Higher Ed financial aid changes in H.R. 1

The President recently signed H.R. 1, known as the One Big Beautiful Bill Act, which made changes to federal financial aid for higher education. Here are the answers to the most asked questions about those changes.

Undergraduate Financial Aid

Q: Were undergraduate subsidized loans changed?

• While an earlier version of the legislation eliminated subsidized loans for undergraduate students, this was not included in the final legislation, so there will be no changes to undergraduate subsidized loans.

Q: Were there any changes to Pell Grants?

• Similar to subsidized loans, the House bill included changs to Pell grants but these were not adopted in the final legislation so no changes to Pell Grant eligibility or amount were included in the final version of the bill. The final bill did include roughly $10 billion to the Pell Grant program to fix a projected shortfall,

Parent PLUS Loans

Q: How have Parent PLUS Loans changed?

• While these loans are still available to the parents or guardians to help them pay for their child’s undergraduate and graduate education, starting July 1, 2026 the loans will be capped at $20,000 per year or $65,000 lifetime total
• Any borrower who receives a Parent PLUS loan prior to July 1, 2026, can continue under the previous rules for up to 3 additional academic years.

Graduate Loans

Q: How have graduate loans been changed?

• The Grad PLUS loan program will be eliminated as of July 1, 2026, leaving only the Direct Unsubsidized Loan program available to finance graduate education.
• Direct Unsubsidized Loans are capped at $50,000 per year or $200,000 in total for professional program students (including MSOT and OTD)

Q: What if I took out a Grad PLUS Loan and I’m still in school?

• Any student who receives a Grad PLUS loan by July 1, 2026 is can continue under the previous Grad PLUS loan rules for up to 3 additional academic years.

Q: What will be the impact of Grad Plus Loans going away?

• Students will be required to take out direct unsubsidized loans, and if the cost of school is more than the loan caps, they will have to take out private loans to cover their costs.

Professional or Graduate Programs

Q: Are MSOT and OTD programs considered professional or graduate degrees for the purpose of yearly and lifetime loan limits?

• The OBBB legislation uses an existing definition of a professional degree as one that “signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor's degree. Professional licensure is also generally required.” Under this current definition MSOT and OTD degrees are considered professional.

Repayment Plans

Q: What options exist to help payback student direct unsubsidized loans?

• Fixed Repayment Plan – Depending on how much a student has borrowed, repayment takes between 10-25 years.
• Repayment Assistance Plan: Monthly payment amount is between 1% and 10% of the borrowers adjusted gross income (AGI). The minimum repayment amount is $10 per month for any borrower with and AGI of less than $10,000 per year. Repayment rates increase as AGI increases. Repayment could take as long as 30 years before forgiveness.

Q: When do these repayment plans take effect?

• New borrowers: Repayment rules apply starting July 1, 2026
• Existing borrowers: Must transition to one of repayment plans by July 1, 2028

Q: Were there any changes to the Public Service Loan Forgiveness (PSLF) Program?

• No changes were made to the PSLF program in this legislation, however the Department of Education is updating the PSLF regulations. AOTA is working with a coalition to advocate improvements to the PSLF program and prevent any adverse changes.

Deferment and Forbearance Options

Q: What changes were made to deferment and forbearance options during repayment in response to unemployment or economic hardship?

• All unemployment and economic hardship deferments are eliminated for any loans taken after July 1, 2027
• Borrowers may still put their loans in forbearance, however the maximum time has be changed from 12 months to 9 months.