Federal Financial Aid Update

Recently, Congress passed the One Big Beautiful Bill Act (OBBBA). This federal legislation introduces major updates to federal student aid, loan limits, and repayment structures. For most students, these policies officially go into effect for the 2026–27 academic year.

Changes to Federal Student & Parent Loans

The OBBBA introduces new annual and lifetime caps on federal loans, but most current students who remain continuously enrolled are protected by legacy "grandfathering" provisions.

For Graduate Students

Grad PLUS Phase-Out: The Graduate PLUS loan program is being eliminated. Graduate students will primarily utilize the Federal Unsubsidized Loan program.

New Limits: Annual unsubsidized loan limits for graduate students are capped at $20,500 ($50,000 for professional students), with a lifetime aggregate borrowing limit of $100,000 ($200,000 for professional students).

The "Grandfather" Safe Harbor: If you were enrolled in your graduate program as of June 30, 2026, have remained continuously enrolled, and received a Direct Loan for that program before July 1, 2026, you are exempt from the new loan caps and the Grad PLUS elimination for up to three academic years (or until you complete your credential, whichever is less).

For Undergraduate Families (Parent PLUS)

New Limits: Parent PLUS borrowing is capped at $20,000 annually per dependent student, with a lifetime aggregate limit of $65,000 per dependent student.

The "Grandfather" Safe Harbor: Parents are exempt from these new PLUS limits if the student remains continuously enrolled in the same program they were in as of June 30, 2026, and either the parent had a Parent PLUS loan disbursed or the student had a Direct Loan disbursed for that program before July 1, 2026 (valid for up to three academic years or until credential completion).

Lifetime Student Cap

The Limit: A new lifetime aggregate limit of $257,500 has been established for all Federal Direct student loans (excluding Parent PLUS) across all levels of undergraduate and graduate study combined.

The Safe Harbor: Students enrolled as of June 30, 2026, who had a Direct Loan disbursed before July 1, 2026, and remain continuously enrolled are exempt from this limit for up to three academic years.

Loan Adjustments for Part-Time Enrollment (SOR)

The Change: Federal student loans (excluding Parent PLUS) must now be prorated in direct proportion to your exact enrollment intensity.

The Impact: Your loan amounts will scale based on whether you are full-time, three-quarter-time, or half-time (e.g., 50% eligibility if you are registered half-time).

Note: Dropping a class after your fall loans disburse won't change your fall payout, but it will reduce your annual eligibility, meaning we will have to adjust your spring loan disbursement downward. Always speak with Student Financial Services before dropping a course!

A New Student Loan Repayment Landscape

For students entering repayment on or after July 1, 2026, the federal government is simplifying repayment options down to two primary plans:

The Tiered Standard Repayment Plan: A fixed monthly payment plan spread over 10, 15, 20, or 25 years based entirely on your total outstanding loan balance.

The Repayment Assistance Plan (RAP): A new income-driven repayment plan where monthly payments are calculated at 1% to 10% of your Adjusted Gross Income (AGI), with a $10 minimum monthly payment. RAP also features a 30-year forgiveness timeline and fully eliminates negative amortization (meaning unpaid interest won't pile up on your principal).

What About Current Borrowers? If you already have federal loans and do not take out any new loans on or after July 1, 2026, you can choose to remain on your existing Standard, Graduated, Extended, or Income-Based Repayment (IBR) plans, or opt into the new RAP.

Note: Older Income-Contingent Repayment plans (including ICR, PAYE, and SAVE) are scheduled to be fully phased out by July 1, 2028, at which point remaining borrowers will transition into RAP or IBR.

We’re Here to Help Keep Your Balance Manageable

While these federal updates represent a significant shift, your access to an affordable education at MCLA is our priority.

Every student’s financial plan is different. If you want to review how these new limits, grandfathering rules, or enrollment proration rules affect your account, please stop by or contact the Student Financial Services team. We are happy to walk you through your options!