Changes to Federal Student Loans from the One Big Beautiful Bill Act

Navigating Federal Aid Changes

We know paying for college can get confusing, especially with recent changes to federal student aid. Use this guide to learn how the One Big Beautiful Bill Act will affect federal student loans and impact your financing options.

How the One Big Beautiful Bill Act Affects Federal Student Aid

The One Big Beautiful Bill Act was signed into law on July 4, 2025, and introduces significant changes to federal student aid. The Department of Education has not yet issued a final version of the regulation, and we are awaiting guidance on changes. SCI-Arc is closely reviewing the law and its impact on how these changes affect our students and families.

Key Updates to Federal Loans

The new law introduces changes to how students and families finance higher education. Here are the most important updates that are effective as of July 1, 2026:

• The Graduate PLUS Loan program, which allowed graduate and professional students to borrow up to the full cost of attendance, has been eliminated for new borrowers.
• Parents of dependent undergraduate students who take out Parent PLUS Loans will now have an annual borrowing limit of $20,000 per student and a lifetime limit of $65,000 per student.
• A new income-driven repayment plan called the Repayment Assistance Plan (RAP) will be introduced. For new borrowers, this and a new standard repayment plan will be the only options.

Loan Options

Current Loan Borrowers

The following Legacy Provisions apply to current borrowers who take out a federal student or parent loan before July 1, 2026. This means if you have a Federal Direct Graduate PLUS or Parent PLUS Loan made before July 1, 2026, while you or your student is enrolled in a program, you may be able to continue to borrow for up to three academic years or until the end of the program, whichever comes first.

Undergraduate Students

• The annual Federal Direct Subsidized and Unsubsidized Student Loan borrowing limits remain the same.
• Parent PLUS borrowers may continue borrowing under the previous annual and lifetime limits for up to three academic years or until the end of their student’s program, whichever comes first.

Graduate Students

• The annual Federal Direct Unsubsidized Student Loan borrowing limit remains the same at $20,500.
• Graduate PLUS borrowers may continue borrowing under the previous annual and lifetime limits for up to three academic years or until the end of their program, whichever comes first.

Federal Loan Repayment Options

The new law also introduces changes to student loan repayment for both undergraduate and graduate students.

Current Loan Borrowers

• May continue in existing standard, graduated, extended, or Income-Based Repayment (IBR) plans.
• Those in Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE) plans must switch into an eligible plan by July 1, 2028.

New Loan Borrowers

• Borrowers with new loans on or after July 1, 2026, may only choose from:
  • A new standard plan with fixed terms of 10, 15, 20, or 25 years.
  • A new income-driven plan called RAP (Repayment Assistance Plan), which calculates payments differently from current income-driven plans.
• All loans must be under the same plan. Borrowers with both pre- and post-July 1, 2026 loans must choose one of the two options above.
• Borrowers with no new loans after July 1, 2026:
  • May continue in existing standard, graduated, extended, or Income-Based Repayment (IBR) plans.
  • Those in Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), or Saving on a Valuable Education (SAVE) plans must switch into an eligible plan by July 1, 2028.

What You Can Do Now

• Review your loans. Log in to studentaid.gov to check your borrowing history and lifetime totals.
• Understand the transition rules. Borrowing before July 1, 2026, may allow continued access to current loan options for a limited time.
• Plan ahead. Your enrollment and borrowing dates may affect which rules apply to you.
• Think about repayment. Compare existing repayment plans with the new options to anticipate future payments.
• Budget carefully. With lower federal loan limits for some students, consider exploring private loan options, scholarships, and other possible funding options.
• Stay informed. SFS will continue to provide updates as the Department of Education releases details.

Resources

• National Association of Student Financial Aid Administrators (PDF)
• One Big Beautiful Bill Act updates from Federal Student Aid
• Inside Higher Ed

Federal Loan Borrowing Limits: What's Changing July 1, 2026

The table below provides a quick comparison of current and new annual and lifetime borrowing limits for undergraduate, graduate, professional, and parent borrowers.

FAQ

What changes are being made to graduate student loans?

The Graduate PLUS Loan is being eliminated. If you have a Federal Direct Loan made before July 1, 2026, you may be able to continue borrowing for up to three academic years or until the end of your program, whichever comes first. Additionally, there are new limits on loan amounts for graduate and professional students who do not have a Federal Direct Loan disbursed before July 1, 2026. For graduate students, the new annual limit will be $20,500 per year and $100,000 over a lifetime; for professional students, the new annual limit will be $50,000 per year and $200,000 over a lifetime. More information is needed from the Department of Education.

What changes are being made to parent student loans?

For new borrowers, the Parent PLUS Loan program will now have an annual limit of $20,000 and a lifetime limit of $65,000 per dependent undergraduate student. Private or alternative loans are available if additional financing is needed. If you have a Federal Direct Parent PLUS Loan made before July 1, 2026, you may be able to continue borrowing for up to three academic years or until the end of your student’s program, whichever comes first. More information is needed from the Department of Education.

When do these new rules start?

The new rules will apply to any student who has not received a Direct Loan before July 1, 2026. You will be considered a new borrower if you enroll in your program for the first time on or after July 1, 2026, or if you have not yet borrowed a Federal Direct Loan.

What are the Legacy Provisions for current students and borrowers?

The Legacy Provisions will include existing borrowers of Federal Direct Loans. This will allow some students to continue borrowing loans under the previous rules. If you have a Federal Direct Graduate PLUS or Parent PLUS Loan made before July 1, 2026, while enrolled in a program, you may be able to continue borrowing for up to three academic years or until your or your student’s program is completed, whichever comes first. More information is needed from the Department of Education.

How will these changes affect my current loans

These changes apply to new loans only. There is a new program called the Repayment Assistance Plan (RAP), which may offer a new repayment option for current borrowers.

What types of loans will be available to finance now that the Graduate PLUS loan has been eliminated?

SCI-Arc is working on expanding our list of private, or alternative, lenders. For more information on loan options, please visit SCI-Arc’s Recommended Lender List.

When should I apply for a private or alternative loan?

You should apply for a private student loan after you complete the FAFSA and receive your financial aid offer, but before your bill is due for the term you need funding. Generally, applying four to six weeks before the payment deadline is a good rule of thumb.

Is there anything I can do before applying for a private loan?

The best way to prepare is to check your credit. Private lenders base approval and interest rates on creditworthiness. Reviewing your credit report ahead of time can help avoid surprises. Go to AnnualCreditReport.com and request a free credit report from TransUnion, Experian, and Equifax.

Determine how much you need to borrow. Borrow only what’s necessary to cover your remaining balance and related educational expenses associated with your cost of attendance.

Review SCI-Arc’s Preferred Lender List to compare lenders and loan terms. Look for the lowest interest rates, flexible repayment options, and borrower benefits such as autopay discounts or cosigner release.

Where can I find more information?

You can visit the Federal Student Aid website or the One Big Beautiful Bill Act for updates and information from the Department of Education.