Federal Financial Aid Updates

New federal financial aid regulations, signed into law on July 4, 2025, include significant changes to Title IV financial aid programs. Many of these provisions are slated to take effect on July 1, 2026.  The regulations affect many programs authorized by the Higher Education Act.

Note that a number of these new provisions allow for current borrowers to be grandfathered and eligible to continue borrowing under current financial aid regulations.

Below is a list of current and anticipated updates, along with the programs, effective dates, and student/family member groups affected - we will keep this page as up-to-date as possible as changes to law arise. Additional information is available at studentaid.gov.

Quick Reference:

• Grad PLUS Loan
• Parent PLUS Loan
• Repayment Options for Parent PLUS & Consolidation Loans
• Graduate/Professional Loans
• Federal Loan Program
• Loan Proration
• Repayment Plan for New Borrowers
• Repayment Plan for Current Borrowers
• Repayment Assistance Plan (RAP)
• Income-Based Repayment (IBR) Plan (Current)
• Standard Repayment Plan
• Loan Rehabiliation Terms
• Loan Deferment Options
• Loan Forebearace
• FAFSA Asset Exemptions
• Foreign Income & Pell Eligibility
• Full Cost of Attendance (COA) Scholarships/Grants
• Students with High Student Aid Index (SAI)

Grad PLUS Loan

(All currently enrolled graduate students)

Elimination: Beginning July 1, 2026, Grad PLUS Loans will be eliminated.

Legacy Provision: If a borrower has a Direct 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 Loan

(Currently enrolled dependent students and future enrollees as of Sept. 2026)

Annual and Aggregate Limits: Beginning 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 ParentPLUS 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 three academic years or the remainder of their dependent student’s expected time to credential, whichever is less.

Repayment Options for Parent PLUS & Consolidation Loans

(All currently enrolled students and alumni)

All new Parent PLUS loans from July 1, 2026 on must be repaid under the standard repayment plan - they are not eligible for Repayment Assistance Plan (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.

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 Income-Driven Repayment (IDR) plan have until July 1, 2028, to select a standard plan, Income-Based Repayment (IBR), or RAP. If the consolidation loan was used to pay off a Parent PLUS loan, it must enter repayment under Income-Contingent Repayment (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.

Graduate/Professional Loans

(Currently enrolled graduate students)

Annual and Aggregate Loan Limits: Beginning July 1, 2026, the annual loan limit is capped at $20,500 (same as prior max amt) 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

(All currently enrolled students)

Loan Limits: Beginning July 1, 2026, there is a $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 ParentPLUS 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 three academic years or the remainder of their expected time to credential, whichever is less.

Loan Proration

(All currently enrolled students)

Beginning with the 2026-2027 financial aid year, institutions are required to prorate annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.

Repayment Plan for New Borrowers

(All currently enrolled students)

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 for Current Borrowers

(All currently enrolled students who borrowed loans)

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 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)

(All currently enrolled students and alumni)

Beginning July 1, 2026, there will be a new Income-Based Repayment (IBR) plan called the Repayment Assistance Plan (RAP). If married and filing separately, a spouse’s adjusted gross income (AGI) and number of dependents are not included in the payment calculation.

Details:

• $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 Standards plans, they will be sunset.

Income-Based Repayment (IBR) Plan (Current)

(All currently enrolled students and alumni)

Beginning July 1, 2026, the requirement for borrowers to demonstrate a partial financial hardship is removed. Also 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.

Standard Repayment Plan

(All currently enrolled students and alumni)

Beginning July 1, 2026, there will be a 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).

Loan Rehabiliation Terms

(All currently enrolled students)

Beginning July 1, 2027, 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

(All currently enrolled students and alumni)

Beginning July 1, 2027, economic hardship and unemployment deferments are sunset. 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’s loans made prior to that date are paid in full, these options will cease to exist.

Loan Forebearace

(All currently enrolled students who borrow on or after July 1, 2027 and will not graduate before July 1, 2027)

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.

FAFSA Asset Exemptions

(All currently enrolled students who do not graduate during or before May of 2026)

Beginning July 1, 2026 (starting with award year 2026-2027), this reinstates the exemptions of family farm and a family-owned small business assets from the SAI calculation and expands asset exemptions to family-owned commercial fisheries. The FAFSA Simplification Act previously removed the exemption of assets for family farms and family-owned small businesses, effective with the 2024-2025 FAFSA.

Foreign Income & Pell Eligibility

(All currently enrolled students who do not graduate during or before May of 2026)

Beginning July 1, 2026 (starting with award year 2026-2027), it is required that foreign income be included in the adjusted gross income (AGI) used to calculate Pell Grant eligibility.

Full Cost of Attendance (COA) Scholarships/Grants

(All currently enrolled undergraduate students)

Beginning July 1, 2026, students who receive grants or scholarships from non-federal sources covering their entire cost of attendance (COA) are ineligible to receive a Pell Grant, even if otherwise eligible for the program.

Students with High Student Aid Index (SAI)

(All currently enrolled undergraduate students)

Beginning July 1, 2026, students are prevented from receiving Pell Grants if their Student Aid Index (SAI) exceeds twice the maximum Pell Grant award.