New Federal Student Loan Caps and Pell Grant Changes Take Effect in 2026 Under One Big Beautiful Bill Act

The One Big Beautiful Bill Act, signed into law by President Trump in 2025, imposes new annual and lifetime caps on federal student loans beginning July 1, 2026. Parent PLUS borrowers will be limited to $20,000 per year and $65,000 total per student. Graduate students face a $20,500 annual cap and a $100,000 total cap per degree.

Students in professional programs such as medicine, law, pharmacy, veterinary medicine, chiropractic, optometry, osteopathic medicine, podiatry, theology and clinical psychology will be restricted to $50,000 per year and $200,000 total. New borrowers after July 1, 2026, will lose access to Graduate PLUS loans. Current Grad PLUS borrowers will retain eligibility.

The Education Department stated that anyone receiving a federal loan on or after that date will face a lifetime cap of $257,500, excluding a few carveouts. Winston Berkman-Breen, legal director of Protect Borrowers, said the limit applies per borrower across undergraduate and graduate programs.

The Education Department reported that 95% of nursing students will not be affected by the borrowing caps.

9 trillion in outstanding student debt, according to LendingTree. New borrowers will have only two repayment options: the Tiered Standard Plan and the Repayment Assistance Plan. Borrowers who already hold loans and take out an additional loan after July 1, 2026, must repay all federal loans under one of the two new plans once repayment begins.

Current borrowers who do not take new loans may continue using the Standard, Extended, Graduated, Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment plans. The One Big Beautiful Bill Act phases out the Pay As You Earn and Income-Contingent Repayment plans by July 1, 2028. Borrowers enrolled in those plans must switch to another option by that date.

Sarah Austin, a policy analyst at the National Association of Student Financial Aid Administrators, said affected borrowers could choose from the remaining existing plans or enroll in the Repayment Assistance Plan after July 1, 2026, but would not qualify for the Tiered Standard Plan.

The SAVE plan will sunset in July 2028. 2 million SAVE enrollees around July 1, 2026, that they must select a new repayment plan within 90 days.

Austin said borrowers who take no action will be placed automatically into the standard plan. Loan payments for SAVE participants have been paused for two years. The law also alters Pell Grant rules.

Students who receive non-federal grants or scholarships that meet or exceed their cost of attendance will no longer qualify for additional Pell funding. The measure closes the provision that allowed students with low reported income but high assets to receive grants.

It expands eligibility to shorter-term workforce programs in fields such as nursing assistance, early childhood education and automotive mechanics.

Beginning July 1, 2026, students may receive Pell Grants for enrollment in high-quality, short-term programs that prepare them for high-skill, high-wage, in-demand jobs, the Education Department said. Austin described the borrowing and repayment changes as the most significant shift in federal student aid policy in many years.