Understanding the “One Big Beautiful Bill” Act

See NASFAA’S OB3 crosswalk for an overview of changes.

Beginning with the 2026-27 academic year (effective July 1, 2026), the requirement in proposed 34 CFR 685.203(m)(1) to adjust the annual loan limit for less-than-full-time enrollment applies to all undergraduate, graduate, and professional student Direct Loan borrowers—Direct Subsidized Loans, Direct Unsubsidized Loans, and graduate PLUS Loans. This includes students borrowing under the pre-July 1, 2026, legacy provisions (limited exceptions) and new borrowers on or after July 1, 2026.

Parent PLUS loans are not included in this proration requirement.

The OBBB reduces the amount of a loan that a student may borrow for an academic year if the student is enrolled in a program of study on less than a full-time basis during that academic year. This reduction in the annual loan limit will be made in direct proportion to the degree to which the student is not enrolled full-time, rounded to the nearest percentage point.

The Department is currently developing the schedule of reductions that is required by the OBBB and will release it later this year.

Currently, the proposed schedule of reduction formula is:

• number of credits enrolled for the academic year / number of credits defined as full time for program academic year x 100 and rounded to the nearest percent.

While the underlying concept of a professional program is not new, the creation of loan limits based on whether a program is professional versus graduate level is new. The law and accompanying regulations define what is considered professional for these new loan limits. Professional degrees are largely limited to: Pharmacy (Pharm.D.), Dentistry (D.D.S. or D.M.D.), Veterinary Medicine (D.V.M.), Chiropractic (D.C. or D.C.M.), Law (L.L.B. or J.D.), Medicine (M.D.), Optometry (O.D.), Osteopathic Medicine (D.O.), Podiatry (D.P.M., D.P., or Pod.D.), Clinical Psychology (Psy.D. or Ph.D.), and Theology (M.Div., or M.H.L.)

Graduate programs will continue unchanged in regards to annual limits with $20,500 being the limit, the Professional programs can now borrow up to $50,000 in unsubsidized funds per academic year.

New aggregate limits also now apply with graduate programs limited to $100,000 and professional programs limited to $200,000. These aggregate limits do not include undergraduate borrowing.

Legacy provisions also apply to these OB3 changes. These permit students who have received a disbursement of Direct Loan in the same program of study at the same school prior to 7/1/26 to continue to borrow under the old regulations for an additional 3 years or until completion of the program whichever is less.

The Grad PLUS loan program is being eliminated as part of the OB3 overhaul. However, there is a legacy provision that permits students who have received a disbursement of Direct Loan in the same program of study at the same school prior to 7/1/26 to continue to receive Grad PLUS loans for an additional 3 years or until completion of the program whichever is less.

If the student withdraws, changes programs, or otherwise ceases enrollment, they lose the legacy provisions and would not be eligible for Grad PLUS loans if and when they reenroll.

Institutions seeking guidance should refer to the NASFAA OB3 Checklist as one of the first points of reference.

• Students with an SAI of 14790 and above (twice the maximum Pell grant) are ineligible to receive Pell.
• Students who receive grants or scholarships from non-federal sources that cover their entire cost of attendance (COA) will no longer be eligible to receive any Pell grants, even if they would otherwise be eligible.
• Foreign Earned Income exclusion credits will now automatically be included in the AGI which is used to calculate a student's Pell grant eligibility on the FAFSA.

• Students with an SAI of 14790 (twice the maximum Pell grant) are ineligible to receive Pell.
• Foreign Earned Income exclusion credits will now automatically be included in the AGI which is used to calculate a student's Pell grant eligibility on the FAFSA.
• In a few cases, students who were previously not eligible due to asset reporting rules may now have Pell eligibility. Why?

Previously, under the FAFSA Simplification Act family farms and family-owned small businesses would be counted as assets when an applicant filed the Free Application for Federal Student Aid (FAFSA®) form.

The OBBBA reverses this requirement and expands on asset exemptions.

Beginning with the 2026–27 award year, the OBBBA updates the Student Aid Index (SAI) calculation to exclude the following from current net worth of businesses and farms:

• The net worth of a family-owned business with 100 or fewer full-time (or full-time equivalent) employees.

• The net worth of a farm on which the family resides, in addition to the existing exemption for a family's primary residence.

• The net worth of a commercial fishing business and related expenses, owned and controlled by a family.

In all cases, the 2026-27 FAFSA is already applying these regulations at the point of processing. Nothing for you to do!

Federal Tax Information (FTI) on the ISIR is indicated by specific flags and data fields labeled as CUI//SP-TAX in the ISIR layout.

FTI data, which includes Adjusted Gross Income, taxes paid, and income earned from work, is distinguished from manually entered data and cannot be viewed or edited at the time of FAFSA submission.

CORE users with view permissions can unmask the imported FTI information starting on page 5 of the ISIR.

• The STATS accountability system will apply.
• Students in non-term programs will have the same Pell eligibility factors applied on their FAFSAs starting in the 2026-27 award year.
• The introduction of Workforce Pell programs.
• Lifetime loan limit changes could also affect borrowing especially for parents taking advantage of Parent PLUS loans for a non-term program.
• The simplified repayment structures are all- borrower inclusive.

• One way that OB3 changes will NOT alter non-term program regulation is in regard to annual loan limits prorations. Non-term loans are already prorated based on student's attendance in a non-term program and students are always considered as enrolled full time in a non-term program. Therefore, a student attending 900 hours with an academic year (AY) definition of 900 hours receives a normal annual loan limit with no proration applied. While a student attending 600 hours with an AY of 900 hours would receive a prorated amount of loans. There is no change to this regulation.

The OB3 language does not address the current need for Professional Programs to be accredited by specific accrediting agencies. As such, we should not assume that the new definition of Professional Program overrides that long standing requirement. We are awaiting a response to the accrediting agency requirement and will share once received. 

FSA stands for Federal Student Aid, an office of the U.S. Department of Education. It is the entity responsible for managing, processing, and overseeing all federal student financial assistance programs, including loans, grants, and work-study funds.