Big Changes Coming to Federal Student Aid: What Students & Parents Need to Know

Starting in 2026, the way students get and repay federal financial aid is going to look a lot different. These changes come from a new law called the One Big Beautiful Bill Act. Here’s a clear breakdown so you know what’s coming and how it might affect you.

1. Pell Grants

  • Extra Funding: The government is adding $10 billion to keep Pell Grants fully funded.
  • Workforce Pell Grants: Starting July 1, 2026, short career-focused programs (8–15 weeks long, 150–600 hours) may qualify for a special “Workforce Pell.” These must:
    • Lead to a credential that works across multiple employers or prepares you for a specific entry-level career.
    • Have at least a 70% completion rate and 70% job placement rate.
    • Be approved by your state’s governor as meeting in-demand job needs.
    • Be affordable compared to the earnings boost it gives.
    • You can’t get a regular Pell and a Workforce Pell at the same time.

2. Federal Student Loans

Changes effective July 1, 2026:

  • Graduate PLUS Loans â€“ going away for new borrowers.
  • Parent PLUS Loans â€“ capped at $20,000 per year and $65,000 total per child.
  • Grad/Professional Loans â€“ annual caps of $20,500 (grad) or $50,000 (professional); total caps of $100,000 and $200,000.
  • Overall Lifetime Limit â€“ $257,500 across all federal student loans (Parent PLUS not included in this total).
  • Schools Can Set Lower Limits â€“ colleges can choose to lower borrowing limits for entire programs.
  • Loan Proration â€“ loans will match your enrollment level (full-time vs. part-time).

3. Loan Repayment

For new loans after July 1, 2026:

  • Only two repayment options:
    1. New Standard Plan â€“ fixed payments over 10, 15, 20, or 25 years (based on loan size).
    2. New Income-Based Repayment Plan (RAP) â€“ payment is 1–10% of income (based on AGI), with discounts for dependents and no interest piling up faster than you pay.
  • Current borrowers can keep their old plans for now, but some plans will be phased out by 2028.
  • Parent PLUS loans taken after July 1, 2026, must use the Standard Plan.

4. FAFSA & Eligibility

Starting with the 2026–27 school year:

  • Family Farms, Small Businesses, and Fisheries â€“ assets won’t count against you in aid calculations.
  • Foreign Income â€“ must be counted when figuring Pell eligibility.
  • Full Scholarships â€“ if outside scholarships fully cover your cost of attendance, you can’t also get a Pell Grant.
  • High Student Aid Index (SAI) â€“ no Pell Grant if your SAI is more than double the max Pell award.

5. School Accountability

From July 1, 2026:

  • If a program’s graduates earn less than people with only a high school diploma (or bachelor’s degree for grad programs) two out of three years, that program can lose access to federal loans.
  • Schools must warn students if their program is failing this “earnings test.”

6. Other Changes

  • Borrower Defense & Closed School Discharge â€“ stricter rules delayed until 2035.
  • Private College Endowment Tax â€“ higher rates for very wealthy schools (based on per-student endowment).
  • Deferment & Forbearance â€“ starting in 2027, fewer options and shorter time limits.

Bottom Line

If you’ll be in college or grad school in 2026 or later, these changes will affect how much you can borrow, how you repay, and in some cases, whether your program qualifies for aid. Parents of future students should pay close attention to the new loan caps and repayment rules.

Â黨ӰĘÓ's Office of Financial Aid will continue to provide updates on the changes affecting federal student aid as more information becomes available.