Federal Student Loans in 2026: What the One Big Beautiful Bill Means for You

Starting July 1, 2026, federal student loans will undergo some of the most sweeping changes in decades, thanks to the One Big Beautiful Bill Act (OBBB). Whether you're a parent planning for your child's college costs or a student preparing to borrow for graduate school, understanding these reforms is essential.

From new borrowing limits and the elimination of certain loan types to streamlined repayment plans and expanded grant opportunities, the OBBB reshapes how families navigate higher education financing. Whether you're a high school senior, a parent planning for college costs, or a graduate student mapping out your next steps, this guide breaks down what's changing and what it means for you.

Key Changes at a Glance

Effective July 1, 2026

Source: NASFAA.org

For Parents of Students Entering College in 2026

What's new:

• If you're taking out a Parent Plus Loan to support your child's education, you can no longer borrow up to the full cost of attendance using this program. The borrowing caps on Parent Plus Loans are $20,000 per year and $65,000 in total per child. That's a big shift from the current "borrow up to cost of attendance" model.
• If you have a student who started college in 2025 and you borrowed a Parent Plus Loan at least once before July 1, 2026, you can lock in the old PLUS rules for 3 more years, which should cover the rest of your student's college education. You could consolidate and enroll into an income-driven repayment (IDR) plan by July 1, 2028 to maintain flexible payment arrangements.

What you can do: Explore other options to make up the difference in coverage through savings, private loans, or payment plans with your student's college or university.

For Students Entering College in 2026

What's New:

• You'll apply for aid under the updated FAFSA rules, which now exclude family farms and small businesses from asset calculations.
• If your family receives scholarships or grants that cover your full cost of attendance, you won't be eligible for a Pell Grant.
• Most income-driven repayment (IDR) plans will be phased out – including the Saving on a Valuable Education (SAVE) plan, Pay as You Earn (PAYE) plan, and the Income-Contingent Repayment (ICR) plan, which leaves new borrowers with only two options: a modified standard plan and a new Repayment Assistance Plan (RAP).

What you can do:

• File the FAFSA early to maximize aid eligibility.
• Ask your school's financial aid office about institutional loan limits—they may be lower than federal caps.
• Research private student loans and consider a qualified cosigner to reap additional benefits.

For Students Graduating College in 2026

What's New:

• If you don't take out new loans after July 1, 2026, you can stay on your current repayment plan.
• If you do borrow again, you'll be moved to the new RAP or standard plan.
• Under these new rules, a senior who takes out a final loan in Fall 2026 will have to repay all loans under the new rules—even older ones.

What you can do:

• Consider finishing borrowing before July 1, 2026, to retain flexibility in repayment plans.
• Review your repayment options before graduation as loan forgiveness will take longer. RAP forgiveness starts after 30 years, not 20 or 25.

For Current College Students and College Graduates

What's New:

• If you already have federal student loans and you want to maintain access to an income-driven repayment plan, you'll need to act by July 1, 2028 and switch over to modified standard plan, which no longer requires "financial hardship" to enroll under the new law. After that, you'll be moved to the new RAP plan by default.
• Both the modified standard plan and the RAP plan will become available to new and existing borrowers on July 1, 2026. Existing borrowers who switch to it before the 2028 deadline can preserve forgiveness options after 25 years.

What you can do:

• Review your current repayment plan and switch to IBR if it makes sense for your income and debt level. IBR is the only IDR plan that will remain, and if you switch to it before the deadline you can preserve forgiveness options after 25 years.

For Students Entering Grad or Medical School in 2026

What's New:

• Graduate PLUS loans are gone.
• Annual loan caps: $20,500 (for graduate degrees), $50,000 (for professional degrees)
• Lifetime loan caps: $100,000 (for graduate degrees), $200,000 (for professional degrees)

What you can do:

• If you're starting grad school before July 1, 2026, you can still access Grad PLUS loans for up to three years. After that, compare program costs carefully and explore scholarships or assistantships.
• Try to plan your total borrowing across all years to stay within the new limits.
• If you're employed, see if your employer offers tuition assistance or education reimbursements.
• If you're exploring private student loans, consider a multi-year approval option so that you're covered for the duration of your graduate education.

For Students Graduating from Grad or Med School in 2026

What's New:

• If you borrowed before July 1, 2026, you can continue under the old rules for up to 3 more years.

What you can do:

• Avoid taking new loans after July 1, 2026, if you want to keep your current repayment plan.
• Consider consolidating loans before the deadline if it benefits your repayment strategy.
• If you're in a stable financial position, refinancing with a private lender might offer better terms—but you'll lose access to federal protections like deferment and forgiveness.

For Students Pursuing Vocational or Trade Programs

What's New:

• Workforce Pell Grants are available for short-term programs (8–15 weeks) that meet strict job placement and earnings criteria.
• Students must enroll full-time (15 or more credits per semester) to receive the maximum Pell Grant allowance.

What you can do:

• Research your program to make sure that it's eligible and state-approved.
• File for the FAFSA, even for non-degree programs.
• Consider enrolling in at least 15 credits per semester to get the full Pell Grant. If you need to enroll half-time or take less credits, talk to your financial aid office first to see what you can do to maintain eligibility.
• Ask if credits can transfer to a future degree program.

For Veterans Starting School

What's New:

• No direct changes to veteran-specific aid, but FAFSA and Pell changes may affect need-based aid.

What you can do:

• Coordinate with your school's veteran services office to maximize aid. Veterans may now benefit from their GI Bill and the new Workforce Pell Grant.
• Use FAFSA to determine eligibility for additional federal aid.

Final Recommendations

• Act Early: Many changes take effect July 1, 2026. Planning ahead can help you lock in more flexible options.
• Ask Questions: Financial aid offices are your best resource for navigating these changes.
• Stay Informed: Policies may continue to evolve. Bookmark trusted sources like studentaid.gov and NASFAA.