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News and Updates About Federal Financial Aid & the FAFSA: Students | Practitioners

For Students: News and Updates About Federal Financial Aid & the FAFSA

Updated as of 9/3/25

What is the status of FAFSA and financial aid right now?

The FAFSA is open and financial aid programs continue to exist. We encourage students to continue with their FAFSA and state financial aid forms. The FAFSA for the 2026-27 school year will officially open to all applicants on October 1, 2025. The form soft-launched in August, and any 2026-27 application submitted before the official opening is still a valid FAFSA. 

What is the “One Big Beautiful Bill Act”?

President Trump signed the “One Big Beautiful Bill Act”. This bill was passed with the majority of Republicans voting for it and Democrats voting against it. Congress used a process called reconciliation which allows certain tax and spending policies to be passed by a simple majority. The bill cuts revenue by $4.5 trillion over the next ten years by making income tax cuts passed in 2017 permanent. The Congressional Budget Office predicts a $3.4 trillion increase in the deficit over ten years. The bill cuts $3.5 trillion in spending cuts over ten years, mostly targeting federal social programs.

Below is an explanation of what the law does, related to financial aid.

Student loans

Undergraduate loans

Here are parts of the undergraduate loan program that are unchanged from current law:

  • Subsidized loans: Undergraduate students can still continue to receive subsidized loans. 

  • Loan limits unchanged: Existing undergraduate annual and aggregate loan limits stay the same.

The new law does establish an enrollment intensity cap:

  • Enrollment intensity caps: Pro-rates student loans for students enrolled less than full-time and allows institutions of higher education to set lower limits for all students in the program.

Parent PLUS loans 
There are new Parent PLUS loan limits that will be effective starting in July 1, 2026:

  • $20,000 per year cap per dependent student and 

  • $65,000 aggregate limit per dependent student (without regard to amounts forgiven, repaid, canceled, or discharged).

Graduate school loans 

  • Grad plus loans: Grad Plus is no longer an option for anyone enrolling after July 1, 2026. For those who are enrolling for the first time in a graduate program during the 2025-26 academic year, they can borrow Grad PLUS loans for this academic year, according to the current rules around Grad PLUS loans, and then also still be able to borrow Grad PLUS loans for either the three academic years after or the expected time to credential, whichever is shorter.

  • Graduate loan limits: Sets annual unsubsidized loan limits at $20,500 for graduate students and $50,000 for professional students. Sets aggregate (lifetime) loan limits of $100,000 for graduate students and $200,000 for professional students (e.g. law or medicine). Graduate limits are in addition to undergraduate limits.

Student loan repayment

The bill makes substantial changes to the loan repayment programs, phasing out the SAVE, PAYE, and ICR plans. 

Borrowers with new loans made on or after July 1, 2026, can be repaid using only two plans: 

  • a new standard repayment plan with fixed monthly payments and fixed terms ranging from 10 to 25 years based on the amount borrowed, or

  • the new income-based repayment plan - the Repayment Assistance Plan (RAP), which calculates monthly payments on a sliding scale, ranging from 1% to 10% of adjusted gross income. Unpaid interest is forgiven, and a $50 monthly principal match helps chip away at the balance. Loans are forgiven after 30 years of payments.

For current borrowers, legacy plans like SAVE, PAYE, and ICR will be phased out between 2026 and 2028 and borrowers will be forced to move into either the RAP plan, or an Amended IBR plan. College Investor has more information about RAP and the Amended IBR plan.

Economic hardship

Establishes that any loans after July 1, 2026, will not be eligible for economic hardship deferment, and that for any loans after July 1, 2027, forbearance may not exceed nine months within a 24-month period.

Workforce Pell Grant program

The law creates a Workforce Pell Grant program that opens up accredited shorter term training programs between 8–15 weeks of instruction to be eligible to be covered by the Pell Grant. This is set to begin on July 1, 2026, for the 2026-27 school year, however it may take more time for the Department of Education to roll out this program. It is possible this may be delayed beyond the 2026-27 school year. It excludes remedial, non-credit, English language learning, or study abroad coursework. 

Immigration enforcement and detention

An estimated $170 billion of the bill has been designated for immigration enforcement and changes eligibility for various federal programs. The National Immigration Law Center has an in-depth analysis of the new law’s impacts on immigrants.

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What is happening to borrowers whose student loans are in default?

The Office of Federal Student Aid (FSA) has resumed collections of its defaulted federal student loans. Technically, a borrower is considered in default when they have entered repayment and then fail to make a loan payment for at least 270 days. This does not apply to students who have taken out a loan and repayment has not yet started because they are still enrolled or are in their grace period. People can check the status of their student loans by logging into StudentAid.gov. The online dashboard shows how much debt they owe and to whom, their monthly payment amount, and if they are in default or not. 

If someone checks the dashboard and there is a discrepancy between the dashboard and their loan servicer portals, they should call their loan servicer and confirm their actual balance and due dates. 

To learn more about the loan rehabilitation program and consolidation, StudentAid.gov/manage-loans has more information. Borrowers in default should go to the Default Resolution Group website to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation. This NPR article has more information.

IRS and DHS Data Sharing + FAFSA

On April 7, the Department of Homeland Security and the Internal Revenue Service signed a memorandum of understanding. This means ICE officers can ask the IRS for information about immigrants who have final orders of removal or are under criminal investigation, including for failing to leave the country after 90 days. This is a substantial change in how IRS data are used. Previously, IRS policy encouraged immigrants to pay taxes, and assured undocumented taxpayers that their information is confidential. This NPR article has more information.

The data-sharing agreement between ICE and the IRS does not grant access to FAFSA data. FAFSA data is distinct from the information maintained by the IRS. To our understanding, this data-sharing agreement will not impact the use of the Direct Data Exchange (DDX) on the FAFSA. Granting consent for the use of the DDX does not present any additional risk of information exposure.

From what we understand now, there is no additional risk to completing the FAFSA for those who have filed their taxes using an ITIN (Individual Taxpayer Identification Number). For those who do not have an ITIN, we recommend that they make their own decision as to whether to create one or not.

Here are more resources about immigration law:

For explanations:

State-specific lists of immigration law and service providers

General legal rights resource regarding if one is stopped, arrested, or detained:

What is happening with the Department of Education?

On March 20, President Trump signed an executive order calling for closing the Department of Education. The Department was created by Congress and cannot be closed without a vote by Congress. Congress would need to vote to eliminate the Department of Education or federal financial aid, and the President cannot do this alone. There has been long-standing support for the Pell Grant by Republicans and Democrats, so we do not expect them to vote to eliminate the FAFSA and financial aid. 

On 3/11/25, the Department of Education fired 1,315 employees, resulting in the Department reducing staff by 50%. The FAFSA and federal financial aid continue to exist and students should complete the FAFSA.

What happened with the gender question on the FAFSA?

As of 2/14/25, the gender question on the FAFSA has been updated to comply with the Trump Administration’s Executive Order. Now the question requires students to choose either male or female, while previously the options included “nonbinary” and “prefer not to answer”.

Students who previously answered this question on the FAFSA do not have to go back and make changes.  Students who answered the previous version of the question with ‘nonbinary’ or ‘prefer not to answer’ will be prompted to answer it again only if they need to make a correction to the FAFSA for any other reason. However you answer the question will not impact your eligibility for financial aid.