Upcoming Changes to Federal Student Aid: What Students and Families Need to Know

The Budget Reconciliation Act (H.R. 1), formerly named the One Big Beautiful Bill Act (OBBB), was signed into law on July 4, 2025, and introduces significant changes to federal student aid programs.

These updates affect loan limits, repayment plans, and eligibility rules, and will be phased in starting July 1, 2026, with some provisions already in effect. 

What does this mean for you? Whether you're a current student, a parent, a recent graduate or former student, these changes may impact how you apply for aid, borrow, and repay student loans. 

UVM is closely monitoring guidance from the U.S. Department of Education and will continue to update this page as more details become available. 

Please stay alert to communications from your loan servicer. 

For Parents of Dependent Students

What are the new limits for Parent PLUS Loans?
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Starting July 1, 2026, Parent PLUS loans will be capped at:

  • $20,000 per year per dependent student
  • $65,000 lifetime limit per dependent student
  • These limits apply regardless of forgiveness, repayment, or discharge status

For Current Students

Are there any changes to FAFSA and Pell Grant eligibility?
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Yes. Starting with the 2026-27 FAFSA cycle:

  • Family farms, small businesses, and fisheries will be excluded from asset calculations
  • Pell Grant eligibility will be denied to students whose Student Aid Index (SAI) exceeds twice the maximum Pell award
  • Foreign earned income exclusion which previously reduced taxable income for U.S. citizens and permanent residents working abroad must now be added back to the Adjusted Gross Income (AGI) when determining Pell Grant eligibility.

Are there changes to graduate and professional student loans?
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Yes. The Grad PLUS Loan program will be eliminated starting July 1, 2026. There will be legacy provisions introduced for existing borrowers, full details are not yet available.

New borrowing limits will be:

  • $20,500/year and $100,000 lifetime for graduate students
  • $50,000/year and $200,000 lifetime for professional students (e.g., medical, law)

For Graduating or Former Students

What are the changes in loan repayment and loan forgiveness programs?
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Federal student loan repayment and forgiveness programs will be phasing out by July 2028, including SAVE, PAYE, IBR, and ICR. While the legislation outlines new options such as the Repayment Assistance Plan (RAP) and modifies IBR plans, many details remain uncertain. 

Borrowers are advised to stay connected with their loan servicer and monitor updates from the U.S. Department of Education as implementation evolves.