Key Changes to Federal Student Loans Made in the Recent One Big Beautiful Bill Act

Loan limit transition period:

The changes to the new borrowing limits (see below) have a transitional period for continuing students, which means that student borrowers who are enrolled in a program as of June 30, 2026, and have received a Direct Loan disbursement (student or parent borrower) for that program prior to July 1, 2026, are considered “Legacy Borrowers” and are exempt from the new borrowing limit rules until one of the following criteria is met:

• The student graduates from their current program
• The student reaches their remaining time to credential as calculated on July 1, 2026, with a cap of three academic years
• The student changes credential or degree level, such as a change from an associate's to a bachelor's degree
• The student withdraws from their current program or takes a break that is not recognized for financial aid purposes

Student or parent borrowers who do not qualify as Legacy Borrowers, exhaust their legacy period, or take an action that invalidates their legacy status are considered new borrowers, and the new provisions apply beginning on the applicable effective date.

Students may not opt-out of the Legacy Borrower status if they otherwise qualify.

Part-time enrollment loan reduction:

Beginning with the 2026-2027 award year, all students who fall below full-time (Undergraduates: 24 credits in an academic year, 12 credits per semester) or (Graduates: 18 credits in an academic year, 9 credits per semester) will be subject to loan reduction based on their part-time credit load. Importantly, there is no legacy provision for this rule, but it does not apply to Parent PLUS loan borrowers regardless of legacy status. For student borrowers, this means the amount of loan money available is directly tied to the number of credits they attempt in an academic year, beginning with loans made for the 2026-2027 award year. Additional context that will help inform the potential impact:

• Full Sail students are generally scheduled full-time unless they are in their final semester, experience an interruption of training, or are on an academic break.
• A student must still be enrolled at least half-time to qualify for a Direct Loan.
• The loan amount is reduced when the borrower is enrolled in fewer than 24 credits in an academic year.
• Loan adjustments will also be made if a student withdraws from a course during the semester and falls below full-time credits for the academic year. This means the next loan disbursement may be adjusted for a prior enrollment change.

Overall student lifetime borrowing limits:

For new borrowers and those who no longer qualify as Legacy Borrowers, OB3 establishes an overall lifetime borrowing limit per student of $57,500 as an undergraduate, an additional $100,000 as a graduate student (or $200,000 as a professional student), for a maximum lifetime borrowing limit per person of $257,000. This excludes Parent PLUS loans because they have separate limits, which are not calculated in the student’s lifetime limits.

• Once the borrower reaches their lifetime loan limit for the credential level, they are prohibited from borrowing additional Direct Loans, even if they make payments or pay off their loans. The only exception to this is loan cancellation before disbursement.
• The new aggregate limits and lifetime restrictions do not apply to Legacy Borrowers.
• When the new overall loan lifetime limits apply, the calculation is based on the individual’s entire borrowing history.

The following rules surrounding Parent PLUS loans have changed for non-legacy and new borrowers:

• There are new per-student academic year and overall loan limits.
• The per-academic year limit is $20,000 per student, regardless of the parent(s) who take out the loan.
• There is an aggregate limit of $65,000 per student, regardless of which parent(s) borrows.
• This means that if a parent borrows the maximum $20,000 amount per academic year, they may not have enough under the $65,000 aggregate limit for the entire program, so careful planning is needed.
• Regardless of legacy status, the part-time enrollment loan reduction does not apply to Parent PLUS loans.

• The federal Grad PLUS loan program is being eliminated for newly enrolling (or returning) graduate students who do not meet the Legacy Borrower requirements as of July 1, 2026.
• Legacy Borrowers remain eligible for the Grad PLUS loan with the current borrowing limits.
• Within the OB3 changes, a distinction is made between “Graduate” students and “Professional” students. All Full Sail graduate level degree-seeking students will be considered “Graduate” students.
• For non-legacy borrowers, the annual limit for graduate-level Direct Unsubsidized Loan will remain at $20,500, but the lifetime aggregate limit is now set at $100,000, as noted above. This is the only Direct Loan available to graduate students.

  Note: The graduate aggregate limit does not include undergraduate borrowing. In other words, a student who has reached their undergraduate aggregate limit is still eligible for the full $100,000 in graduate aggregate limits. However, any prior graduate-level borrowing counts toward this new aggregate limit for non-legacy borrowers.

For new loans disbursed on or after July 1, 2026, OB3 replaces the current income-driven repayment plans (IBR, PAYE, SAVE) and with the new Repayment Assistance Program (RAP) and implements a new tiered Standard repayment plan.

• Students who borrow new Direct Loans on or after July 1, 2026, are limited to the RAP and tiered Standard payment plan.
• For loans disbursed before July 1, 2026, borrowers can continue to access the current Standard, Income Based (IBR), Graduated, and Extended repayment plans, until those programs sunset on July 1, 2028. The borrower could also opt into the new repayment plans sooner.
• Current borrowers enrolled in ICR, PAYE, or SAVE plans must transition to a new repayment plan by the sunset date. If no selection is made by that date, they will be moved into RAP.
• RAP repayment period is up to a 30-year plan. However, the borrower can prepay or switch to a Standard plan, which ranges from 10 to 25 years.

• Despite many of the changes taking effect soon, ED still has not issued final regulations or detailed guidance to schools on many aspects of the OB3 changes.
• There may be questions that we are currently not able to answer in detail as our teams work diligently to ensure all these changes are understood and properly implemented. However, we encourage you to reach out to our financial aid department to assess the potential impact of any of these provisions.
• We will provide an update to this information periodically when additional information becomes available.
• The final rules regarding ED’s interpretation of the OB3 changes have yet to be published, and any of the above guidance is subject to change at any time.

See the following ED website for more information: https://studentaid.gov/announcements-events/big-updates