Federal Student Aid Changes from the One Big Beautiful Bill Act

On July 4th, President Trump signed into law a budget reconciliation bill called the “One Big Beautiful Bill Act”. As part of this reconciliation bill, there are many changes that affect Federal Student Aid. These changes are currently in negotiated rule making so many details have not been finalized. The broad changes that are included in the One Big Beautiful Bill Act that affect Federal Student Aid are as follows. This list is not exhaustive and may change:

Federal Direct Loan Program

Topic	Change	Note	Effective Dates
Graduate PLUS Loan Program	Eliminates the Graduate PLUS loan program.	Legacy Provision: If a borrower has a Federal Direct Loan made before July 1, 2026, while enrolled in a credentialed program, the borrower can borrow from the Grad PLUS program for 3 academic years or the remainder of their expected time to credential, whichever is less.	July 1, 2026
Parent PLUS Annual & Aggregate Loan Limits	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: If a borrower has a Federal Direct 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 for 3 academic years or the remainder of their dependent student’s expected time to credential, whichever is less.	July 1, 2026
Graduate/Professional Annual & Aggregate Loan Limits	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 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. A professional student is a student enrolled in a program of study that awards a professional degree, as defined under section 34 CFR 668.2. Examples of a professional degree include but are not limited to 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.), and Theology (M.Div., or M.H.L.).	July 1, 2026
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.	July 1, 2026
Institutionally Determined Limits	Allows institutions to impose their own lower program-level loan limits.	Lower loan limits must be applied to the entire program and not on a student-by-student basis.	July 1, 2026
Loan Proration	Requires institutions to prorate annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.		No date mentioned in final bill.

 

Student Loan Repayment

Topic	Change	Notes	Effective Dates
Repayment Plan/New Borrowers	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.	July 1, 2026
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.	July 1, 2026 & July 1, 2028
Repayment Assistance Plan	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.	After all current borrowers move out of all other current IDR or Standard plans, they will be sunset.	July 1, 2026
IBR Plan (Current)	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.		July 1, 2026
Standard Repayment Plan	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).		July 1, 2026
Repayment Options for Parent PLUS & Consolidation Loans	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, 2028, 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.		July 1, 2026
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.		July 1, 2027
Loan Deferment Options	Sunsets the economic hardship and unemployment deferments.		July 1, 2027
Loan Forbearance	Loans made on or after July 1, 2027, are eligible for forbearance for up to nine months in any two-year period.		July 1, 2027