Federal student aid programs are changing in response to the Trump administration’s One Big Beautiful Bill Act (OBBA), which was signed on July 4, 2025. These changes directly affect undergraduate, graduate and professional student borrowers effective July 1, 2026.
The bill affects Pell Grants, federal student loans, loan caps and repayment plans.
Although there is no change in the Pell maximum award — $7,395 — for the 2026-2027 academic year, the bill changes the eligibility criteria for the program.
Students and families with significant assets may no longer be eligible for the Pell Grant. Additionally, students who receive non-federal grants and scholarships that cover the entire cost of attendance (COA) are no longer eligible for the Pell Grant.
The Pell Grant is dependent on the student aid index (SAI), as calculated by the Free Application for Federal Student Aid (FAFSA). Students may receive a maximum Pell, minimum Pell or calculated Pell.
“This change will affect student-athletes on full ride scholarships, as well as other students whose institutional, state and/or private aid meet or exceed full COA,” the National Association of Student Financial Aid Administrators (NASFAA) wrote in a brief.
Additionally, there will be a change in accounting for the inclusion of foreign income when determining Pell eligibility. Though foreign income was previously listed in FAFSA, it is now automated to be included in adjusted gross income (AGI) when determining eligibility, as noted by NASFAA.
The Pell also now expands to optional workforce programs. These are “short-term, career-focused programs” that will support workforce development and “expand Pell eligibility to previously illegible non-traditional educational pathways.”
The Federal Direct Loan Program also faces significant changes, such as new limits starting July 1, 2026. These changes now eliminate the Direct PLUS Loan, referred to as grad PLUS loans, that offered graduate or professional students to borrow “the cost of your education for the academic year, minus any estimated financial aid you receive each academic year” with 8.94% interest. This will be replaced by new unsubsidized Federal Direct Stafford loans.
This loan caps the annual limit at $20,500 for graduate students and $50,000 for professional students. The aggregate limit is $100,000 for graduate students and $200,000 for professional students.
Parent PLUS loans, for dependent undergraduates, also have new limits. “All parents (combined) may borrow $20,000 per year per dependent student and a $65,000 aggregate limit per dependent student (without regard to amounts forgiven, repaid, or discharged),” NASFAA states.
Additionally, there is also a new lifetime federal loan limit for all federal direct loans: $257,500 for all levels of study.
Current Associated Students of UCI (ASUCI) President, Alondra Arevalo, shared her concern about student enrollment in undergraduate and graduate programs with New University via email.
“Graduate PLUS loans is how most low and middle-income students afford graduate programs, so this is definitely going to play a role in how and when students attend post-grad programs,” Arevalo wrote to New University. “On the undergraduate side, I think the changes for part-time students — such as the loan caps — [which] will be a determining factor on if students can remain in school.”
According to the Institute for College Access and Success, undergraduate Pell Grant recipients were more likely to borrow through the Graduate PLUS loan program. And the majority of Pell Grant recipients had an annual family income of $40,000 or less.
There will also be changes to Student Loan Repayment with two eligible loan repayment plans. These include the Repayment Assistance Plan (RAP) and the Tiered Standard Repayment Plan.
RAP is an income-driven repayment plan that requires a $10 monthly minimum payment for incomes of $10,000 or less. For individuals with incomes greater than $10,000, they must pay 1% to 10% of adjusted gross income. Some key features include the elimination of a cap on monthly payment and negative amortization — the increase of the amount a person owes due to their payment not covering interest.
“Unlike existing IDR [income driven repayment] plans, RAP ensures that borrowers who make full, on-time monthly payments will be shielded from runaway interest and are able to make progress toward reducing the principal balance on their loan,” the US Department of Education said in a press release.
The Tiered Standard Repayment Plan requires fixed monthly payments over 10, 15, 20, or 25 years. This is based on “a borrower’s total outstanding loan balance, giving borrowers with higher debt lower monthly payments and more time to repay,” according to the Department of Education.
Arevalo encourages students to reach out for help during this period of change.
“It’s a period of uncertainty, so keep staying informed and always ask for help if you need clarification on anything at all,” Arevalo said.
Ayeza Shaur is a News Intern for the spring 2026 quarter. She can be reached at ashaur@uci.edu.
Edited by Joshua Gonzales