Federal Updates (OB3)

OB3 introduces significant changes to federal student aid programs. Some provisions are clear, but others still require clarification from the U.S. Department of Education. We know that students, families, and staff have questions. We do as well. As we receive additional guidance and official updates, we will continue to revise and expand this webpage so it reflects the most accurate and useful information available. This content reflects the latest guidance on OB3 and may change as new information is released.

What is OB3? The One Big Beautiful Bill Act was enacted into law on July 4, 2025, through the federal budget reconciliation process. This legislation contains major changes that significantly reshape federal student aid across the country.

What changed under OB3?

Federal Loan Program Changes

Changes to the following Federal Student Loan Programs will be effective July 1, 2026:

• Elimination of Graduate PLUS Loan Program
• Changes to Parent PLUS Annual and Loan Limits
• Changes to Graduate/Professional Annual and Aggregate Loan Limits
• Changes to Federal Loan Program Lifetime Limits
• Loan Reduction for students below full-time enrollment (see below).

Less Than Full Time Loan Adjustments

One of the biggest changes affects how students can borrow federal Direct Loans. Beginning in the 2026–2027 academic year, annual federal subsidized and unsubsidized loan amounts will be reduced based on enrollment status. Students enrolled less than full time will only be eligible to borrow a portion of the standard loan amount, based on the number of credit hours they are taking. However, federal regulations still require at least half-time enrollment to receive federal loans (that did not change from before).

This adjustment, known as a “schedule of reduction”, applies throughout the semester. If a student drops classes at any point, the institution must recalculate the student’s eligibility and determine any possible impacts.

Before OB3, students enrolled at least half time were eligible to receive the full annual federal loan amount. Under the new policy, students enrolled between half time and full time will no longer receive the full amount. Eligibility is now determined directly by the number of registered credit hours.

Loan eligibility for less than full-time enrollment is calculated using a standard formula. This rule applies to all Direct Loan borrowers, including undergraduate, graduate, and professional students. It also applies to legacy borrowers who received Direct Loans before July 1, 2026.

Parent PLUS Loans

Parent PLUS Loans will have new annual and lifetime borrowing limits per dependent student. These limits apply regardless of any prior loan forgiveness, repayment, cancellation, or discharge. Parents may borrow up to $20,000 per year, with a $65,000 lifetime limit per dependent student. If the student or parent borrowed a Federal Direct Loan before July 1, 2026, Parent PLUS borrowing may continue under the current limits for up to three academic years or the remainder of the student’s program, whichever is less.

Graduate PLUS Loan

Graduate PLUS Loans will no longer be available starting July 1, 2026. Students who already have Graduate PLUS Loans may continue to borrow under the previous limits for up to three academic years or the remainder of their academic program, whichever is less. To remain eligible, students must be continuously enrolled in the same program through graduation.

 

Federal Pell Grant Eligibility Changes

The following Pell changes take effect beginning July 1, 2026:

• Cost of Attendance Limit: Students whose scholarships, waivers, and other aid meet or exceed their full Cost of Attendance (COA) will no longer be eligible to receive a Pell Grant. This is a change from previous regulations, which allowed students in some circumstances to be fully funded with scholarship aid and still received their Federal Pell Grant on top.
• SAI Threshold: Students with a Student Aid Index (SAI) of 14,790 or higher (twice the maximum Pell Grant which is $7,395) will be ineligible to receive a Pell Grant.
• Excluded Assets: Assets from family businesses with 100 or fewer employees, family farms, and commercial fishing operations will be excluded from the SAI calculation.
• Foreign Income Inclusion: Foreign income will now be added to a student’s adjusted gross income (AGI) when determining Pell eligibility.

 

Change Overview

Incoming Freshman and Transfer Students: Incoming Fall 2026 Freshmen and Transfer students will fall completely under the new federal policy.

Undergraduate Loan Limits: Incoming Fall 2026 freshmen and transfer students will adhere to the new Federal Direct Loan limits as shown in the table below. Lifetime limits listed below exclude Parent PLUS.

Undergraduate Annual Loan Limits

Year in School	Dependent Students	Independent Students
First-Year Annual Loan Limit:	$5,500 - No more than $3,500 of this amount may be in subsidized loans.	$9,500 - No more than $3,500 of this amount my be in subsidized loans.
Second-Year Annual Loan Limit:	$6,500 - No more than $4,500 of this amount may be in subsidized loan	$10,500 - No more than $4,500 of this amount may be in subsidized loan
Third-Year and Beyond Annual Loan Limit:	$7,500 - No more than $5,500 of this amount may be in subsidized loan	$12,500 - No more than $5,500 of this amount may be in subsidized loan

 

Undergraduate Aggregate and Lifetime Loan Limits

Loan Limits	Dependent Students	Independent Students
Subsidized and Unsubsidized Aggregate Loan Limit:	$31,000 - No more than $23,000 of this amount may be in subsidized loans.	$57,500 - No more than $23,000 of this amount may be in subsidized loans.
Lifetime Loan Limit:	$257,500	$257,500

 

Parent PLUS Loans: Subject to new annual and aggregate borrowing limits per dependent student. These limits apply regardless of prior loan forgiveness, repayment, cancellation, or discharge. Parents (combined) may borrow $20,000 per year ($65,000 aggregate limit) per dependent student.

Schedule of Reduction for Loans: Beginning in the 2026-2027 academic year, all unsubsidized and subsidized annual loan amounts will be reduced based on enrollment status for those enrolled less than full time. Borrowers enrolled in less than full time will only be able to borrow loan amounts in direct proportion to their credit load, with a minimum half-time enrollment requirement.

Legacy Provision for Active Parent Plus Loan Borrowers: If the student or parent borrower received a Federal Direct Loan before July 1, 2026, while the dependent student was enrolled in their current academic program, Parent PLUS borrowing may continue under current loan limits for up to three academic years or the remainder of the student’s expected time to credential, whichever is less.

What’s Staying the Same
Many students currently enrolled as of Spring 2026 and Summer 2026, who have previously borrowed federal direct loans under their current program will fall under the legacy provisions.

Legacy Provisions: Allows current students or parents to temporarily continue to borrow under the prior federal loan rules and loan limits for 3 academic years or the remainder of their expected time to credential, whichever is less.

• Annual: $5,500-$12,500 (based on year and dependency status)
• Total: $31,000 (dependent) or $57,500 (independent)

Legacy Provisions Qualifications:

• A Federal Direct Loan is disbursed on or before June 30, 2026.
• Undergraduates may change majors if they remain at the undergraduate level.
• There is no withdrawal or break in enrollment.
• If you do not qualify for the legacy provisions, please see the Incoming Freshmen/Transfer Undergraduate Students section for more information about the changes to federal financial aid.

 

Frequently Asked Questions

When will the changes discussed on this page be implemented?

Most changes take effect starting July 1, 2026. That includes new loan limits, the phase-out of Grad PLUS, and changes to Pell Grant eligibility.

What is considered full-time?

Federal full-time status is 12 credits per semester for Undergraduate students, 9 credits per semester for Graduate students, and 12 credits per semester for Pharmacy students.

What is considered half-time enrollment?

Students must be enrolled at least in a half-time load of financial aid-eligible classes to receive a Federal Direct Loan in any given semester. The minimum number of credits per semester to be considered half-time is 6 credits per semester for Undergraduate students, 6 credits per semester for Graduate students for Fall/Spring or 3 credits per semester for Summer, and 6 credit hours for Pharmacy students.

If I am enrolled less than full-time, will that change the amount of my Federal Direct Loan that is disbursed to me?

Yes, borrowers enrolled in less than full time will only be able to borrow loan amounts in direct proportion to their credit load, with a minimum half-time enrollment requirement.

• Your eligibility will be determined just prior to disbursement for that term.
• The definition of full time for undergraduate students in an academic year is 24 hours (12 in Fall and 12 in Spring).
• The definition of full time for graduate students in an academic year is 18 hours (9 hours in Fall and 9 hours in Spring).
• Summer is a separate term for federal loan eligibility. Students must be enrolled at least half-time to be eligible for a loan in any semester.

What is the Schedule of Reduction Formula?

Any time a student is less than full time, we must follow this formula:

(number of credit hours enrolled for academic year (fall + spring) divided by number of credit hours
considered full-time for academic year (fall + spring)) × 100 = Loan Amount Eligibility (%)

For Fall and Spring aid periods, total credit hours enrolled include both Fall and Spring semesters, divided by 24 (if Undergraduate or Pharmacy) or 18 (if Graduate). This then equals the percentage you may borrow of the maximum loan limit.

Undergraduate Example: Student is eligible for $5,500 in federal direct subsidized loan and is a Junior Undergraduate who will enroll in 9 hours in Fall and 12 in Spring.
9 + 12 = 21
21/24 = 0.875 x 100 = 88%
$5,500 x 88% = $4,440 max loan offered
for an Undergraduate student enrolled in 9 hours in Fall and 12 hours in Spring.

Graduate Example: Student is eligible for $20,500 in federal direct unsubsidized loan. Student will enroll in 6 hours in Fall and 6 hours in Spring.
6 + 6 = 12
12/18 = 0.666 x 100 = 67%
$20,500 x 67% = $13,735 max loan offered
for a Graduate student enrolled in 6 hours in Fall and 6 hours in Spring.

What is a Schedule of Reduction or loan proration?

A Schedule of Reduction (SOR) is a process that the Financial Aid office uses to adjust and prorate a student’s annual federal loan amount based on enrollment level. It applies to students who are enrolled less than full‑time but still meet the minimum half‑time requirement for federal loan eligibility. When a student is not enrolled full‑time, the office must reduce the loan amount to match the student’s actual credit‑hour load.

Please note, if you drop below your enrolled credits after funds have disbursed but before the Census Date, you may be subject to retroactive loan reductions for the term, which can result in a balance owed. If you drop below your enrolled credits after the Census Date, it may impact future term eligibility.

How much can Undergraduates borrow under the new law?

The new law does not change the annual or aggregate loan limits for Undergraduate students.

What are the new borrowing limits for graduate students?

Starting in the 2026–27 Academic Year, new federal loan limits will apply to Graduate students.

Graduate students will be limited to the new loan limit of $20,500 annually with a program limit of $100,000. The program limit does not include Undergraduate loans. The lifetime federal loan limit is $257,500 which includes those who have borrowed a Graduate Plus loan, but this does not include Undergraduate Parent PLUS loans.

Since the Direct Graduate PLUS loans will be eliminated for new borrowers, what other options are available to me?

Private Educational Loans: These are offered by private lenders, banks, and credit unions. The terms can vary depending on the lender and normally require a credit check. It is important to compare interest rates, repayment terms, and borrower protection policies offered by each lender.

Are Graduate PLUS Loans no longer available?

Grad PLUS Loans are being phased out under the new law.

New Graduate students will no longer be eligible to borrow Grad PLUS for terms that begin on or after July 1, 2026.

If you’re already borrowing Direct Loans before July 1, 2026, you may continue to borrow Graduate PLUS Loans. To be eligible, you must be continuously enrolled in your current program of study.

Will parents still be able to borrow Parent PLUS Loans?

Yes, but starting July 1, 2026 new limits apply:

New Parent PLUS Loan Borrowers will be capped at $20,000 per year and $65,000 lifetime in PLUS borrowing per student. If both parents borrow on behalf of the same student, their combined borrowing is capped at $20,000 per year and $65,000 lifetime.

If you borrowed Parent PLUS Loans prior to July 1, 2026, you are eligible to borrow under the previous loan limits for the remainder of your student’s program or three years, whichever is shorter. The student must remain continuously enrolled in their current program. If the student takes a leave of absence or doesn’t complete a term, they will be considered a new borrower and subject to the new limits.

I’m already enrolled in a UT Tyler Degree program; will these changes affect me mid-program?

If you’re currently enrolled and participating in the student and/or parent federal loan programs at UT Tyler, there are no changes to the aid you’ve already received.

If you borrowed a federal student loan at UT Tyler for a term that began before July 1, 2026, you remain eligible to borrow under the previous loan limits for the duration of your current program or for three years (whichever is shorter), including Graduate PLUS loans.

If your parent borrowed a Parent PLUS loan at UT Tyler for a term that began before July 1, 2026, your parent remains eligible to borrow under the previous loan limits for the duration of your current program or for three years (whichever is shorter).

Can I forfeit my legacy borrower status and be considered a new borrower?

No, students who meet the legacy provisions may not forfeit their legacy borrower status and must continue to borrow under the current loan regulations prior to OB3.

Will I keep my legacy provision status if I change my major at the undergraduate level?

Yes. Undergraduates may change majors if they remain at the Undergraduate level and keep their legacy provision status for up to three academic years or the remainder of the student’s expected time to credential, whichever is less.

How do I know if I qualify under the legacy provision for Grad PLUS eligibility?

Currently active Graduate students, who have previously borrowed federal direct loans that were disbursed on or before June 30, 2026, under their current program will fall under the legacy provisions. To be eligible, you must be continuously enrolled in your current program of study.

By not enrolling in Summer Semester courses, will that be considered a break in enrollment and affect my Legacy Provision Status?

Not enrolling in summer courses is not considered a break in enrollment for OB3, as long as the student is enrolled for the preceding Spring term and the following Fall term, unless your program requires Summer enrollment.

Can I receive the Federal Pell Grant if I have other scholarships that cover my entire cost of attendance?

No. Effective July 1, 2026, students who receive grants or scholarships from non-federal sources covering their entire cost of attendance (COA) are ineligible to receive a Pell Grant, even if otherwise eligible for the program.

I am a Patriot Promise program eligible student. Will my Pell Grant be impacted by OB3 since my Tuition & Fees are covered?

The Patriot Promise program covers 100% of tuition and mandatory fees; however, it does not cover the full cost of attendance. Pell Grant eligibility will only be impacted if you receive non-federal grants or scholarships from non-federal sources (institutional, state, or private) that meet or exceed your Cost of Attendance.

Will these changes affect my merit scholarships?

No, federal loan and aid changes under the new law will not affect your scholarships. Scholarships are awarded and renewed based on university policies and program criteria.