One Big Beautiful Bill Act (OBBBA) | Southern Connecticut State University

Changes to 2026-2027 Federal Student Loans

In July 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), which brings several updates to federal student loan policies starting July 1, 2026. These updates will not impact borrowing for the 2025–2026 academic year.

Students who have already taken out federal loans for their current academic program may qualify as “continuing borrowers” and be grandfathered under existing rules if they remain enrolled in the same program through June 30, 2026.

Disclaimer

The information provided by Southern Connecticut State University is intended to orient students/ Parents to the changing landscape of federal student loan programs. While it is based on our good-faith understanding of the evolving federal standards, students should refer to federal governmental sources for official guidance.

Current Borrowers

These changes do not impact the current academic year. Students and parents who borrowed through the Federal Direct Loan Program before July 1, 2026, may continue accessing loans under the current (expiring) limits for up to three additional years, or for the remaining time required to complete their existing degree program, whichever period is shorter. This timeframe is based on the minimum published length of your program minus the time you have already completed.

We are still awaiting guidance from the Department of Education regarding how grandfathering will apply to dual‑degree programs. Updates will be posted here as soon as they are available.

Upcoming Changes to Federal Student Loan Limits

The following are new borrowing limits under the Federal Direct Loan Program, effective July 1, 2026:

Graduate programs: Limited to $20,500 per year or $100,000 for the degree.
Undergraduate programs: Student borrowing remains unchanged, but Parent PLUS Loans will be capped at $20,000 per year and $65,000 for the degree.

Private Loan Options

Private loans have long been available to students and families who seek to borrow outside the federal program. There are important differences between federal loans and private loans, and between private lenders. We encourage you to explore www.elmselect.com or consult with your financial institution should you need to borrow. For additional details on private loans, please refer to the private loan section of our website.

Additional Resources

For additional resources published by Federal Student Aid (FSA) and national associations, please visit:

Frequently Asked Questions (FAQs) About the One Big Beautiful Bill Act (OBBBA) and Private Loans

Section 1: Federal Loan Changes Under OBBBA

What changes have been made to federal student loan programs under the OBBBA?

The One Big Beautiful Bill Act (OBBBA), passed by Congress in July 2025, introduces changes effective July 1, 2026, without affecting borrowing for the 2025–26 academic year. Highlights include:

Federal Loan Borrowing Caps:

Graduate, Professional, and Undergraduate Programs will all be subject to a prorated loan model for awards. Previously, if you were enrolled at least half-time, you could often access your full annual loan limit. Starting July 1, 2026, annual federal loan eligibility will scale directly with credit load.
Undergraduate and Parent PLUS Loans: As of July 1, 2026, Parent PLUS Loans are capped at $20,000 per student per year, with a $65,000 lifetime limit. Undergraduate annual loan limits will not change but count toward a new lifetime limit.
Graduate Borrowers: Direct Unsubsidized Loans are limited to $20,500 per year and a $100,000 total cap for the degree.
Professional Programs: Direct Unsubsidized Loans can be up to $50,000 per year with a $200,000 lifetime borrowing limit.
Undergraduate and Parent PLUS Loans: As of July 1, 2026, Parent PLUS Loans are capped at $20,000 per student per year, with a $65,000 lifetime limit. Undergraduate annual loan limits will not change but count toward a new lifetime limit.
Graduate, Professional, and Undergraduate Programs will all be subject to a prorated loan model for awards. Previously, if you were enrolled at least half-time, you could often access your full annual loan limit. Starting July 1, 2026, annual federal loan eligibility will scale directly with credit load.

How is my loan amount calculated if I’m not full-time?

OBBBA uses a "fractional" math formula. Your annual loan limit is multiplied by the percentage of a full-time load you are taking.

Undergraduate Example: If full-time is 24 credits per year and you take 12 credits (half-time), you are eligible for 50% of your annual limit.
Graduate/Legacy Professional Example: If your program considers 18 credits a full year and you take 9, you are eligible for 50% of the $20,500 limit ($10,250).

I’ve been a part-time student since 2024. Will my loans be cut by proration in July 2026?

YES, even though you received a disbursement before July 1, 2026, for your current program, and you fall under the Legacy Provision, you are subject to this rule.

What is happening to Graduate PLUS Loans?

Graduate PLUS Loans will be phased out starting July 1, 2026, for new borrowers. Existing borrowers may continue to borrow under the generally higher limits for the duration of their degree, subject to some limitations. Please speak to your financial aid office with any questions on eligibility.

Students must have borrowed a federal Direct Loan (Subsidized, Unsubsidized, or PLUS) in their current program before July 1, 2026.
The eligibility period, while up to three years or the completion of your degree (whichever is sooner), is also limited by the minimum length of your program minus the time you have been enrolled.
We do not yet have explicit direction from the Department of Education on how grandfathering applies to dual-degree programs. Updates will be posted as information becomes available.

What is the new lifetime borrowing limit introduced by the OBBBA?

Under OBBBA, the overall lifetime borrowing limit for federal student loans, excluding Parent PLUS loans, is $257,500. This applies to students starting a new program on or after July 1, 2026.

Section 2: Grandfathering, New and Continuing Borrower Status

If I am a current Graduate or Professional student, what does this mean for me?

The grandfathering rule may allow students who have borrowed any federal student loan before July 1, 2026, and stay enrolled in the same academic program through June 30, 2026, to continue to borrow under the generally higher limits for the duration of their degree, subject to some limitations.

Students must have borrowed a federal Direct Loan (Subsidized, Unsubsidized, or PLUS) in their current program before July 1, 2026.
The eligibility period, while up to three years or the completion of your degree (whichever is sooner), is also limited by the minimum length of your program minus the time you have already completed.
We also do not yet have clear federal guidance on dual-degree programs. Please speak to your financial aid office with any questions.

Does taking summer classes help me get grandfathered?

Only if the summer class is part of your program of study and your coursework/enrollment begins before July 1, 2026.

What should students who have not yet borrowed any federal loan in their current program know?

If you haven't borrowed under the Federal Direct Loan Program for your current program, and you anticipate needing any federal loans above the new caps in future academic years, you may wish to consider whether borrowing before July 1, 2026, aligns with your academic and financial plans. This allows you to access current borrowing limits rather than the new caps.

How can I establish borrowing eligibility before the new changes take effect?

Carefully consider whether you expect to need to borrow beyond the caps that take effect on July 1, 2026, while completing your current degree. If you decide that you do or will and wish to preserve current federal borrowing limits, undertake the following by April 1, 2026:

Submit the 2025–2026 FAFSA.
Complete Loan Entrance Counseling.
Sign the Master Promissory Note for Direct Unsubsidized Loans.
Accept Direct Unsubsidized Loan funding via your Banner Student portal.

Section 3: Private Loans

What are private student loans and how do they differ from federal loans?

Private student loans, or alternative education loans, help bridge funding gaps beyond federal loan limits. Federal eligibility should generally be exhausted before turning to private loans.

What should I consider before applying for a private loan?

There are many private lenders, and each may offer different options. Consider:

Confirming eligibility with lenders
Borrowing limits (your school’s COA minus aid)
Cosigner requirements and release options
Interest rates: fixed vs. variable
Borrower benefits, such as autopay reductions
Fees (origination, late payment, returned check)
Repayment terms, including grace, deferment, and forbearance

Should I apply for Federal Loans or Private Loans first?

Federal loans have attributes not present in private loans and are generally easier to obtain. We recommend using federal loans first and then considering private loans if additional borrowing is needed.

When should I apply for a private loan?

Ideally, apply after committing to a school and receiving your financial aid package so that you may accurately assess your financial needs and the amount you need to borrow.

Why should I wait for my financial aid package before applying for a loan?

Reviewing your financial aid package first helps minimize borrowing needs by accounting for scholarships, grants, and work-study. This strategic approach reduces potential debt.

Can I apply for a loan at any time during the year?

Yes, but because tuition and fees have due dates, you should align your application timing with your school’s deadlines and academic start dates to ensure timely availability of funds.

What tools can help me determine my loan availability?

Use online loan calculators and pre-qualification tools from various lenders. The Free Application for Federal Student Aid (FAFSA) can also provide insight into federal loan options.

Section 4: Credit and Interest Rates

Are there actions to improve my credit score before applying?

Yes, you may undertake a number of actions:

Become an authorized user on a family member’s credit account, if that person has good credit history
Consider opening a secured credit card or a student credit card
Pay all bills on time
Keep utilization on credit lines below 30%
Avoid opening too many accounts
Monitor your credit report
Consider a cosigner

Are the interest rates on private loans higher?

Student loans are unsecured, which may result in higher rates than loans with collateral. Rates reflect your credit score, cosigner status, repayment term, and loan type. Many borrowers work to maintain or improve their credit profile while in school and refinance after graduating and obtaining verifiable employment.

What factors impact the interest rate given to me?

Lenders use a variety of factors that include:

Credit score
The existence of a cosigner and that person’s credit
Repayment length
Broader economic conditions

What if I am denied a private loan?

If you are denied a private loan, please contact your financial aid office for more information on available resources.

What is a cosigner?

A cosigner has a secondary legal responsibility if you default on the loan. Having a cosigner often results in a lower interest rate. Many lenders offer cosigner release after a borrower meets specific criteria (e.g., a certain number of timely payments, creditworthiness). Details vary by lender.

Who are the suggested private loan lenders?

Students are free to select any lender and are encouraged to compare rates and terms.