Federal Student Loan Updates 2026

One Big Beautiful Bill Act (OB3) Federal Financial Aid Updates

On July 4, 2025, the One Big Beautiful Bill Act was signed into law, which introduced significant changes to federal financial aid programs. Most changes are effective July 1, 2026, which affects the 2026–2027 academic year. 

This page outlines the most important updates and explains how the changes may affect students and families based on student classification. Students beginning college or transferring and receiving federal aid after June 30, 2026 will follow the new federal aid regulations, while some continuing students may remain eligible under previous provisions, which allows them to complete their current program under existing policies and loan limits (referred to as legacy status).

Disclaimer: The information on this page is provided by Student Financial Services to help orient students to the evolving landscape of higher education funding. While it reflects our good-faith understanding of current federal standards, it does not constitute official guidance and should not be considered definitive. Students are encouraged to consult with the Student Financial Services staff to review if and how these changes affect their financial aid eligibility.  For official guidance and the latest updates, visit studentaid.gov. 

Changes to the FAFSA and Pell Grant Eligibility

FAFSA Asset Exemptions

The need analysis formula used when processing FAFSA and determining Pell Grant eligibility reinstated exemptions for family farms and family-owned small businesses. It expanded exemptions to include family-owned fisheries.  These assets will be excluded from the Student Aid Index (SAI) calculation.

 

Foreign Income and Pell Grant Eligibility

Foreign income must be included in Adjusted Gross Income (AGI) when determining Pell Grant eligibility.

 

Full Cost of Attendance (COA) Scholarships and Grants

Students who receive non-federal grants or scholarships covering their entire cost of attendance are not eligible for a Pell Grant, even if they otherwise qualify.

 

Students with a High Student Aid Index (SAI)

Students with an SAI that exceeds twice the maximum Pell Grant award will be ineligible to receive a Pell Grant.

Changes to Federal Direct Loans

Incoming Undergraduate Students

Parent PLUS Loans

Beginning July 1, 2026, Parent PLUS Loans for incoming, transfer students, and any new student borrower will be limited to $20,000 per student each academic year, with a maximum lifetime borrowing limit of $65,000 per dependent student. Parents who choose to use the Parent PLUS Loan program may borrow up to these annual and aggregate limits for each child. This limit applies to each student and not each parent borrower. 

Schedule of Reductions (SOR)

 Beginning the 2026-2027 academic year, all unsubsidized and subsidized annual loan amounts will be reduced based on enrollment for those less than full-time.  This includes dropping below full-time at any point in the academic year, including after add/drop periods. This means Student Financial Services will be required to return a portion of any loans received or future disbursements of loans.

Lifetime Borrowing Limits

Federal student loan borrowing will be subject to a lifetime cap of $257,500. This cap limits the total amount a borrower may receive across all federal student loan programs. Parent PLUS loans borrowed on behalf of a dependent student are excluded from this limit.

Returning Undergraduate Students

Many students enrolled during the Spring or Summer 2026 terms who have previously received Federal Direct Loans may remain eligible under the legacy provisions.

Legacy Provisions

Legacy provisions allow eligible current students and parents to temporarily continue borrowing under the previous federal loan rules and borrowing limits. Eligibility for Legacy status is determined by federal regulations and is automatically applied to qualifying students; it cannot be declined or waived.

Eligibility Requirements for Legacy Provisions
Students must meet all of the following conditions:

  • A Federal Direct Loan must have been disbursed on or before June 30, 2026.
  • The student must continue in the same academic program at the same institution. Undergraduate students may change majors if they remain in an undergraduate program.
  • The student cannot withdraw or experience a break in enrollment. Summer term attendance is not required and is not considered a break in enrollment.
  • The student must remain within the expected timeframe for program completion, defined as the lesser of three academic years or the remaining length of the program.
    • Time to credential is defined by how long it would take a full-time student to complete a program and does not account for atypical enrollment, changes in major, or other delays in study.

Students who do not qualify under legacy provisions should refer to the Incoming Undergraduate Students section for all new federal aid changes. 

Parent PLUS Loan Borrowers (PLUS)

Existing Parent PLUS borrowers who have borrowed for their students or students who have borrowed an unsubsidized loan before July 1, 2026, can continue borrowing under the current limits for the lesser of three years or the student’s expected time to credential based on published program lengths. 

Part-Time Students

Schedule of Loan Reductions (SOR)

Beginning with the 2026–2027 academic year, annual subsidized and unsubsidized federal loan eligibility will be prorated for students enrolled less than full-time, resulting in reduced loan amounts based on enrollment status. 

Incoming Graduate Students

Graduate students beginning their program in Fall 2026 or later will be fully subject to the new federal loan policies. Students enrolled in the PA Program should refer to the Professional Students section for additional information.

  • The Graduate PLUS Loan will no longer be available.
  • Graduate students may borrow up to $20,500 annually in unsubsidized federal loans.
  • The maximum graduate aggregate borrowing limit will be $100,000, excluding undergraduate federal student loan debt, but including and Direct Loans borrowed in previous graduate or professional programs.
  • The aggregate lifetime federal loan limit will be $257,500, excluding undergraduate Parent PLUS Loans.
Schedule of Reduction for Loans

Beginning with the 2026–2027 academic year, annual unsubsidized federal loan eligibility will be prorated for students enrolled less than full-time for their program of study, resulting in reduced loan amounts based on enrollment status.

Returning Graduate Students

Graduate students enrolled during the Spring or Summer 2026 terms who previously borrowed Federal Direct Loans may qualify for legacy provisions. This includes Marietta’s Physician’s Assistant (PA) Program. These provisions allow eligible continuing students to temporarily continue borrowing under prior federal loan rules and loan limits, including continued access to Graduate PLUS Loans. Legacy eligibility is determined by federal law, automatically applied to qualifying students, and cannot be waived or declined.

To remain eligible for legacy provisions, students must meet all of the following requirements:

  • A Federal Direct Loan must be disbursed on or before June 30, 2026.
  • The student must remain enrolled in the same academic program at the same institution.
  • The student cannot withdraw or have a break in enrollment.
  • For trimester-based programs, failure to enroll in the summer term is considered a break in enrollment and will result in loss of legacy eligibility.
  • The student must remain within the expected timeframe for degree completion, defined as the shorter of three academic years or the remaining length of the program for a full-time student.

Students who do not qualify for legacy provisions should review the updated federal financial aid policies applicable to incoming graduate students.

Schedule of Reductions (SOR)

Beginning with the 2026–2027 academic year, annual unsubsidized federal loan eligibility will be prorated for students enrolled less than full-time for their program of study, resulting in reduced loan amounts based on enrollment status.

Professional Students 

On June 23, 2026 a federal court order stayed, or temporarily halted, key parts of the U.S. Department of Education's narrowed professional degree definition. While the department is appealing the ruling, it issued guidance clarifying how schools can treat professional degree programs for loan limit purposes. The guidance includes an updated list of programs temporarily eligible for higher professional degree program loan limits.

One Marietta College program, Physician Assistant Studies, was originally defined as a graduate program. Now, under the court order, this program is temporarily deemed a professional program, which is eligible for higher loan limits.  However, Marietta College has determined that it will not increase federal loan eligibility for this program at this time.

While we understand concerns about federal funding eligibility, the College made this decision because of the uncertainty about the new guidance and the risk of future harm for student borrowers and the College, if final court rulings affirm the original professional degree definition, which is very possible. 

Current and prospective PA students should continue working with Student Financial Services regarding financial aid planning. Because the litigation is ongoing, additional developments are possible in the coming weeks and months

Changes to Student Loan Repayment

  • The bill eliminates current income-driven repayment plans (IBR, PAYE, SAVE) for loans disbursed after July 1st, 2026.
  • The changes will apply to both new and continuing borrowers.
  • There will be two repayment plan options:
    • A tiered Standard Repayment Plan
    • An income-driven Repayment Assistance Plan (RAP)
  • Students who have borrowed loans before July 1, 2026, and will borrow a new loan after July 1, 2026, are limited to the new RAP or the standard plans for the new loan.
  • Borrowers with no new loans made on or after July 1, 2026, can continue to be eligible to enroll in the current Standard, current Income Based (IBR), Graduated, and Extended repayment plans, and could also opt in to the new RAP. Current borrowers enrolled in ICR, PAYE, or SAVE plans must transition to a new repayment plan by July 1, 2028. If no selection is made by that date, they will be moved into RAP.

Resources

For additional resources published by Federal Student Aid (FSA) and national associations, please visit:

*Please note that until sub-regulatory guidance is finalized and guidance to, all information and provisions are subject to change.