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One Big Beautiful Bill Act (OBBBA) and Loans
What You Need to Know
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The OBBBA contains numerous provisions that amend the Higher Education Act of 1965 (HEA) and impact the administration of Title IV, HEA programs. There are changes to the Federal Pell Grant Program, the Federal Direct Loan Program, need analysis, institutional accountability, and student loan repayment.
Many of the changes under the OBBBA were implemented on July 1, 2026 and over the subsequent years. Some changes made by the OBBBA became effective upon enactment.
As the Department of Education releases additional guidance on these provisions, we will update this information.
Students must be enrolled at least half-time to be eligible for federal student loans.
Changes that affect Student Loans
Beginning on July 1, 2026, significant changes were made that affect Student Loans and the Direct Loan Program. The following are key changes to the loan programs that went into effect July 1, 2026.
The OBBBA, requires institutions to prorate annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.
The student's annual loan limit must be adjusted for less than full time enrollment (known as Schedule of Reduction or SOR). This requirement applies to all undergraduate, graduate and professional student Direct Loan Borrowers for Direct Subsidized Loans, Direct Unsubsidized Loans and graduate PLUS Loans. Parent PLUS loans are not subject to these adjustments.
How is Schedule of Reduction or SOR calculated?
The following is how the Schedule of Reduction is calculated. Note: Schedule of Reduction (SOR) only applies to students that are not enrolled full-time for the full Academic year.
1. First, we must evaluate your maximum annual loan limit for the Award Year. The maximum annual loan limits are determined based on the student's grade level and dependency status.
2. Then, we must calculate the Percent of Enrollment the student has over the Academic Year. This is referred to as Schedule of Reductions percentage and is calculated by the following:
3. Your Schedule of Reductions percentage is then multiplied by the maximum annual loan eligibility to calculate the Schedule of Reductions annual loan amount.
[(Number of credit hours enrolled for the term) ÷ (number of credit hours considered full time for the academic year for the program of study)] x Schedule of Reductions annual loan amount = loan amount for that term
What if the student wants to borrow less than their maximum loan amount?
After the Schedule of Reductions calculation is complete, the student may request less than that amount. As long as the student requests loan funds that are less than the calculated Schedule of Reductions amount, the student may receive those funds as long as all other eligibility criteria are met.
Key Point: The Schedule of Reductions is always calculated based on the initial maximum eligibility (before borrower choice), not the amount the borrower chooses to accept.
Example:
The following example is for information use only.
Jane is enrolled in a total of 21 units in the Academic Year, with 12 units in Fall, and 9 units in Spring. She is enrolled in an associates degree program that has a 24 unit Academic Year. She is a dependent, first year student; therefore, her maximum annual loan limit is $3500 for a Subsidized Loan (with the assumption of sufficient need).
What is Jane's Schedule of Reductions percentage?
The Schedule of Reductions percentage is calculated as follows:
(21 units enrolled in Academic Year) ÷ (24 units in Academic Year for the associate degree Program) = 21/24 = 0.875, or 87.5%, rounded to 88%
Now that we have the Schedule of Reductions percentage (88%) we calculate the Schedule of Reductions annual loan limit:
88% x $3500 Subsidized = $3080 maximum award for the year
We calculate the disbursements for each term based on the enrollment in that term out of the total enrollment the student has in the Academic Year:
Fall: (12 units ÷ 21 units enrolled in Academic Year) x $3080 = $1760
Spring: (9 units ÷ 21 units enrolled in Academic Year) x $3080 = $1320
Schools may adjust disbursement amounts, so the total awarded for all terms equals the Schedule of Reduction annual amount.
The OBBBA established a new lifetime federal loan limit of $257,500 for all Federal Direct student loans (excluding Parent PLUS loans) borrowed for all levels of study.
Limited Exception: Students are not subject to the new lifetime loan limit (for up to three academic years or the remainder of their expected time to credential, whichever is less) if the student remains continuously enrolled in the same program of study at the same institution as they were enrolled as of June 30, 2026 and they had a Direct Loan disbursed for that same program before July 1, 2026.
Parents who receive their first Parent PLUS Loan disbursement on or after July 1, 2026, are considered NEW borrowers and will be subject to the new annual and aggregate loan limits.
All parents (parent1 and parent2, combined) may borrow $20,000 per year per dependent student and a $65,000 aggregate limit per dependent student (without regard to amounts forgiven, repaid, cancelled or discharged).
Limited Exception: Parents are not subject to the new PLUS loan limits (for up to three academic years or the remainder of the student's expected time to credential, whichever is less) if the student remains continuously enrolled in the same program of study at the same institution as they were enrolled as of June 30, 2026 and either the parent had a Parent PLUS Loan disbursed for that same program before July 1, 2026, or the student had a Direct Loan (subsidized or unsubsidized) disbursed for that same program before July 1, 2026.
NOTE: Parents who borrow the maximum amount of $20,000 per year, may exhaust their lifetime eligibility prior to the student's senior year in college.
The OBBBA established under this law, colleges and universities have the authority to further restrict how much students may borrow, which may be below the maximum federal annual loan limits.
Colleges and Universities that elect to establish lower loan limits must apply the lower loan limits to all students within the same program of study and not on a student-by-student basis.
The OBBBA caps the annual loan limits at $20,500 for graduate students and $50,000 for professional students. The aggregate limit is capped at $100,000 for graduate students and $200,000 for professional students, and does not include amounts borrowed as an undergraduate.
Limited Exception/Legacy Provision: Students are not subject to the new loan limits (for up to three academic years or the remainder of their expected time to credential, whichever is less) if they remain continuously enrolled in the same program of study at the same institution as they were enrolled as of June 30, 2026 and for whom a Direct Loan was made for that program of study prior to July 1, 2026.
NOTE: College of the Canyons is a California Community College and therefore, does not participate in Graduate/Professional Loan Programs.
The OBBBA eliminates Direct PLUS Loan program eligibility for graduate and professional students for any new period of instruction beginning on or after July 1, 2026.
Limited Exception/Legacy Provision: Students can continue to borrow under the Graduate PLUS program (for up to three academic years or the remainder of their expected time to credential, whichever is less) if they remain continuously enrolled in the same program of study at the same institution as they were enrolled as of June 30, 2026 and for whom a Direct Loan was made for that program of study prior to July 1, 2026.
NOTE: College of the Canyons is a California Community College and therefore, does not participate in the Graduate PLUS Loan Program. This is a different program then the Parent PLUS Loan.