Parent PLUS and Grad PLUS Loan Changes Now Law
The One Big Beautiful Bill Act, signed into law by President Trump on July 4, includes major changes to federal student aid, college accountability, and higher education funding.
If you’re a parent of a college-bound student, an undergraduate already in school, a graduate student, or a school administrator, here’s what you need to know—and how to prepare.
For Parents of College-Bound Students
The biggest change affecting parents is a limit on how much they can borrow through the Parent PLUS loan program. But there are also important exceptions and deadlines to know that could help protect your ability to pay for college without a major disruption.
Parent Plus Loan Changes
What to do now: If you plan to use Parent PLUS loans, take your first loan before July 1, 2026, to lock in the old borrowing rules for three more years. Also, make sure to consolidate and enroll in an IDR plan on time to keep flexible repayment options. However, parents of students starting college in fall of 2026 won’t have that option since those loans will disburse after the cutoff date of July 1, 2026. They will fall under the new loan caps and other new rules.For Undergraduate Students
The bill also brings major changes to Pell Grants, which are federal grants that help lower-income students pay for college. The new Pell Grant rules, which take effect in the 2026-27 academic year, tighten eligibility and change how much aid you receive depending on your class load.
Pell Grant Changes
| New Rule | Why It Matters |
|---|---|
| Students with a Student Aid Index (SAI) greater than twice the maximum Pell amount will no longer qualify. | Middle-income students may lose access to Pell under this new cutoff. |
| Students receiving scholarships that cover the full cost of attendance are no longer eligible for Pell Grants. | This mainly impacts students who receive high-paying athletic scholarships. |
| A new “Workforce Pell” program will allow students to use Pell Grants for short-term, skills-based training programs (150–600 hours) that meet job and wage standards. | If college isn’t the right fit, this creates another path to use federal money for in-demand career training. |
What to do now: As is currently required, make sure you plan to enroll in at least 12 credits per semester to get the full Pell Grant. If you’re considering dropping below half-time, talk to your financial aid office first—you could lose your Pell eligibility completely.
For Graduate and Professional Students
If you’re thinking about grad school, the federal loan landscape is about to change dramatically. The government is eliminating a major loan option, Grad Plus Loans, and putting hard limits on how much you can borrow overall. The changes take place for the 2026-27 academic year.
What’s Changing for Grad Students
| Federal Loan Type (after July 1, 2026) | Annual Limit | Lifetime Limit |
|---|---|---|
| Direct Unsubsidized (Stafford) | $20,500 | Counts toward cap |
| Grad PLUS | Eliminated | – |
| Total federal borrowing cap | – | $100,000 (graduate degrees), $200,000 (professional degrees like MD, JD, DDS) |
With Grad PLUS loans gone, students will no longer be able to borrow the full cost of attendance using federal loans. If your program costs more than what Direct Unsubsidized Loans cover, you’ll need other sources.
What can you use instead?
- Private graduate student loans
- Assistantships or fellowships
- Tuition payment plans
- Employer tuition assistance
What to do now: Review the cost of your program, estimate how much you can borrow through federal loans, and explore private or school-based options early.
For Colleges and Universities
Colleges aren’t left out of this bill either. The legislation introduces new financial penalties and performance measures that could affect how schools structure their programs.
Key changes schools must prepare for:
- Endowment tax increases: Colleges with large endowments will pay a tax on investment earnings, with rates ranging from 1.4% to 8%.
- Accountability rules: Any academic program whose graduates earn less than high school graduates for two of the past three years could lose access to federal aid.
- Transparency requirements: Colleges will be required to publish more financial data about costs, aid, and graduate earnings.
What this means: Some schools may cut programs with weak job outcomes, reduce financial aid, or adjust tuition. Families should pay close attention to program-level outcomes when choosing a major or school.
Action Steps for Families Planning for College
The “One Big Beautiful Bill” brings major shifts to how college is paid for and who qualifies for what aid. The best way to prepare is to start planning now: check your credit load, watch deadlines, lock in grandfathered loan terms if possible, and explore new sources of funding before you need them.
| Group | Action Steps |
|---|---|
| Parents | Borrow at least once before July 1, 2026 to lock in old PLUS rules for 3 more years. Consolidate and enroll in an IDR plan by July 1, 2028 to keep flexible repayment. |
| Undergraduates | Enroll in 15+ credits per semester for full Pell aid. Avoid going below half-time to retain Pell eligibility. |
| Graduate Students | Plan around the $20.5K/year cap and total lifetime limits. Research private loans and institutional aid early. |
| Colleges | Prepare for accountability rules and funding changes. Monitor program earnings outcomes to protect federal funding. |
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