Federal Loan Changes for 2026鈥�27
Legislation recently passed by Congress, known as the One Big Beautiful Bill (OB3) Act, will result in significant modifications to the Federal Direct Loan program beginning with the 2026鈥�2027 academic year (effective July 1, 2026).
These changes primarily affect graduate/professional students, parents of undergraduate students and undergraduate students. You may view the updates and FAQs on their
For Graduate Students
The most significant changes concern the Graduate PLUS Loan program and new lending limits for Direct Unsubsidized Loans.
Elimination of Grad PLUS for New Borrowers
Effective July 1, 2026, the Federal Direct Graduate PLUS Loan program will be eliminated for new borrowers. This means you will no longer be able to borrow up to the full Cost of Attendance (COA) minus other aid using federal loans alone, unless you qualify for the Exception 鈥淟egacy Provision鈥� (see below).
New Loan Limits
The legislation establishes new annual and aggregate (lifetime) limits for Direct Unsubsidized Loans, distinguishing between 鈥淕raduate鈥� and 鈥淧rofessional鈥� students.
- Graduate Students (Master鈥檚, Ph.D., etc.):
- Annual Limit: Remains $20,500.
- Aggregate Limit: Capped at $100,000 (does not include loans borrowed as an undergraduate).
Exception 鈥淟egacy Provision鈥� (Grandfathering)
Graduate and professional students may continue borrowing under the previous federal loan rules鈥攊ncluding eligibility for Graduate PLUS Loans up to the cost of attendance鈥攊f they qualify for the limited exception.
To qualify, a student must meet all of the following requirements:
- The student was enrolled in the program of study by June 30, 2026.
- The student received a federal Direct Loan for that specific program before July 1, 2026.
- The student remains continuously enrolled in the same program at the same institution, including summer based on program length and full-time enrollment requirement.聽
- The student has not exceeded the program鈥檚 expected time to credential.
The limited exception is available only during the student鈥檚 expected time to credential. This period is the shorter of:
- Three academic years; or
- The remaining published length of the student鈥檚 program, based on the portion of the program completed before July 1, 2026.
Changing programs, beginning a new degree, transferring to another institution, failing to maintain continuous enrollment, or exceeding the expected time to credential may cause the student to lose eligibility for the limited exception. Once the exception no longer applies, the student will be subject to the federal loan limits effective July 1, 2026.
For Parents of Undergraduate Students
The Parent PLUS Loan will remain available, but with new 鈥渉ard caps鈥� on borrowing amounts.
New Annual and Lifetime Caps
Starting in the 2026鈥�27 academic year, Parent PLUS Loans will be limited to:
- Annual Limit: $20,000 per student per year.
- Aggregate Limit: $65,000 per student total.
Currently, parents can borrow up to the full Cost of Attendance minus other aid. This new cap means some families may need to seek alternative financing, such as private loans, if their funding gap exceeds $20,000.
Exception 鈥淟egacy Provision鈥� for Parents
Parents may continue to borrow under the current rules (up to the full Cost of Attendance) for up to three additional years or the remainder of the student鈥檚 current program, whichever comes first, if:
- The student they are borrowing for is enrolled in the same program they were attending before July 1, 2026.
- The student borrowed a Direct Loan (or on whose behalf a loan was borrowed) before July 1, 2026.
New Lifetime Borrowing Cap
The legislation introduces a total aggregate lifetime limit of $257,500 for all federal student loans combined. This cap applies to the total outstanding principal balance of all your federal loans (Subsidized, Unsubsidized and Graduate PLUS loans).
Note: This aggregate limit excludes Parent PLUS loans.
Less Than Full-Time Enrollment 鈥擲chedule of Reduction (SOR)
The new law requires annual loan amounts to be updated in direct proportion to your enrollment status. This change is effective with all loans borrowed for the 2026-27 academic year (undergraduate or graduate). Your eligibility will be determined at the time of disbursement based on the number of credit hours a full-time student is expected to take for the academic year. The calculation occurs just before loan disbursement and applies to all student loan borrowers enrolled less than full-time 鈥� undergraduate students with less than 12 hours and graduate students with less than 6 hours.
Note: Any courses that are dropped during the fall semester after the initial fall disbursement must be considered when calculating the remaining eligibility for the spring disbursement.
Undergraduate Student Example
For example, an undergraduate student must take 12 hours per semester for a total of 24 hours per academic year to be considered full time.聽A freshman student enrolled in 6 hours during the fall semester would be eligible for 25% (6/24) of the annual loan limit of $5,500 ($1,375) in the fall semester.聽If this same student enrolled for 9 hours in the spring, the remaining eligibility would be calculated as follows: 6 hours for fall + 9 hours for spring, or 15/24 (63%) of the annual loan limit, minus the $1,375 received in the fall, for a total of $2,090.
Graduate Student Example
For example, a graduate student must enroll in six credit hours per semester, for a total of 18 credit hours per academic year, to be considered full time. A graduate student enrolled in three credit hours during the fall semester would be eligible for 16.67% (3/18) of the annual Direct Unsubsidized Loan limit of $20,500, or approximately $3,417, for the fall semester. If the same student enrolls in six credit hours during the spring semester, the student鈥檚 cumulative eligibility would be calculated using three fall credit hours plus six spring credit hours, for a total of 9/18, or 50%, of the annual loan limit. Fifty percent of $20,500 is $10,250. After subtracting the approximately $3,417 received during the fall semester, the student would have approximately $6,833 in remaining Direct Unsubsidized Loan eligibility for the spring semester.
Pell Grant Eligibility Changes
Beginning with the 2026鈥�27 award year, several new rules will affect eligibility for the Federal Pell Grant. Students whose total non-federal grant/scholarship aid meets or exceeds their full Cost of Attendance (COA) may no longer be eligible for any Pell Grant.
How to Prepare
- Check Your Loan History: Log in to to view your current total loan balance.
- Understand Your Status: Determine if you will likely qualify for the Exception 鈥淟egacy Provision鈥�. If you are currently enrolled and have borrowed federal loans, you generally will.
- Plan for the Gap: If you anticipate your costs will exceed the new federal limits (especially for new graduate students or parents), begin researching private student loan options or preparing personal savings.
Disclaimer
The information provided by The University of West Alabama is intended to orient students to the changing landscape of federal student aid programs. While it is based on our good-faith understanding of the evolving federal standards, students should refer to federal governmental sources for official guidance.