What Does One Big Beautiful Bill Mean for Families?

Originally posted on BrightHorizons.com

• Expanded Eligibility: Pell Grant eligibility now includes students enrolled in short-term job training programs, making workforce education more accessible.
• Maintained Part-Time Eligibility: Traditional Pell Grant eligibility for part-time students remains intact, ensuring that part-time students may still receive financial aid.
• Inflation Adjustments: The maximum Pell Grant award will be indexed to inflation, ensuring that the grant amount keeps pace with rising education costs.

FAFSA 

• Family-Owned Businesses: The bill exempts families who own small businesses, farms, and commercial fisheries from reporting properties and equipment as assets on the FAFSA. The bill also simplifies the needs test by excluding certain assets, such as retirement accounts and assets from small family-owned businesses, farms, and commercial fisheries from the financial aid calculation. 
• Asset Protection Allowance: The bill increases the asset protection allowance, which is the amount of assets that can be excluded from the financial aid calculation. This change aims to make it easier for families to save for college without negatively impacting their financial aid eligibility.
• Family Contribution Formula: The formula for calculating the student aid index (SAI) has been revised to better reflect a family's ability to pay for college. This includes adjustments for inflation and cost of living.

Loans 

For New Borrowers (loans disbursed after July 1, 2026), there will only be two repayment options available when in repayment.
• Standard Plan: Fixed payments with repayment terms based on loan size:
• Borrowers with less than $25,000 in debt will have a 10-year repayment term
• Borrowers with $25,001–$50,000 in debt will have a 15-year repayment term
• Borrowers with $50,001–$100,000 in debt will have a 20-year repayment term
• Borrowers with greater than $100,000 in debt will have a 25-year repayment term
• Repayment Assistance Plan (RAP): Monthly payments based on income
• Monthly payments start at $10/month
• Scale up to 10% of AGI for incomes over $100,000
• $50/month discount per dependent
• Spousal income for those who file taxes “married filing separately” will not be included in the calculation
• No interest accrual on unpaid interest
• Forgiveness after 30 years (360 payments) 
• Borrowing Loan Limits Modifications
• Borrowing Loan Limits Modifications
• Graduate: $20,500/year, $100,000 total
• Professional (e.g., law, medicine): $50,000/year, $200,000 total
• Parent PLUS: $20,000/year per student, $65,000 total
• Grad PLUS Loans: Eliminated

For Existing Borrowers (loans disbursed before July 1, 2026)

All current federal repayment plans will be eliminated, including the current IDR Plans: ICR, PAYE, and SAVE. Those will be phased out by July 1, 2028.
• Borrowers must switch to:
• Modified IBR:
• 15% of discretionary income (pre-2014 loans), forgiveness after 25 years
• 10% of discretionary income (post-2014 loans), forgiveness after 20 years
• RAP, if eligible 
• OR select Standard Plan with fixed payments and repayment terms as described above

Parent PLUS Borrowers (new Parent PLUS Loans Made after July 1,2026)

• Annual borrowing limit of $20,000
• Lifetime cap of $65,000
• Those who borrowed before the Bill takes effect may have a three-year grace period to continue borrowing under the current terms.
• New loans: Only eligible for the Standard Plan
• Existing loans: Can consolidate by June 30, 2026, and apply for ICR by June 30, 2028, to be moved to IBR
• Can access forgiveness only if they consolidate (by June 30, 2026) and enroll in ICR (by June 30, 2028), then they will be switched to IBR
• IBR Forgiveness after 25 years of payments

Graduate PLUS Loans

• Eliminated under Bill
• Federal Direct student loans for graduate student loan limits increased (see above)

Public Service Loan Forgiveness (PSLF)

• Still available under the new system
• Requires 120 qualifying payments (10 years) while working full-time for a qualifying employer
• Borrowers must be on a qualifying plan (e.g., IBR or RAP)

Borrower Deferment & Forbearance

• Economic hardship and unemployment deferments eliminated
• Discretionary forbearance capped at nine months per 24-month period 

Loan Rehabilitation

• Borrowers who default on federal student loans will have the opportunity to rehabilitate a federal loan back to good standing twice. Previously, borrowers only had the opportunity to rehabilitate once.