Federal Loan Changes 2026-2027
Federal Loan Changes Effective for the 2026-27 School Year
The One Big Beautiful Bill Act (OBBBA or OB3), passed in July 2025, made significant changes to federal student and parent loan regulations, and the legislation is slated to go into effect for the 2026-27 academic year. Seton Hill University’s financial aid office is providing the following information on these changes in order to help students and families plan their financial future. The information provided reflects our current interpretation of federal loan regulations - but is not an official or binding statement of policy.
Seton Hill will continue to update this page as additional information from the federal government is released.
Students and families are urged to consult the U.S. Department of Education’s official publications and website (studentaid.gov) for definitive guidance.
Overview of Federal Loan Changes
- There are no changes stemming from this legislation to financial aid for the 2025–26 academic year.
- There are no changes to annual undergraduate student loan amounts or undergraduate aggregate loan limits.
- For new parent borrowers, Parent PLUS loans will be capped at $20,000 per student per year, with a $65,000 lifetime limit per dependent student.
- If the student or parent borrower has a Federal Direct Loan made before July 1, 2026, the parent can continue to borrow Parent PLUS Loan for up to the remaining cost of attendance for three academic years or the remainder of the student’s expected time to credential, whichever is less.
- The Unsubsidized Direct Loan program for all graduate students will continue, but with new loan limits for certain borrowers.
- The Graduate PLUS Loan program is not available to borrowers enrolling in new programs for the 2026-27 academic year and beyond.
- Students enrolled in graduate school before July 1, 2026, may still be eligible for Graduate PLUS Loan under current rules.
- There are no changes to undergraduate student loan limits, and undergraduate student loans do not count toward the new lifetime graduate and professional limits.
- Starting July 1, 2026 for new borrowers, Parent PLUS loans will be capped at $20,000 per student per year, with a $65,000 lifetime limit per dependent student.
- Existing Parent PLUS borrowers who have borrowed for their students before July 1, 2026, can continue with the current limits (up to the cost of attendance, minus other financial aid) for three more years or until the student’s program ends.
- Changing majors does not affect Parent PLUS Loan eligibility. An undergraduate student who changes majors within the same degree or certificate is considered enrolled in the same program of study.
- Graduate PLUS loans will be phased out beginning on July 1, 2026; as of that date, loans will not be available to new borrowers.
- There will be some continuing eligibility for existing Graduate PLUS borrowers as they complete their current programs.
- If a borrower has a Federal Loan made before July 1, 2026, while enrolled in a program of study, the borrower can continue to borrow both the UNSUBSIDIZED Direct and Graduate PLUS loans for three academic years or the remainder of their expected time to credential, whichever is less.
- Professional programs (e.g., medicine and law):
- Up to $50,000/year, $200,000 lifetime borrowing limit and does not include amounts borrowed as an undergraduate.
- Other graduate programs:
- Up to $20,500/year, $100,000 lifetime borrowing limit and does not include amounts borrowed as an undergraduate.
- New 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.
- Definitions of “professional” vs. “graduate” programs are defined by federal regulation (see below).
- Borrowers with Federal Direct Loans made prior to July 1, 2026 may be eligible for higher prior Unsubsidized Direct Loan annual and aggregate amounts until completing their current program or for three additional years, whichever is less.
While the underlying concept of a professional program is not new, the creation of loan limits based on whether a program is professional versus graduate level is new. The law and accompanying regulations define what is considered professional for these new loan limits. Professional programs are largely limited to those that offer the following degrees:
- Pharmacy (Pharm.D.)
- Dentistry (D.D.S. or D.M.D.)
- Veterinary Medicine (D.V.M.)
- Chiropractic (D.C. or D.C.M.)
- Law (L.L.B. or J.D.)
- Medicine (M.D.)
- Optometry (O.D.)
- Osteopathic Medicine (D.O.)
- Podiatry (D.P.M., D.P., or Pod.D.)
- Clinical Psychology (Psy.D. or Ph.D.)
- Theology (M.Div., or M.H.L.)
- Students who borrow any Direct Loan or Graduate PLUS Loan before July 1, 2026 will remain eligible for Graduate PLUS Loan under the “up to three academic years or until program completion” rule—as long as they stay enrolled in the same graduate program at the same school where the original pre‑July 1, 2026 loan was disbursed.
- Current students who remain eligible for Graduate PLUS Loans after July 1, 2026, cannot choose to decline Graduate PLUS Loan to access the new $50,000 Unsubsidized Direct Loan cap.
- The bill includes a provision to prorate undergraduate and graduate loan amounts based on enrollment.
- Half-time students (e.g., as defined by each program) would only be eligible for a portion of the annual loan limit.
- Students enrolled less than half-time (part-time) are not eligible for federal student loans.
- Loan proration applies to both borrowers under the pre-July 1, 2026, legacy provisions (limited exceptions) and new borrowers on or after July 1, 2026.
- Further guidance regarding loan proration will be forthcoming from the Department of Education.
- For borrowers with all loans disbursed on or after July 1, 2026, the bill eliminates the income-driven repayment plans (IBR, PAYE, SAVE) and replaces them with a new Repayment Assistance Program (RAP).
- Students who borrowed loans before July 1, 2026, and borrow again after July 1, 2026, are limited to the new RAP or the standard plans. All loans must be paid under the same repayment plan.
- RAP borrowers will not be locked into a 30-year plan. They can switch to a standard plan, which ranges from 10 to 25 years.
- Borrowers with no new loans made on or after July 1, 2026, are eligible to enroll in the current Standard Income Based (IBR), Graduated, and Extended repayment plans, and could also opt in to the new RAP.
- Borrowers enrolled in ICR, PAYE, or SAVE plans must transition to a new repayment plan by July 1, 2028. If no selection is made by that date, they will be moved into RAP.
We're Here to Help!
Call or email any time to get answers to questions about costs, enrollment or financial aid: HelpFinReg@setonhill.edu or (724) 830-1010.