Please note that the Department of Education must make system updates and publish guidance on the changes.
By Rick Cox and Siobahn Arbogast
The Reconciliation Bill has now been passed to go into effect July 1, 2026. Please note that the Department of Education must make system updates and publish guidance on the changes. Once the department has completed these steps, Global will address all process changes for our clients. We will also share information we have with the financial aid community.
Below is a synopsis of the bill and how it affects the higher education community.
- Grad PLUS will be eliminated for any new graduate or professional student borrowers beginning July 1, 2026.
- There will be exceptions on the new loan provisions (annual limits, elimination of PLUS, etc.) for students who were already in school as of June 30, 2026, AND have already received these loans. This exception will be the lesser of:
Three years; or
The period determined by calculating the difference between:
— The length of the program; and
— The period of the program that has been completed as of July 1, 2026 - The Parent Plus loan annual limit will be $20,000.
- The annual limit for graduate students will be $20,500.
- The annual limit for professional students will be $50,000.
- The aggregate limit for graduate students (not professional students) will be $100,000.
— This limit applies if they are enrolling in a graduate degree program and have not been previously enrolled in a program as a professional student as of July 1, 2026. - The aggregate limit will be $200,000 for professional students.
— This does not include any amounts borrowed as an undergraduate.
–Additionally, borrowers who are both graduate and professional students at some point in their education may only borrow up to $200,000 total for graduate and professional school. - The lifetime aggregate limit for all students is being increased to $257,500 beginning July 1, 2026.
- Loan amounts will be prorated for less than full-time enrollment based on enrollment intensity.
- Parent PLUS loans will have an aggregate limit of $65,000 (per student) regardless of any loans that have been repaid, forgiven, cancelled or discharged beginning July 1, 2026.
- Beginning July 1, 2026, colleges (at the discretion of the Financial Aid Administrator) may limit the total amount a student or parent may borrow for an academic year for that particular program of study. This limitation must apply consistently to all students enrolled in that program.
Two Repayment Plans in Effect July 1, 2026 - Effective July 1, 2026, there will only be two repayment plans:
1. A standard repayment plan with a fixed monthly repayment amount:
— The period is 10 years if the outstanding principal balance is less than $25,000;
— There is a period of 15 years for an outstanding principal balance of at least $25,000 but less than $50,000;
— Twenty years if the outstanding principal balance is at least $50,000 but less than $100,000; and
— Twenty-five years if the outstanding principal balance is $100,000 or more.
2. Income-based Repayment Assistance Plan:
— Minimum monthly payments will be at least $10 for 30 years.
- If a borrower does not choose a repayment plan, they will be assigned to the standard repayment plan.
- A borrower can switch between repayment plans at any time.
- For borrowers with Parent PLUS loans received on or after July 1, 2026, they are required to repay under a standard repayment plan.
- Economic Hardship and Unemployment forbearances will be eliminated beginning July 1, 2026.
- Forbearances will be reduced to a limit of nine months during any 24-month period.
- Loan Rehabilitation is currently limited to one time. Borrowers will now be allowed two opportunities to rehabilitate their loans but with a minimum payment amount of $10 beginning July 1, 2027.
Factors in Direct Loan and Pell Eligibility - The bill creates an accountability measure that will cause a program to lose eligibility for Direct Loans if it fails the low earnings measure for two out of three years.
— For undergraduate programs, the earnings measure compares the median earnings for completers four years after program completion with the earnings of working adults with only a high school diploma or GED;
— For graduate programs, the comparison will be the median earnings four years post-enrollment with the earnings of working adults with only a bachelor’s degree that are not enrolled in higher education;
— If a program fails the measure, a warning must be provided to students notifying them that the program could lose eligibility. - In determining eligibility for Pell Grants only, the Adjusted Gross Income to be used for the student or parent will be the AGI plus any foreign income.
- Pell Grants can no longer be awarded to students if they received other grants and/or scholarships equal to or greater than their Cost of Attendance.
Specifics for Pell and Workforce Pell Guidelines - The 2026 Pell budget will be increased by $10.5 billion to account for the current shortfall.
- Family-owned small businesses, family farms and family-owned commercial fisheries will be excluded from assets for the purpose of calculating the Student Aid Index.
- If a student’s calculated SAI is more than twice the maximum Pell Grant award, the student cannot receive a Pell Grant.
- Workforce Pell Grants will allow Pell Grants to be awarded to short-term programs that are at least 150 clock hours but less than 600 and contain at least eight weeks but less than 15. Currently, short-term programs are only eligible for Direct Loan. Eligibility for the Workforce Pell Grant is the same as Pell. The only difference is that it’s awarded for a short-term program. If a student is eligible for less than the minimum Pell Grant because they are enrolled in a Workforce Program that is less than an academic year, the student can receive a prorated amount of the award. These programs must meet certain criteria to qualify under this new provision, including:
— Must lead to a portable, stackable credential across more than one employer or prepare students for entry-level employment for which there is only one recognized post-secondary credential;
–The program must be approved by the state governor as aligned with in-demand jobs and meeting employers’ needs;
— Must have been offered by the institution for at least one year and meet performance benchmarks, including having at least a 70 percent completion and placement rate;
— The program cost cannot exceed the value-added earnings of students who completed the program three years prior;
— Credits must be allowed to transfer into future degree programs; and
— Remedial, non-credit, ES, and study abroad are not eligible under this provision. - Delays the implementation of the 2022 Borrower Defense to Repayment regulations until July 1, 2035.
- Delays the implementation of the 2022 Closed School Discharge regulations until July 1, 2035.
- The bill creates a graduated investment income excise tax rate based on the student’s per-student endowment. This will only apply to private institutions and is applicable to tax years beginning after December 31, 2025.You can access the entire bill here.
Rick Cox is Global’s Executive Director of Regulatory Affairs and Compliance. Siobahn Arbogast is Global’s Director of Title IV Accounting.
July 18, 2025
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