Federal Education Loan Changes for 2026–27 and Beyond

As a result of the One Big Beautiful Bill Act (OB3 or OBBBA), sometimes also referred to as the "Working Families Tax Cuts" Act, beginning July 1, 2026 there are significant changes to the federal student loan programs and other federal student aid policies for the 2026-27 academic year and beyond.

Graduate Direct Loans

  • Starting July 1, 2026, graduate students who have not already borrowed for their current degree program will be subject to a new $100,000 graduate level borrowing limit. The annual borrowing limit for unsubsidized loans is staying the same at $20,500. At Stanford, students working toward MD, JD and MSPA degrees meet the criteria for a new “professional” category and are now eligible to borrow up to $50,000 annually and have a $200,000 graduate level borrowing limit.

  • The Graduate PLUS loan program has been eliminated as of July 1, 2026. The law allows some students to continue borrowing from the Graduate PLUS program without being subject to the new aggregate and lifetime borrowing limits under a limited exception through their time to completion, for a maximum of three years.

  • Students may qualify for the limited exception if:
    • They remain continuously enrolled in the same program of study at the same institution as they were enrolled in as of June 30, 2026 (summer breaks are ok), AND
    • They had a Direct Loan disbursed (Direct Subsidized or Unsubsidized or Graduate PLUS) for that same program before July 1, 2026

Undergraduate Subsidized/Unsubsidized Direct Loans

  • Annual and aggregate borrowing limits will stay the same.

Parent PLUS Loans

  • Starting July 1, 2026, parent PLUS loans will be capped at $20,000 per undergraduate student per academic year, with a lifetime limit of $65,000 per student.

  • Parent PLUS borrowers who have borrowed for their students before July 1, 2026, can continue under the old borrowing limits until the student’s degree program ends or June 30, 2029, whichever comes first.

Loan Proration

  • OBBBA includes a provision to prorate loan amounts based on enrollment level. Part-time students (e.g., those enrolled less than full-time) will only be eligible for a portion of the annual loan limit. Borrowers who are considering dropping a class that will create less than full-time enrollment are encouraged to discuss their situation with the Financial Aid Office.

New Repayment Plans

Federal Direct loans with a first disbursement date on or after July 1, 2026 are eligible for only two repayment plans: a restructured Standard repayment plan with a repayment period ranging from 10 to 25 years, or a new income-driven Repayment Assistance Plan (RAP) with a 30-year repayment period. This applies to first-time Direct loan borrowers as well as those who have already borrowed for their current programs.

Borrowers with no new loans made on or after July 1, 2026, can continue to be eligible to enroll in the current Standard, current Income Based (IBR), Graduated, and Extended repayment plans, and could also opt in to the new RAP. Current 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.

Students who borrow a new federal Direct Loan on or after July 1, 2026, will be eligible for only two repayment plans:

  1. Tiered Standard Repayment
    • Fixed monthly payments
    • Repayment term lengths range from 10 to 25 years, depending on the amount borrowed.

  2. Repayment Assistance Plan (RAP)
    • Monthly payments based on income
    • Loan forgiveness after 30 years of repayment
    • Is a qualifying plan for Public Service Loan Forgiveness

Students who do not borrow a new federal Direct Loan on or after July 1, 2026, may continue to access current repayment options, including:

  • Standard (10-year), Graduated, or Extended Repayment
  • Income-Based Repayment (IBR)
  • Pay As You Earn (PAYE)*
  • Income-Contingent Repayment (ICR)*
  • They may also access the new Repayment Assistance Plan (RAP)

 *The law sunsets the PAYE and ICR plans effective July 1, 2028. Borrowers who enroll in PAYE or ICR must switch to any of the other eligible plans listed before July 1, 2028, or they will be automatically moved into RAP. Eligible borrowers must enroll in PAYE before July 1, 2027 due to actions related to the Saving on a Valuable Education (SAVE) plan litigation. This action is separate from OBBBA repayment changes. Borrowers enrolled before July 1, 2027 may remain in PAYE through June 30, 2028. Learn more.
All federal loans must be repaid using the same repayment plan. Students with older loans (borrowed before July 1, 2026) who take out new loans on or after that date will have to repay their loans under one of the two repayment options described above.

Pell Grant Eligibility Changes

  • The loophole that allowed students and families with low income but significant assets to receive Pell Grants has been closed. (Stanford will continue to meet full need for undergraduates, using institutional funds if necessary.)

  • Students who receive grants of scholarships from non-federal sources (institutional, state or private) that cover their entire cost of attendance are ineligible to receive a Pell Grant, even if otherwise eligible for the program.
    • We still encourage full-ride athletes to submit their FAFSA to demonstrate need for other programs.
Updated on July 28, 2026 4:05 PM