Financial Aid Updates
The House reconciliation bill dubbed the OBBBA means some changes are coming to Federal Financial Aid.
The budget reconciliation known as the OBBBA, passed by Congress on July 3, 2025 and signed into law on July 4, 2025, contained several provisions impacting federal student aid. These updates are highlighted below. Additional details will be added to this site in the coming months. Unless otherwise noted, these changes will be effective July 1, 2026.
Please be aware that this is an evolving situation, Naropa Financial Aid is committed to helping students and families navigate these changes while also staying informed of policy updates to ensure students receive the most accurate and timely guidance. As the Department of Education releases additional implementation guidelines and in the coming weeks, Naropa will continue to monitor developments closely and share timely updates with the campus community.
The bill introduces some notable changes to federal student aid programs and institutional accountability.
What changes are coming?
Resources for additional information:
Federal Unsubsidized Loans
- While the annual Unsubsidized Loan borrowing limit remains unchanged at $20,500, a new lifetime borrowing maximum of $100,000 will be introduced for new borrowers.
- Exception: If a borrower has a Direct Unsubsidized Loan made before July 1, 2026, while continually enrolled in their program, the borrower can continue to borrow under current loan limits for 3 academic years or the remainder of their expected time to complete the current program, whichever is less.
- At this time, our understanding is that students must be continually enrolled at least half-time
Federal Graduate PLUS Loans
- Beginning July 1, 2026, the Graduate PLUS Loan program will be discontinued.
- Legacy Provision: If a borrower has a Graduate PLUS 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 complete the current program, whichever is less.
- Please note that this exception only applies so long as you continue in your current degree program.
- At this time, our understanding is that students must be continually enrolled at least half-time and be a loan direct loan borrower prior to July 1st, 2026.
Pell Grant Eligibility
- Students who have a Student Aid Index (SAI) of 2 times the maximum annual Pell amount will no longer be eligible for Pell (SAI is the need calculation from FAFSA, formerly called “EFC”)
- Based on the 2025/2026 Pell grant amount, the cap would be 14,790, meaning that any student with an SAI higher than 14,790 would not be eligible for Pell grant beginning in the 2026/2027 year.
- Changes to the Student Aid Index calculation may result in fewer students being eligible for Pell Grants. However, starting in July 2026, it is expected that low-income students will be able to use Pell Grants for short-term job training programs that meet specific criteria for high-skill or in-demand careers.
Parent PLUS Loan Changes
- Parents of dependent students will be limited to borrowing $20,000 per year per child, with a $65,000 lifetime cap per child.
- Exception: If a borrower has a Parent PLUS loan made before July 1, 2026, while the dependent student is continuously enrolled in their program, 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 complete their current program, whichever is less.
Please note that Naropa is awaiting final guidance from the Department of Education on which programs at Naropa will fit into the “graduate degree” vs “professional program” distinction, but at this time we believe that only the Master of Divinity program will meet the “Professional Degree” designation.
Professional Annual & Aggregate Loan Limits – Effective July 1, 2026
- The annual loan limit is capped at $50,000* for professional students.
- The aggregate limit is capped at $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.
Loan proration for less-than-full-time enrollment
- The new law requires institutions to prorate the annual loan amount that a student may borrow if they are enrolled on a less than full-time basis.
- This reduction in the annual loan limit will be made in direct proportion to the degree to which the student is not enrolled full-time, rounded to the nearest percentage point.
- The Department of Education is still finalizing the official schedule of reductions and will publish final guidance in early 2026.
- These provisions will go into effect for the 2026/2027 financial aid year.
- Example (based on the proposed schedule of reductions): An undergraduate student taking 12 credits in Fall and 12 credits, will complete 24 credits annually (full time)=no loan reduction. An undergraduate student taking 6 credits in Fall and 6 credits in Spring would only complete 12 credits annually. 6/12=50% so they would receive 50% of their annual loan limit for the year, split between Fall and Spring.
- Aggregate Loan Limits
All new federal student loan borrowers will have a lifetime borrowing maximum on all federal student loans of $257,500 ($57,500 as an undergraduate student), excluding borrowed Parent PLUS Loan amounts.
The new law introduces several important changes to student and parent loan repayment. Additional information will be shared once the Department of Education releases further clarification.
Please check with your loan servicer to discuss repayment options for your loans.
Repayment Plan/New Borrowers – Effective July 1, 2026
- 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/Current Borrowers – Effective July 1, 2026 & July 1, 2028
- 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 (IBR) repayment plans, and may also opt in to the new RAP.
- 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) – Effective July 1, 2026
- Tiered repayment formula that increases the percentage of income that must be dedicated to a borrower’s monthly student loan payments as their earnings rise.
- $10 minimum payment. The monthly payment is 1-10% of income based on AGI. If married filing separately, the spouse’s AGI and number of dependents are not included in the payment calculation. $50 off monthly payment (base payment) per dependent. No cap on monthly payment, even if it’s higher than the standard repayment plan would be.
- Qualifying plan for loan forgiveness
- 30-year repayment period
- Eliminates negative amortization
- If a borrower makes an on-time payment that reduces their principal by less than $50, ED will cover the difference, up to the amount paid.
- Borrowers currently on the SAVE plan have until July 1, 2028, to switch or be automatically enrolled in RAP.
IBR Plan (Current) – Effective July 1st, 2026
- Removes the requirement for borrowers to demonstrate a partial financial hardship. Retains cancellation for balances of loans repaid under IBR at 25 years.
Standard Repayment Plan – Effective July 1, 2026
- 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)
- Fixed monthly payments
For more information, please visit studentaid.gov.
