FSA Updates

Earlier versions of the bill proposed changing the defi­nition of full-time enrollment for Pell eligibility, as well as eliminating Pell eligibility for less-than-half-time enrollment. These provisions were not included in the ­final legislation.

An earlier version of the bill proposed eliminating the subsidized loan programs. This provision was not included in the final legislation.

Requires institutions to prorate annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.

Semester loan amounts will be based on enrolled hrs. Changes in enrollment may result in reductions in loan award amounts in current or future semesters.

ED officials indicated during negotiated rulemaking that they intend for this provision to be effective for loans made for the 2026-27 award year.

Legacy Provision: If a borrower has a Federal Direct Loan made before July 1, 2026, while enrolled in and remains in the same program of study, the borrower can continue to borrow from the program for 3 academic years or the remainder of their expected time to credential, whichever is less.

Effective July 1, 2026

Legacy Provision: If the student or parent borrower has a Federal Direct Loan made before July 1, 2026, while the dependent student is enrolled in a program of study, 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 credential, whichever is less.

Effective July 1, 2026

Caps the annual loan limits at $20,500 for graduate students and $50,000 for professional students. The aggregate limit is capped at $100,000 for graduate students and $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 Federal Direct Loan made before July 1, 2026, while enrolled in and remains in the same program of study, the current loan limits continue to apply” for 3 academic years or the remainder of their expected time to credential, whichever is less.

A professional student is a student enrolled in a program of study that awards a professional degree upon completion of the program.

For a definition of a professional student visit https://www.nasfaa.org/ob3

Effective July 1, 2026

$257,500 lifetime borrowing limit on all federal student loans, excluding Parent Plus and Graduate Plus loans.

Legacy Provision: If a borrower has a Federal Direct 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.

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.

Effective July 1, 2026

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 may also switch between, enter or remain on existing IDR plans until July 1, 2028.

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.

Effective July 1, 2026 & July 8, 2028

Creation of new IBR plan called the Repayment Assistance Plan (RAP). If married filing separately, spouse’s AGI and number of dependents are not included in the payment calculation. $10 minimum payment. Monthly payment is 1-10% of income based on AGI. $50 off monthly payment (base payment) per dependent. 30-year repayment period. Eliminates negative amortization. No cap on monthly payment, even if it’s higher than the standard repayment plan would be. If a borrower makes an on-time payment that reduces their principal by less than $50, ED will make a payment to the principal, up to the amount paid, minus what was applied to the principal or $50, whichever is less.

After all current borrowers move out of all other current IDR or Standards 
plans, they will be sunset.

Effective July 1, 2026

Removes the requirement for borrowers to demonstrate a partial financial hardship.  Retains cancellation for balances of loans repaid under IBR at 25 years, or 20 years for new borrowers. Allows for covered income contingent loans to be repaid 
under IBR.

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).

Effective July 1, 2026

Consolidation loans made on or after July 1, 2026, are only eligible for the RAP or 
standard repayment plans. 
A consolidation loan (subsidized or unsubsidized) taken out by a borrower before 
July 1, 2026, is treated like any other eligible loan. Borrowers currently in an IDR 
plan have until July 1, 2028, to select a standard plan, IBR, or RAP.

If the consolidation loan was used to pay off a Parent Plus loan, the borrower must enroll in ICR and make at least one payment under ICR before July 1, 2028 in order to be eligible for IBR when ICR is sunset.

If the borrower takes no action by that date, all eligible loans will be automatically moved to RAP, and any loans not eligible for RAP will be placed into IBR.

All new Parent PLUS loans from July 1, 2026 on must be repaid under the standard repayment plan, they are not eligible for RAP. If a borrower chooses RAP, but has a loan that is not eligible for RAP (like Parent PLUS and certain consolidated loans) they must repay the ineligible loan/s separately.

For borrowers who had borrowed Parent PLUS before July 1, 2026, and subsequently borrowed from the program on or after July 1, 2026, repayment for all loans must be under the same repayment plan, of which the only eligible plan for Parent PLUS borrowers is the standard plan.

Effective July 1, 2026

Borrowers can rehabilitate a defaulted loan twice, instead of once as currently 
allowed. The minimum rehab payment for Direct Loans changes to $10.

Effective July 1, 2027

Sunsets the economic hardship and unemployment deferments.

Borrowers with loans made on or before July 1, 2027, are still able to use these deferment options under the current rules. Once all borrower’s loans made prior to that date are paid in full, these options will cease to exist.

Effective July 1, 2027

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

Current rules allow for a forbearance up to 12 months at a time, with a 
cumulative limit of three years.

Effective July 1, 2027