Important Changes to Federal Student Loans: 2026-2027 Academic Year
New federal legislation enacted in July 2025 has introduced significant modifications to the Federal Direct Loan programs. These changes will take effect beginning with the 2026–2027 academic year (effective July 1, 2026).
While there are no changes to federal student loans for the 2025–2026 academic year, the new law introduces critical changes to how students and families finance higher education moving forward. The University of Massachusetts Lowell is continuing to track all of these changes and plans to update this site as more clarification from the Department of Education is released.
In the meantime, please note:
- There are no changes to financial aid for the 2025–2026 academic year stemming from this legislation.
- Students who have received federal student loans disbursed before July 1, 2026, may still be eligible for the prior borrowing rules under specific "Legacy" rules.
Important Disclaimer: The information contained on this page is provided by UMass Lowell to help students navigate the changing landscape of federal student loan programs. While it is based on our understanding of the evolving federal standards, it is not official guidance and should not be regarded by students as definitive. Students should refer to federal governmental sources for official guidance. See the Federal Student Aid website for more information.
Schedule of Reductions for Direct Loans for Less than Full-Time Students
Starting with the 2026–2027 academic year, federal law requires a new "Schedule of Reductions" for any student enrolled less than full-time. Under previous rules, students could often receive their full annual loan limit if they were enrolled at least half-time. Full-time status for undergraduate level students is 12 or more credits per semester, and for graduate level students, it is 9 or more credits.
Under the new regulations, a student’s annual loan limit must be reduced in direct proportion to their enrollment status. For example, if you are enrolled half-time, your maximum annual loan limit will be approximately half of the full-time statutory limit. This change applies to all Direct Subsidized, Unsubsidized, and Grad PLUS (for eligible borrowers) loans for both undergraduate and graduate students.
Understanding "Legacy" vs. "New" Borrowers
Beginning July 1, 2026, federal student loan borrowers will fall into two distinct categories:
- New Borrower: A person with no federal loans taken out prior to July 1, 2026, or someone who has paid their prior federal loans in full.
- Legacy Borrower: A person who has had a federal loan disbursed prior to July 1, 2026, and will remain enrolled in the same degree for the 2026-2027 academic year.
Eligibility at a Glance:
- New Borrowers will be eligible for Federal Direct Subsidized/Unsubsidized loans and Parent PLUS loans (subject to new limits).
- Legacy Borrowers will remain eligible for Subsidized/Unsubsidized loans and may maintain access to the Graduate PLUS loan and Parent PLUS loan under older, higher limit rules for a limited time. Other eligibility criteria may apply.
Effects on Undergraduate Students
The most significant impact for undergraduates involves the Parent PLUS Loan program.
New Parent PLUS Loan Limits (Effective July 1, 2026)
For new borrowers, the annual and aggregate borrowing caps per dependent student are now:
- Annual Limit: Parents can borrow up to $20,000 per academic year per student. Even if multiple parents borrow, the maximum a student can receive is $20,000 per academic year.
- Aggregate Limit: Total lifetime borrowing cap is $65,000 per student. Please note that if a parent borrows the annual limit of $20,000 per year for three years, they will have limited eligibility in the fourth year.
Note: For legacy students, parents may still be eligible to borrow up to the full Cost of Attendance (COA) (minus other aid) for up to three years or until program completion.
Effects on Graduate and Professional Students
New regulations significantly change Graduate and Professional borrowing under the Direct Unsubsidized Loan program, effective July 1, 2026.
Graduate Students (Masters, Doctorate)
- Direct Grad PLUS Loan: No longer available for new borrowers.
- Annual Unsubsidized Limit: $20,500 per academic year.
- Aggregate Unsubsidized Lifetime Limit: $100,000 total (does not include undergraduate borrowing).
Professional Students in certain Doctoral Programs
- Direct Grad PLUS Loan: No longer available for new borrowers.
- Annual Unsubsidized Limit: $50,000 per academic year.
- Aggregate Lifetime Limit: $200,000 total (does not include undergraduate borrowing).
The New Lifetime "Hard Cap"
All new borrowers are subject to a Total Lifetime Cap of $257,500. This includes all undergraduate, graduate, and professional loans combined (but excludes Parent PLUS loans).
Changes to Repayment Options
Starting with the 2026–2027 academic year, the federal government has modified the options available for repaying your student loans. They have begun phasing out several older repayment plans for new borrowers to focus on two choices.
The primary options for new borrowers will include:
- Tiered Standard Repayment Plan: This plan offers fixed monthly payments over a period of 10 to 25 years, with the specific term determined by your total debt balance.
- Repayment Assistance Plan (RAP): This is a new income-driven option where your monthly payments are calculated based on a percentage of your income. It is specifically designed to ensure that on-time payments cover at least the monthly interest, which prevents your total loan balance from growing over time.
While new borrowers will primarily use these two plans, some "legacy" borrowers may still have access to older plans during a transition period.
Because your specific eligibility for different plans depends on when you first borrowed and your individual financial situation, we strongly recommend that you contact your loan servicer for more specific information and to discuss which repayment plan best fits your needs.
Comparison Table: Annual and Aggregate Loan Limit
| Type of Loan | Annual Limit: Legacy | Annual Limit: After July 1, 2026 | Aggregate Limit: Legacy | Aggregate Limit: After July 1, 2026 |
|---|---|---|---|---|
| Undergraduate - Dependent | $5,500 - $7,500 | $5,500 - $7,500 | $31,000 | $31,000 |
| Undergraduate - Independent | $9,500 - $12,500 | $9,500 - $12,500 | $57,500 | $57,000 |
| Undergraduate - Parent PLUS | Up to COA* | $20,000 | Up to COA* | $65,000 (per student) |
| Graduate - Unsubsidized | $20,500 | $20,500 | $138,500 | $100,000 (excludes undergrad loans) |
| Professional - Unsubsidized | $20,500 | $50,000 | $224,000 | $200,000 (excludes undergrad loans) |
| Grad PLUS Loan | Up to COA* | No new borrowers | Up to COA* | No new borrowers |
| Lifetime Borrowing Cap | No lifetime cap | No lifetime cap | N/A | $257,000 |
*COA = Cost of Attendance minus other financial aid.