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2026-2027 Financial Aid Updates

About the One Big Beautiful Bill Act (OBBBA)

On July 4, 2025 the One Big Beautiful Bill Act (OBBBA) was signed into law. The following information is designed to provide continual guidance on what has changed related to federal student aid programs. While many of these changes are still working through the finalization process within the Department of Education (ED), these regulations are scheduled to become effective on July 1, 2026.

Note: As ED releases further guidance and finalizes the rules, we will continue to update this page with the most accurate and actionable information available. We understand that students, families, and others have questions, and we are here to help.

What Has Not Changed for MSU Students

  • Direct Loan annual limits for undergraduate and graduate students will continue to remain the same.
  • Aggregate (lifetime) loan limits for undergraduates will remain the same ($31,000 for dependent undergraduates and $57,500 for independent undergraduates).

Federal Direct Loan Annual Limits

Financial Aid Impact by Student Level

Undergraduate  | Graduate

Undergraduate Students

Loan Amount Changes if You’re Enrolled Less Than Full-Time

Starting with the 2026–2027 academic year, your federal student loan amount will be based on your enrollment status (full-time or less than full-time).

  • Institutions are required to reduce annual loan amounts based on how your enrollment level compares to full-time.
  • If you are enrolled less than full-time, your loan will be reduced proportionally.

If your enrollment changes during the semester:

  • If you drop or withdraw from a course and fall below full-time status, MSU is required to reduce your loan amount for the following semester (see example below). 

Undergraduate Loan Adjustment Example

This example shows how enrollment changes can affect your loan across the academic year.

The student may receive less in spring if the student drops below full-time in fall—even if the student was full-time when the fall loan was paid.

Fall semester: Student starts full-time (12 credits- 12/24 credits=50%)

  • Student receives the fall loan disbursement: $2,750 (50% of a $5,500 annual loan)
  • Student later in the semester withdraws from one course (3 credits)
  • Student stays enrolled, but now at 9 credits (less than full-time) and keeps the fall disbursement

Spring semester: Student enrolls full-time (12 credits-50%) 

  • Students total credit amount for the year is now 21 credits (9 credits (Fall) + 12 credits (Spring) = 21 credits total)
  • Students annual loan eligibility is recalculated
  • A full-time academic year is 24 credits, so the student completed: 21 ÷ 24 = 87.5% of full-time enrollment
  • Student can only receive 87.5% of the annual loan ($5,500 × 87.5% = $4,813 total eligibility)
  • Since the student already received $2,750 in the fall, the remaining eligibility for spring is: $4,813-$2750 = $2,063

Parent PLUS Loan Limits

  • Annual limit: $20,000 per year, per student.
  • Lifetime limit: $65,000 aggregate per dependent student.

For parents with prior PLUS loans (Legacy status)

Parents who borrowed a Parent PLUS loan for the dependent before July 1, 2026 may qualify for “legacy” status.

What this means:

  • Parents may continue borrowing for the dependent up to the Cost of Attendance (COA)
  • This is allowed for:
    • Up to 3 years, or
    • The student’s expected time to complete their program, based on full-time enrollment

Important details about expected time to completion:

Under the One Big Beautiful Bill Act (OBBBA), expected time to credential is used to determine how long certain students can remain eligible for “legacy” federal loan rules for Parent PLUS loans after those regulations are enforced beginning on July 1, 2026.

  • Expected time to credential is the amount of time a student should reasonabily need to complete their program based on full-time enrollment, using the program’s published length and subtracting time already completed.
  • For a bachelor’s degree, this is typically 4 years when enrolled full-time (12+ credits per semester).

Transferring and Change of Major/Programs

  • Students who transfer from one institution to another or move from an associate degree to a bachelor’s program are no longer considered legacy students.
  • When this happens, they will be subject to the new Parent PLUS annual and lifetime limits.
  • If a parent has already reached those limits, no additional Parent PLUS loans can be borrowed for that student.

Students cannot opt out of the legacy provisions. If they follow the guidelines, they will continue to be legacy students under the old rules for the next 3 years beginning Fall 2026.

Pell Grant Changes

The One Big Beautiful Bill Act has tightened the regulations on who can receive the Federal Pell Grant. 

  1. Higher Income Threshold (SAI Limit): Students whose Student Aid Index (SAI) is equal to or greater than twice the maximum Pell award (about $14,790 for 2026–27) will not be eligible — even if their income is lower. 
  2. Students with Full Scholarships: If a student has enough non-federal scholarships and grants (like a full-ride scholarship) to cover their entire cost of attendance, they cannot also get a Pell Grant.  
  3. Foreign Income Counts for Eligibility: If a family has foreign earned income, it must now be included in calculating eligibility — which can raise the SAI and reduce or eliminate Pell eligibility.

FSA Partner Connect

Together, these changes mean some students who previously qualified could lose Pell Grant eligibility.

Graduate Students

Lifetime of all Loans: $257,500

  • Excluding Parent PLUS loans where student received funds for parent's loan application.
  • Includes undergraduate, graduate, Grad PLUS Loans, and Parent PLUS loans where the individual is the one who borrowed.
  • Legacy: If a borrower has a Federal Direct or Grad PLUS loan disbursed prior to July 1, 2026, they can continue to receive loan disbursements for up to 3 years, or the student's expected time to credential, as long as they maintain concurrent enrollment. If they withdraw from a semester, don’t attend a semester, or change degree programs, they are no longer a legacy student.

Graduate Loan Limits:

Lifetime:

  • $100,000 for new graduate students beginning Fall 2026.
  • $200,000 for 'professional' students: Law schools and med schools only.
    • The School Psychology (PSYD) program is the program at Minnesota State University, Mankato eligible for professional level loan limits.
  • Does not include loans borrowed as an undergraduate student.
  • Legacy Students - their lifetime loan limit is still $138,500 and includes undergraduate and graduate loans.

Grad PLUS Loans

This program has been eliminated as of July 1, 2026. If you are a new graduate student for the 2026-2027 school year, or have graduated and are starting a new graduate program, the Grad PLUS Loan will no longer be available to you.

  • Legacy: If a borrower has a Federal Direct (Unsub or PLUS) loan disbursed prior to July 1, 2026, they can continue to apply for and receive Grad PLUS loan disbursements for up to 3 years or the student's expected time to credential as long as they maintain concurrent enrollment. If they withdraw from a semester, don't attend a semester, or change degree programs they are no longer a legacy student

Expected Time to Credential meaning 

Under the One Big Beautiful Bill Act (OBBBA), expected time to credential is used to determine how long certain students can remain eligible for “legacy” federal loan rules, especially PLUS loan and higher unsubsidized loan limits, after those programs are largely eliminated on July 1, 2026.

Expected time to credential is how much time a student should reasonably need to finish their current program, assuming full‑time enrollment, based on the program’s published length—minus the time they’ve already completed. The expected time to credential for graduate students vary based on the certificate or degree program they are enrolled in.

Transferring and Change of Major/Programs

Students must maintain concurrent enrollment in their current program, started prior to July 1, 2026. If a student changes their program of study, that is not concurrent enrollment, and they lose their legacy status. If a student graduates and then starts a new program within the next 3 years, that is not concurrent enrollment, and they lose their legacy status.

Students cannot opt out of the legacy provisions. If they follow the guidelines, they will continue to be legacy students under the old rules for the next 3 years beginning Fall 2026.

Less than Full-Time enrollment

  • Institutions are required to reduce annual loan amounts in direct proportion to the percent of full-time status the student is enrolled.
  • If a student drops a course or withdraws from a course at any point within the semester and they go below full-time, we will be required to reduce their loans in a subsequent term.
  • This will be effective for the 2026-2027 aid year for ALL students

Frequently Asked Questions

  1. Students who are eligible for the interim exception to the new loan limits have been referred to by some as legacy borrowers. Eligibility for the interim exception is contingent upon whether a student was enrolled in a program of study at an institution as of June 30, 2026, and received a Direct Loan for that program prior to July 1, 2026.
  2. Once eligibility is established, students are eligible for the pre-Working Families Tax Cuts Act (pre-July 1, 2026 rules) loan limits during their expected time to credential, defined as the expected time for a student to complete a program that is equal to the lesser of three academic years.
  3. For graduate and professional students who have established eligibility for the interim exception, the annual Unsubsidized Loan limit is $20,500 and they can continue to borrow Grad PLUS Loans up to the cost of attendance minus other financial assistance.
  4. For parent borrowers who have established eligibility for the interim exception, Parent PLUS Loan borrowing remains up to the cost of attendance minus other financial assistance. Undergraduate borrowing is unaffected. No eligible borrowers are subject to the Lifetime Maximum Aggregate Loan Limit during their expected time to credential.

Eligibility for the interim exception is based on whether the student was enrolled in a program of study at an institution as of June 30, 2026, and received (was disbursed) a Direct Loan for that program prior to July 1, 2026. If the conditions are met, the student is eligible for the interim exception for the lesser of three years or the difference between the program length (published) and the amount of time the student has been in the program.

The parent of a dependent borrower would be subject to the new loan limits on or after July 1, 2026, if neither they nor the student took out a Direct Loan prior to July 1, 2026, for the program of study at an institution that the student was enrolled in by June 30, 2026. If, however, the student received a Direct Loan prior to July 1, 2026, for that program of study, the parent would be eligible for the interim exception to the new loan limits during the student’s expected time to credential, defined as the lesser of three academic years and the difference between the program length and the period of such program of study that such individual has completed prior to July 1, 2026. 

No. A borrower is not permitted to opt out of the interim exception so that they may receive the new annual loan limits. Students who meet the conditions for the interim exception are subject to all legacy loan limits and cannot opt out.

No. If the parent borrower is not eligible for the interim exception because the student is enrolled beyond their program length, they cannot continue to borrow once they reach the $65,000 aggregate maximum limit.

Yes. The Graduate PLUS Loan for spring will be canceled as the student is no longer eligible for this disbursement. Once the student loses eligibility for the interim exception, they are not permitted to receive Graduate PLUS Loans.

Graduate students are subject to the new $100,000 aggregate loan limit when they complete or withdraw from the program in which they are currently enrolled. All Subsidized and Unsubsidized Loans previously borrowed for graduate degrees count toward the $100,000 limit. These students may not receive additional Unsubsidized Loans until they are repaid, whether in full or in part.