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Federal Loan Changes

Key Changes to Federal Student Loans as a result of the One Big Beautiful Bill Act signed into law on July 4, 2025

Enacted on July 4, 2025, the One Big Beautiful Bill Act (OBBB) made significant changes in federal student loan programs. While there are no changes to federal student loans for the 2025–26 academic year, changes resulting from the legislation are slated for July 1, 2026.

Continuing students will be considered Legacy Borrowers if they have borrowed any Federal Direct Loan before July 1, 2026 and have remained continuously enrolled in the same program at the same school for which they borrowed a federal direct loan prior to July 1, 2026. A Legacy Borrower will remain in that status for up to three academic years or until the completion of their degree program (whichever is earlier). Continuing students who are considered Legacy Borrowers cannot opt out of this classification.

Federal Direct Loan Limits for Legacy Borrowers

  • Graduate and Professional programs:
    • Annual limit: Federal Direct Unsubsidized Loan of up to $20,500 per academic year (if enrolled full-time*) and Federal Direct Graduate PLUS Loan up to Cost of Attendance
  • Aggregate Limit on all Federal Loans
    • $138,500 aggregate limit on on federal loans (undergraduate and graduate/professional; including Federal Direct Subsidized Loans and Federal Direct Unsubsidized Loans, excluding Federal Direct Graduate PLUS Loans).

Federal Direct Loan Limits for New Borrowers on or after July 1, 2026

  • Professional programs (see definition below):
    • Annual limit: Federal Direct Unsubsidized Loan of up to $50,000 per academic year (if enrolled full-time*)
    • Aggregate maximum: $200,000 for loans borrowed as a graduate or professional student while seeking a graduate or professional degree.
  • Graduate programs:
    • Annual limit: Federal Direct Unsubsidized Loan of up to $20,500 per academic year (if enrolled full-time*)
    • Aggregate maximum: $100,000 for loans borrowed as a graduate student while seeking a graduate degree.
  • New Lifetime Limit on all Federal Loans
    • $257,500 borrowing cap on all federal loans (undergraduate and graduate/professional; including Federal Direct Subsidized Loans and Federal Direct Unsubsidized Loans, excluding Federal Direct Graduate PLUS Loans).

Definition of a Professional Degree Program

  • A degree program that signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor’s degree;
  • Is generally at the doctoral level, and that requires at least six academic years of postsecondary education course work for completion, including at least two years of post-baccalaureate level coursework;
  • Generally requires professional licensure to begin practice.
  • The St. Thomas programs determined to be considered professional degree programs include Law (JD), Theology (M.Div), and Psychology (PsyD).

*Full-Time Enrollment Definition

  • Law/JD
    • Fall and Spring: 12 or more credits per term
    • Summer: 6 or more credits per term
  • All Other Graduate and Professional Programs
    • Fall, J-term and Spring (combined), and Summer: 6 or more credits per term

*Loan Proration for Part-Time Students

  • Part-time graduate and professional students (e.g., those enrolled less than full-time in a given term) would be eligible for a prorated/reduced amount of the annual loan limit.

New Repayment Plans

  • For new loans disbursed after July 1, 2026, the bill eliminates current income-driven repayment plans (IBR, PAYE, SAVE) and replaces them with a new Repayment Assistance Program (RAP).
  • Students who have borrowed loans before July 1, 2026, and will borrow a new loan after July 1, 2026, are limited to the new RAP or the standard plans for the new loan.
  • RAP borrowers will not be locked into a 30-year plan. They can switch to a standard plan, which ranges from 10 to 25 years.
  • Borrowers with no new loans made on or after July 1, 2026, can continue to be eligible to enroll in the current Standard, current Income Based (IBR), Graduated, and Extended repayment plans, and could also opt in to the new RAP. Current borrowers enrolled in ICR, PAYE, or SAVE plans must transition to a new repayment plan by July 1, 2028. If no selection is made by that date, they will be moved into RAP.

Important disclaimer: The information contained on this page is provided by St. Thomas to educate students to the changing landscape of federal student loan programs. While it is based on our good faith understanding of the evolving federal standards, it is not official guidance and should not be regarded by students as definitive. St. Thomas will continue to track all these changes and update this site as more clarification/guidance is released by U.S. Department of Education.