Federal Student Aid Changes from the One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill (OBBB) Act was signed into law, introducing significant changes to programs authorized under the Higher Education Act. The summary below highlights several of these changes. This page will be updated as the U.S. Department of Education releases additional guidance.
PELL GRANT PROGRAM
- • Workforce Pell – Effective July 1, 2026
- ‣ Creates a Workforce Pell Grant program. Eligible programs must be 150-600 clock hours and run at least 8 weeks but fewer than 15 weeks. Programs must lead to a “portable, stackable” credential across more than one employer or prepare students for entry-level employment for which there is only one recognized postsecondary credential. The program must be approved by the state governor as aligned with in-demand jobs and meeting employers’ needs, as well as have been offered by the institution for at least one year, and meet performance benchmarks, including, having a ≥70% completion rate, ≥70% job placement rate (within 180 days), and the program cost cannot exceed the value-added earnings of students who completed the program 3 years prior. The credit must also be allowed to transfer into future degree programs.
- ‣ Remedial, non-credit, correspondence, English language learning, and study abroad coursework are not eligible. Also excludes unaccredited institutions from participating. Students cannot receive both regular Pell and Workforce Pell simultaneously, and time spent using a Workforce Pell Grant counts toward the student’s overall Pell eligibility limit.
FEDERAL DIRECT LOAN PROGRAM
- • Graduate PLUS Loan Program – Effective July 1, 2026
- ‣ Eliminates the Graduate PLUS loan program effective July 1, 2026, for new borrowers.
- ‣ Legacy Provision: If a borrower has a Graduate 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.
- • Parent PLUS Annual & Aggregate Loan Limits – 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: 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 for 3 academic years or the remainder of their dependent student’s expected time to credential, whichever is less.
- • Graduate Annual & Aggregate Loan Limits – Effective July 1, 2026
- ‣ Caps the annual loan limits at $20,500 for graduate students. The aggregate limit is capped at $100,000 for graduate 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 – Effective July 1, 2026
- ‣ $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 the current loan limits for 3 academic years or the remainder of their expected time to credential, whichever is less.
- • Loan Proration – No effective date mentioned in final bill (information forthcoming)
- ‣ Requires institutions to prorate annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.
STUDENT LOAN REPAYMENT
- • Repayment Plan/New Borrowers – Effective 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 – Effective July 1, 2026 & July 1, 2028
- ‣ 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 Repayment (IBR) plans, and may also opt in to the new RAP.
- ‣ 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 – Effective July 1, 2026
- ‣ Creation of a new IBR plan called the Repayment Assistance Plan (RAP). If married filing separately, the spouse’s AGI and number of dependents are not included in the payment calculation. $10 minimum payment. The 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 cover the difference, up to the amount paid.
- ‣ After all current borrowers move out of all other current IDR or Standard plans, they will be sunset.
- • Income Based Repayment (IBR) Plan (Current) – Effective July 1st, 2026
- ‣ Removes the requirement for borrowers to demonstrate a partial financial hardship. Retains cancellation for balances of loans repaid under IBR at 25 years.
- • Standard Repayment Plan – Effective July 1, 2026
- ‣ 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)
- • Repayment Options for ParentPLUS & Consolidation Loans – Effective July 1, 2026
- ‣ Certain consolidation loans made on or after July 1, 2026, are only eligible for the RAP or standard repayment plans.
- ‣ A consolidation loan repaid using an IDR plan between July 1, 2026, and June 30, 2028, would not be eligible for RAP and must be repaid under the standard plan. A consolidation loan used to pay off a ParentPLUS is not eligible for RAP and must be repaid under the standard plan.
- ‣ All new ParentPLUS loans from the effective date 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 ParentPLUS and certain consolidated loans) they must repay the ineligible loan/s separately.
- ‣ For borrowers who had borrowed ParentPLUS 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 ParentPLUS borrowers is the standard plan.
ADDITIONAL INFORMATION and FAQs