OBBBA Overview

OBBBA: Title IV Aid Changes

The U.S. Department of Education is implementing major legislative changes to Title IV aid under the One Big Beautiful Bill Act (OBBBA), with most provisions taking effect on July 1, 2026. The legislation introduces new limits for Direct Loans, structural changes to Pell Grant eligibility, and updated institutional accountability metrics.

Last updated June 2026

Interim Exception (Legacy Borrowing)

Students qualify for the interim exception if they are enrolled in a program of study as of June 30, 2026, and a Direct Loan first disbursement was made prior to July 1, 2026.
Students maintain legacy status if they are in good standing, have not graduated, and are not officially withdrawn.
Legacy eligibility duration is limited by the Expected Time to Credential (ETTC), calculated as the lesser of three academic years or the program length minus the period the student has already completed.
Legacy status is lost if an undergraduate student changes program types or schools.
Legacy status is lost if a graduate student changes majors or schools, though changing concentrations within the same 4-digit CIP code is allowed.

Direct Loan Limits

The OBBBA introduces major reductions to borrowing limits for non-legacy students starting July 1, 2026.

Loan Category	Legacy Borrowers	Non-Legacy Borrowers
Graduate Student Limits	$20,500 annual / $138,500 aggregate	$20,500 annual / $100,000 aggregate
Professional Student Limits	$20,500 annual / $138,500 aggregate	$50,000 annual / $200,000 aggregate
Graduate PLUS Loans	Up to COA minus other financial aid	Eliminated
Parent PLUS Loans	Up to COA minus other financial aid	$20,000 annual / $65,000 aggregate per student
Student Lifetime Limit	Not applicable	$257,500 limit on all Title IV student borrowing, excluding Parent PLUS

Schedule of Reductions (SOR)

Beginning in the 2026–27 academic year, Direct Loans must be proportionally reduced for students enrolled on a less-than-full-time (LTFT) basis.
The SOR applies to all undergraduate, graduate, and professional student loans, including legacy Graduate PLUS loans.
SOR does not apply to Parent PLUS loans, non-term programs, or clock-hour programs.
The reduction is calculated by dividing the student's enrolled credit hours for the academic year by the program's defined full-time credit hours for that academic year.
Financial aid offices must evaluate enrollment at the time of each disbursement.
Students enrolled in a single semester generally cannot receive more than one-half of their full-time annual loan limit.

FAFSA and Pell Grant Provisions

The FAFSA will now exempt the net worth of family farms, commercial fishing businesses, and family-owned businesses with 100 or fewer full-time employees.
Students receiving nonfederal grants or scholarships that equal or exceed their entire Cost of Attendance (COA) are no longer eligible for a Pell Grant.
To maintain Pell Grant eligibility, a student's Student Aid Index (SAI) must be less than twice the maximum Pell amount.
Under the new Workforce Pell rules, eligible undergraduate workforce programs lasting 8 to 15 weeks and consisting of 150 to less than 600 clock hours will qualify for Pell Grants.

Accountability and Loan Repayment

The Student Tuition and Transparency System (STATS) eliminates the previous debt-to-earnings metric.
STATS measures program value by comparing the median earnings of Title IV recipients four years post-completion against the median earnings of a working adult.
Student loans disbursed on or after July 1, 2026, will only be eligible for two repayment plans: Tiered Standard and the Repayment Assistance Plan (RAP).
Effective July 1, 2027, borrowers will be allowed to rehabilitate a defaulted loan twice.
Loans made on or after July 1, 2027, will not qualify for unemployment or economic hardship deferments, and forbearance will be strictly limited to nine months within any two-year period.