If you’ve followed the news lately, you may have noticed the same legislative package referred to by multiple names—the Reconciliation Bill, House Bill, Senate Bill, and even “The Big Beautiful Bill." This terminology confusion has made it challenging to determine what’s proposed, what’s final, and most importantly, what applies to your institution.
Here’s what matters: The Senate version of the Reconciliation Bill passed both chambers and was signed into law by President Trump on July 4th.
We get it—it’s hard to keep up with all the changes: the headlines, the regulations, the ongoing commentary. So much noise. Many media articles are still referencing the House Bill’s more drastic proposed changes that were announced in May. But here’s the reality: while the final Senate version (now law) does include significant new requirements that institutions must prepare for, it’s far more measured than the House’s original version.
So let’s break it all down.
What Didn’t Make It from the Original Version? (Collective Exhale Moment)
Several drastic proposals from the House version were not included in the final law:
Pell Grant Program Remains Largely Intact
- Full-time enrollment definition is not changing from 12 semester credits to 15 (or the equivalent)
- Students enrolled less-than-half-time are still eligible to receive funding
Key Programs Preserved
- The Subsidized Loan Program has not been eliminated for undergraduate students
- A student’s need analysis will not be capped at the Median Cost of College
- Institutional risk-sharing model for schools participating in the Direct Loan program has not been implemented
- 90/10 and Gainful Employment rules have not been repealed
What Is Changing? Approved, Signed, and Delivered—Effective as Early as July 1, 2026
Student Loan Program Overhaul
Graduate and Professional Student Loans:
- Annual borrowing limits:
- Graduate students (non-professional): $20,500
- Professional students: $50,000
- Aggregate limits (in addition to undergraduate amounts):
- Graduate students: $100,000
- Professional students: $200,000
- The lifetime maximum aggregate amount for all students (excluding certain PLUS loans) will be $257,500.
- Graduate PLUS loans terminated for periods beginning July 1, 2026
Parent PLUS Loan Caps:
- Annual maximum: $20,000 per dependent student (all parents combined)
- Aggregate maximum: $65,000 per dependent student
Repayment Changes:
- Transition to new income-based repayment plans required by July 2028
- For loans made after July 1, 2026: Only two repayment options (standard and Repayment Assistance Plan)
- Income-contingent repayment plans eliminated effective July 1, 2028
Deferment and Forbearance Restrictions:
- Economic hardship and unemployment deferments eliminated for loans made after July 1, 2027
- Forbearances limited to 9 months in any 24-month period
Positive Changes:
- Loan rehabilitation allowed twice (previously once)
- $1 billion appropriated for loan servicing and administrative improvements
Pell Grant Updates
New Eligibility Restrictions (July 1, 2026):
- Foreign income now included in adjusted gross income calculations
- Students ineligible if their Student Aid Index (SAI) equals or exceeds twice the maximum Pell Grant
- Students receiving other grant aid (state, institutional, private) exceeding cost of attendance become ineligible
New Workforce Pell Grant Program:
- Launches July 1, 2026
- For eligible short-term programs (150-600 clock hours, 8-15 weeks)
- Must meet 70% completion and job placement rates
- Requires governor approval for alignment with high-demand sectors
- Cannot receive both regular and Workforce Pell simultaneously
Funding Relief:
- Pell shortfall funding increased from $2.17 billion to $12.67 billion
Accountability Measures
Low Earning Outcomes (Effective July 1, 2026):
- Programs lose federal aid eligibility if median graduate earnings don’t exceed comparable programs (state or national level)
- Appeals process available during review
- Institutions must notify students if programs are at risk
- Programs can regain eligibility after 2 years
- Undergraduate certificates exempt
Other Notable Changes
Asset Exemptions (July 1, 2026):
- Alaska Native Corporation Settlement Trust distributions excluded
- Fishing vessel and permit income/assets exempted from aid calculations
Regulatory Relief:
- Borrower Defense to Repayment and Closed School Discharge rules implementation delayed 10 years (for loans before July 1, 2035)
- July 2020 regulations restored for these loans
What’s Next?
It’s a lot of information, we know! If you are unsure where to go from here or where you should start, read through our How to Navigate the Sweeping Changes to Federal Student Aid analysis for a proactive roadmap.
Just as we are all starting to unpack and digest this legislation, there’s a new wave of conversation—this time around the yearly federal budget proposal (FY26). The yearly federal budget begins on October 1 of each year, but the final bill is often passed months into the fiscal year. This proposal is not law yet, although it could signal what’s next on the agenda for student financial aid programs.
Proposed Policy Changes (Not Yet Law):
Pell Grant:
- Lowering the Pell maximum from $7,395 (current levels) to $5,710 in 2026-27 due to projected shortfall
- Note: The Reconciliation Bill does address the Pell Grant shortfall by closing the projected gap. We anticipate this should keep maximum Pell at the current level or allow a slight inflationary increase.
- New Workforce Pell—approved for short-term certificate programs to support workforce re-skilling
- Note: The Reconciliation Bill has approved the Workforce Pell Program.
Campus-Based Aid Programs:
- Federal Work-Study Reform: Will shift the cost burden to employers (or the Institution). Currently, the federal government contributes 75% of a student’s hourly wage, while the employer pays the remaining 25%. The adjustment would shift these levels so that the federal contribution is reduced to 25%, requiring employers to pick up the remaining 75%.
- Federal Supplemental Education Opportunity Grant (SEOG): This program is cut entirely from the budget proposal.
We are just at the beginning of the yearly budget proposal process, so there is no need to panic yet. Stay informed with meaningful updates from McClintock as we aim to cut out the noise.
McClintock & Associates: Keeping institutions compliant for over 50 years. We track Title IV changes year-round and highlight what matters most for you. Sign-up for our newsletter to stay up to date or schedule a consultation with our Title IV compliance experts to discuss how this change impacts your institution.
