking effect on July 1, 2026. The legislation introduces new limits for Direct Loans, structural changes to Pell Grant eligibility, and updated institutional accountability metrics.
Loans
Before July 1, 2026, students could continue borrowing federal student loans for as long as they remained enrolled in an eligible program. Beginning July 1, 2026, loan eligibility is tied to the published length of the academic program, rather than the amount of time a student takes to complete it.
For example, a program designed to be completed in two years generally provides about two years of federal loan eligibility, even if a student takes longer to graduate. This change has the greatest impact on part-time students. A student taking 9 units per term instead of 15 units may need four years to complete a two-year program, but federal loan eligibility would still be limited to approximately two years.
In addition, new borrowers enrolled less than full time (fewer than 12 units) are only eligible to borrow a prorated loan amount based on their enrollment level, reducing the total loan funds available each term.
Student Loans
| Loan Type | Change Level | OLD Rule (BEFORE July 1, 2026) | NEW Rule (AFTER July 1, 2026) |
|---|---|---|---|
| Loan eligibility duration | Major change | Students could borrow for as long as they remained enrolled in 6 or more units and met all other criteria. | Loan eligibility tied to program length. A two-year program gets two years of loans even if you have not completed your program. |
| Part-time loan amounts | Major change | A part-time student could borrow the same amount as a full-time student. | Loan amounts prorated based on unit load. Half-time students get roughly half the amount. |
| Undergraduate loans (subsidized and unsubsidized) | Little to no change | $5,500 to $7,500 per year depending on year in school. $31,000 lifetime cap for dependent undergrads. | Annual and lifetime limits unchanged |
| Lifetime federal loan cap (all student borrowing combined) | New Rule | No single unified lifetime cap across all federal student loan types. | $257,500 total across undergraduate, graduate, and professional loans combined. |
Parent Loans
Parents can now borrow a maximum of $20,000 per year and $65,000 total per child, across all years. Previously there was no cap.
| Loan Type | Change Level | OLD Rule (BEFORE July 1, 2026) | NEW Rule (AFTER July 1, 2026) |
|---|---|---|---|
| Parent PLUS loans | Major change | Parents could borrow up to the full cost of attendance minus other aid, every year. No annual cap. No lifetime cap. | $20,000 per year per child. $65,000 lifetime cap per child. Cap follows the student, not the school. |
Interim Exception (Legacy Borrowing)
- Students qualify for the interim exception if they are enrolled in a program of study as of June 30, 2026, and a Direct Loan first disbursement was made prior to July 1, 2026.
- Students maintain legacy status if they are in good standing, have not graduated, and are not officially withdrawn.
- Legacy eligibility duration is limited by the Expected Time to Credential (ETTC), calculated as the lesser of three academic years or the program length minus the period the student has already completed.
- Legacy status is lost if an undergraduate student changes program types or schools.
- Legacy status is lost if a graduate student changes majors or schools, though changing concentrations within the same 4-digit CIP code is allowed.
Direct Loan Limits
The OBBBA introduces major reductions to borrowing limits for non-legacy students starting July 1, 2026.
| Loan Category | Legacy Borrowers | Non-Legacy Borrowers |
|---|---|---|
| Graduate Student Limits | $20,500 annual / $138,500 aggregate | $20,500 annual / $100,000 aggregate |
| Professional Student Limits | $20,500 annual / $138,500 aggregate | $50,000 annual / $200,000 aggregate |
| Graduate PLUS Loans | Up to COA minus other financial aid | Eliminated |
| Parent PLUS Loans | Up to COA minus other financial aid | $20,000 annual / $65,000 aggregate per student |
| Student Lifetime Limit | Not applicable | $257,500 limit on all Title IV student borrowing, excluding Parent PLUS |
Loan Schedule of Reductions (SOR)
- Beginning in the 2026-27 academic year, Direct Loans must be proportionally reduced for students enrolled on a less-than-full-time (LTFT) basis.
- The SOR applies to all undergraduate, graduate, and professional student loans, including legacy Graduate PLUS loans.
- SOR does not apply to Parent PLUS loans, non-term programs, or clock-hour programs.
- The reduction is calculated by dividing the student's enrolled credit hours for the academic year by the program's defined full-time credit hours for that academic year.
- Financial aid offices must evaluate enrollment at the time of each disbursement.
- Students enrolled in a single semester generally cannot receive more than one-half of their full-time annual loan limit.
Loan Repayment
- Student loans disbursed on or after July 1, 2026, will only be eligible for two repayment plans: Tiered Standard and the Repayment Assistance Plan (RAP).
- Effective July 1, 2027, borrowers will be allowed to rehabilitate a defaulted loan twice.
- Loans made on or after July 1, 2027, will not qualify for unemployment or economic hardship deferments, and forbearance will be strictly limited to nine months within any two-year period.
FAFSA
Beginning April 26, 2026, the federal government added a new step to the Free Application for Federal Student Aid (FAFSA) process to protect students from identity fraud. From this date forward, random applications will be selected for an identity check.
| Item | Change Level | OLD Rule (BEFORE July 1, 2026) | NEW Rule (AFTER July 1, 2026) |
|---|---|---|---|
| Identity Verification | New Rule | Standard FAFSA submission. Verification only when flagged, typically through paperwork. | Real-time identity screening tiers applicants into four risk levels. High-risk applicants must complete live camera verification on a phone or tablet. |
Pell Grants
- The FAFSA will now exempt the net worth of family farms, commercial fishing businesses, and family-owned businesses with 100 or fewer full-time employees.
- Students receiving nonfederal grants or scholarships that equal or exceed their entire Cost of Attendance (COA) are no longer eligible for a Pell Grant.
- To keep Pell Grant eligibility, a student's Student Aid Index (SAI) must be less than twice the maximum Pell amount.
- Under the new Workforce Pell rules, eligible undergraduate workforce programs lasting 8 to 15 weeks and consisting of 150 to less than 600 clock hours will qualify for Pell Grants.
| Item | Change Level | OLD Rule (BEFORE July 1, 2026) | NEW Rule (AFTER July 1, 2026) |
|---|---|---|---|
| Pell Eligibility | Moderate Change | Available based on financial need (Student Aid index). Less-than-half-time students qualified for partial Pell. | Students with non-federal aid covering full cost of attendance no longer qualify. New high-asset and foreign income exclusions. |
| Workforce Pell (short-term programs) | New Program (Delta?) | Pell could not be awarded for programs under 16 weeks. | Pell available for approved workforce programs 8 to 15 weeks, 150 to 600 clock hours. Programs must meet federal completion and job placement requirements. Approval takes a year or more. |
Accountability
- The Student Tuition and Transparency System (STATS) eliminate the previous debt-to-earnings metric.
- STATS measures program value by comparing the median earnings of Title IV recipients four years post-completion against the median earnings of a working adult.