Important Changes for 2026-2027

The One Big Beautiful Bill (OB3) Act was signed into law by Congress on July 4, 2025 and will result in significant changes to federal student aid programs beginning July 1, 2026 for the 2026-27 academic year. Key changes include the following:

Federal Pell Grant Program

CHANGE: Students who receive grants or scholarships from non-federal sources (institutional, state, or private) that cover their entire cost of attendance (COA) are ineligible to receive a Pell Grant, even if otherwise eligible for the program.

CHANGE: Students with an SAI equal to or greater than 14,790 (twice the maximum Pell Grant) are ineligible to receive a Pell Grant.

Federal Direct Loan Program

CHANGE: Annual loan amounts must be prorated in direct proportion to the students enrolled credit load.

Note: Minimum of half-time enrollment is required.

CHANGE: Program will be eliminated.

Legacy Provision: If a borrower has a Federal Direct Loan disbursed before July 1, 2026, while enrolled in a program of study, the borrower can continue to borrow for 3 academic years or the remainder of their expected time to credential, whichever is less.

CHANGE: Caps annually at $20,500

Legacy Provision: If a borrower has a Federal Direct Loan disbursed before July 1, 2026, while enrolled in a program of study, the current loan limits continue to apply for 3 academic years or the remainder of their expected time to credential, whichever is less.

CHANGE: Caps annually at $50,000

Legacy Provision: If a borrower has a Federal Direct Loan disbursed before July 1, 2026, while enrolled in a program of study, the current loan limits continue to apply for 3 academic years or the remainder of their expected time to credential, whichever is less.

CHANGE: Caps at $100,000

Legacy Provision: If a borrower has a Federal Direct Loan disbursed before July 1, 2026, while enrolled in a program of study, the current loan limits continue to apply for 3 academic years or the remainder of their expected time to credential, whichever is less. 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.

CHANGE: Caps at $200,000

Legacy Provision: If a borrower has a Federal Direct Loan disbursed before July 1, 2026, while enrolled in a program of study, the current loan limits continue to apply for 3 academic years or the remainder of their expected time to credential, whichever is less. 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.

CHANGE: $257,500 limit on all federal student loans, excluding Parent PLUS and Graduate PLUS loans.

Legacy Provision: If a borrower has a Federal Direct Loan disbursed 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.

CHANGE: 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 the student or parent borrower has a Federal Direct Loan disbursed before July 1, 2026, while the dependent student is enrolled in a program of study, 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.

FAFSA Data/Need Analysis

CHANGE: Exempts family farm and family-owned small business assets from the SAI calculation and expands asset exemptions to family-owned commercial fisheries.

CHANGE: Requires foreign income be included in the AGI used the calculate Pell Grant eligibility.

Definitions:

New borrower:
A student with no loans taken out prior to July 1, 2026, or all loans taken out during that time have been paid in full

Active or Current borrower:
A student is enrolled in program of study at an institution as of June 30, 2026; and a direct loan was made for such program of study prior to July 1, 2026, which has not been paid off

Aggregate Loan Limit:
Refers to the maximum amount a student can borrow in specific, cumulative unsubsidized loans for their program.

Lifetime Loan Limit:
A capped debt amount a borrower can have of all federal student loan programs combined (undergraduate, graduate, professional).

Legacy Provision:
Regarding student loans, the legacy provision acts as a “grandfather clause”. It allows borrowers with existing Federal Direct Loans disbursed before July 1, 2026, to continue borrowing under old rules for up to 3 years or until they finish their program.

Professional Student:
A student enrolled in a program of study that awards a professional degree upon completion of the program.

Professional Degree:
Degree that signifies both completion of the academic requirements for beginning practice in a given profession, and a level of professional skill beyond that normally required for a bachelor’s degree; is generally at the doctoral level, and requires at least two years of post-baccalaureate level coursework; generally requires professional licensure to begin practice; and includes a four-digit program CIP code in the same intermediate group as the following fields:

  • 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.)
  • Theology (M.Div., or M.H.L.)
  • Clinical Psychology (Psy.D. or Ph.D.)

Resources:

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