Federal Student Aid Changes from the One Big Beautiful Bill Act

Last updated: July 8, 2026

On July 4, 2025, the One Big Beautiful Bill Act was signed into law, introducing significant changes to federal student aid programs. Beginning July 1, 2026, several important changes will reshape how students and families pay for higher education. We are actively reviewing the legislation and will continue to share updates as additional guidance becomes available from the U.S. Department of Education and other relevant authorities.

As of November 6, 2025, the Department of Education completed the first of two negotiated rulemaking committee sessions. The Re-imagining and Improving Student Education (RISE) Committee came to a consensus by developing regulations to implement statutory changes to student loan programs. This was followed by a period of public comment in early 2026, with final rules to be published in the federal register in spring 2026.

Below is a summary of what we know so far, what these changes may mean for you, and the steps you can take to begin preparing. While based on our good-faith understanding of the changes to come, we are still awaiting official guidance, and this information is subject to change.

Changes to Federal Student Loans

Undergraduate Students

All Student Borrowers

No changes were made to the annual or lifetime borrowing limits for undergraduate Federal Direct Subsidized and Unsubsidized Loans.

All Federal Direct Loans, including Subsidized and Unsubsidized, will be reduced based on enrollment, if the student is enrolled less than full-time. This new policy is called “schedule of reduction (SOR).” See FAQ below for examples.

Undergraduate students – 12 hours is considered full-time.
Schedule of reduction may also impact students who initially enroll full-time but drop or withdraw to part-time enrollment during the semester.

Federal Parent PLUS Loan

New Borrowers

Parents who borrow their first Parent PLUS loan on or after July 1, 2026, will be considered a new borrower and will be subject to updated Parent PLUS loan borrowing limits.

Parent PLUS loan borrowing will be capped at $20,000 per student per year, with a lifetime maximum of $65,000 per student.

Current Borrowers (borrowed before July 1, 2026)

Current borrowers who obtained a Parent PLUS loan before July 1, 2026, for a dependent student's current academic program may continue to borrow at the current maximum limit of up to the cost of attendance (minus other financial aid) for up to three academic years, or the remainder of the student's expected time to degree, whichever is less. There is no lifetime limit on the Parent PLUS loan for current borrowers.

Graduate and Professional Students

Professional Degree Program Classification

Draft federal guidance defines "professional degree programs" as including only the following that are offered at NIU: Law (J.D.), Audiology (AuD), Speech-Language Pathology (SLP), Athletic Training (MSAT), Physical Therapy (DPT) and Nursing Practice (DNP).

All Student Borrowers

Federal Direct Unsubsidized loans for graduate and professional students will be reduced based on enrollment if the student is enrolled less than full-time. See FAQ below for examples.

Graduate students – 9 hours is considered full-time
Professional students – full-time requirement varies by program
Schedule of reduction (SOR) may also impact students who initially enroll full-time but drop or withdraw to part-time enrollment during the semester.

New Borrowers

Starting July 1, 2026, new borrowers will no longer be eligible for the federal GradPLUS Loan.

New borrowers at the graduate level will be eligible for up to $20,500 in Direct Unsubsidized loans annually. Individual eligibility will be determined by a student’s cost of attendance and prior borrowing history. Lifetime borrowing at the graduate level is limited to $100,000, as well as a combined $257,500 at any credential level.

New borrowers in a Professional Degree Program will be eligible for a maximum annual Direct loan amount of $50,000. Individual eligibility will be determined by a student’s cost of attendance and prior borrowing history. Lifetime aggregate is $200,000 at the professional level, as well as a combined $257,500 at any credential level.

At this time, it is unclear if the lifetime aggregate will include any Parent PLUS loan amounts borrowed on behalf of a dependent student. More information will be posted when clarification is available.

Current Borrowers (borrowed before July 1, 2026)

If you have borrowed an Unsubsidized or GradPLUS loan in your current program of study, you will continue to qualify for existing Unsubsidized Loan limits for a limited time based on your expected time to credential. Proposed language indicates this period is up to three academic years or the remaining length of your program at the time eligibility is determined, whichever is shorter. We will publish updates as details become available.

If you are enrolled in your current program and borrowed a Federal Direct loan before July 1, 2026, you will still be able to access GradPLUS for up to the cost of attendance for a limited time as noted above.

These legacy provisions apply only to loans borrowed for your current program if continuous enrollment is maintained. If you borrowed Federal Direct loans for a previous program or start a new program after July 1, 2026, you will not be eligible for the GradPLUS loan in your new program.

Changes to Federal Student Loan Repayment Plans

New Borrowers (borrowing after July 1, 2026)

The bill eliminates current income-driven repayment plans (IBR, PAYE, SAVE) and replaces them with a new Repayment Assistance Program (RAP).

Students who borrowed loans prior to July 1, 2026, and will borrow a new loan after July 1, 2026, are limited to the new RAP or standard plans. RAP borrowers will not be locked into a 30-year plan; a standard 10- or 25-year plan will also be available.

All new Parent PLUS loans borrowed after July 1, 2026, must be repaid under the standard repayment plan. Parent borrowers are not eligible for RAP.

Parent PLUS borrowers who borrowed a loan before July 1, 2026, and any subsequent Parent PLUS loan borrowed after July 1, 2026, must all be repaid under the standard plan.

Current Borrowers (borrowed before July 1, 2026)

Current borrowers who do not borrow a loan after July 1, 2026, and want to stay in an income-driven plan must enroll by June 30, 2028. Those who do not will be automatically moved into RAP.

Borrowers currently enrolled in the SAVE repayment plan will have 90 days, starting on July 1, 2026, to select another repayment plan. Loan servicers will communicate specific deadlines to affected borrowers.

Loan Rehabilitation, Deferment and Forbearance

The bill now allows borrowers to rehabilitate a defaulted loan twice, with a minimum rehabilitation payment of $10 per month, effective July 1, 2027.

The bill sunsets economic hardship and unemployment deferments, effective July 1, 2027.

Any loans made on or after July 1, 2027, are eligible for forbearance for up to nine months in any two-year period.

Public Service Loan Forgiveness

There are no changes to the Public Service Loan Forgiveness (PSLF) program.

However, some borrowers who were enrolled in income-driven repayment (IDR) programs and had or will have loans discharged may be subject to changes in tax policy. Borrowers are encouraged to speak with the IRS or a tax professional to determine whether their loan cancellation is considered taxable income.

Other Changes to Student Aid Eligibility

The changes listed below are not subject to negotiated rulemaking, and the effective dates are final.

FAFSA Asset Exemptions

The bill reinstates the exemptions of family farm and family-owned small business assets from the Student Aid Index (SAI) calculation and expands asset exemptions to family-owned commercial fisheries, effective for the 2026-2027 award year.

Foreign Income and Pell Eligibility

The bill now requires that foreign income be included in the reported Adjusted Gross Income (AGI) used to calculate Pell Grant eligibility, effective for the 2026-2027 award year.

Students with a High Student Aid Index

The bill prevents students from receiving a Pell Grant if their SAI exceeds twice the maximum Pell Grant award, effective for the 2026-2027 award year.

Full Cost of Attendance Scholarships and Grants

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 they are otherwise eligible, effective for the 2026-2027 award year. This includes students who receive a full athletic or academic scholarship, among other scenarios.

Frequently Asked Questions

How does the Schedule of Reduction (SOR) affect my loan if I’m not enrolled full time?

Your annual federal student loan limit may decrease if you enroll less than full-time. Instead of qualifying for the maximum annual amount, your borrowing limit will be based on the credit hours you take each semester and throughout the academic year. No more than 50% of the annual loan amount can be applied to any fall or spring semester.

Undergraduate Students: Full-time enrollment requires 12 credit hours per semester, totaling 24 credit hours per year.
Graduate Students: Full-time enrollment requires 9 credit hours per semester, totaling 18 credit hours per year.
- If you are in a graduate program that requires summer enrollment, full-time enrollment includes at least 6 credit hours in the summer, totaling 24 credit hours per year.
Law Students: Full-time enrollment requires 12 credit hours per semester, totaling 24 credit hours per year.

Schedule of Reduction Example 1: Undergraduate Students (Freshman)

Maximum Federal Unsubsidized Annual Loan Amount for Full-Time: $5,500

Federal Unsubsidized Loan Amount for Fall Full-Time (12 or more hours): $2,750

Federal Unsubsidized Loan Amount for Spring Full-Time (12 or more hours): $2,750

If this student enrolled in 6 hours in fall and 6 hours in the spring, the annual loan amount would be reduced by 50% to $2,750.

Half of the loan is applied to fall and half to spring, resulting in $1,375 per semester.

Schedule of Reduction Example 2: Graduate Students

Maximum Federal Unsubsidized Annual Loan Amount for Full-Time: $20,500

Federal Unsubsidized Loan Amount for Fall Full-Time (9 or more hours): $10,250

Federal Unsubsidized Loan Amount for Spring Full-Time (9 or more hours): $10,250

If this student enrolled in 6 hours in fall and 6 hours in the spring, the annual loan amount would be reduced by 33% to $13,530

Half of the loan is applied to fall and half to the spring, resulting in $6,765 per semester.

Schedule of Reduction Example 3: Law Students

Maximum Federal Unsubsidized Annual Loan Amount for Full-Time: $50,000

Federal Unsubsidized Loan Amount for Fall Full-Time (9 or more hours): $25,000

Federal Unsubsidized Loan Amount for Spring Full-Time (9 or more hours): $25,000

If this student enrolled in 6 hours in fall and 6 hours in the spring, the annual loan amount would be reduced by 50% to $25,000.

Half of the loan is applied to fall and half to the spring, resulting in $12,500 per semester.

Schedule of Reduction Example 4: Undergraduate Freshman - Fall course withdrawal

Maximum Federal Unsubsidized Annual Loan Amount for Full-Time: $5,500

Federal Unsubsidized Loan Amount for One Semester Full-Time (12 or more hours): $2,750

If this student enrolls in 12 hours for fall but withdraws from 3 hours after the loans have disbursed, and then enrolls in 12 hours for the spring, their annual enrollment would be calculated as: (12-3) + 12 = 21 hours.

The fall loan amount will stay the same, but because this student already received 50% (12 hours worth) of the loan amount in the fall, the remaining spring eligibility will be reduced.

21 - 12 = 9 hours of loan remaining for spring

9/12 = 75% of scheduled spring loan, resulting in $2,062 for the spring semester.

Are parent borrowers of current students included under the legacy provisions?

Yes, if the parent has borrowed a Federal Direct PLUS Loan before July 1, 2026, or if the student has borrowed a federal student loan prior to July 1, 2026, the parent falls under legacy and may continue borrowing under the current loan limits (up to the cost of attendance with no lifetime maximum). This provision remains in effect for the lesser of three academic years or completion of the student’s published program length, if the student stays enrolled in their current program of study.

I am a current student. Am I eligible for legacy loan provisions?

If you received a disbursement of a Federal Direct Student Loan before July 1, 2026 for the program you are currently enrolled in, you qualify for the legacy provisions.

You can continue to borrow federal student loans under the federal loan programs originally available to you when you started your program of study for the lesser of three academic years or completion of your published program length. The federal student loan limits (annual and total) continue to apply.

For example, graduate and law students in this category can continue to apply for the Graduate PLUS Loan to finance their education expenses up to cost of attendance for the 2026-2027 academic year.

If I have longer than three years to complete my program, what are my options?

After a student has fulfilled their program requirements, or upon reaching the lesser of three academic years or the published program length, any remaining coursework and program requirements will be subject to the new federal loan regulations.