Introduction to New Federal Loan Regulations
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Important changes to federal student loan programs are coming.
New Legislation enacted in July 2025, made significant modifications to the Federal Direct Loan programs beginning with the 2026–2027 academic year (effective July 1, 2026).
While there are no changes to federal student loans for the 2025–2026 academic year, the new law introduces changes to how students and families finance higher education.
The University of Pennsylvania (Penn) is continuing to track all of these changes and plans to update this site as more clarification from the Department of Education is released. In the meantime, please note:
- There are no changes to financial aid for the 2025–2026 academic year stemming from this legislation.
- Students starting graduate school before July 1, 2026, may still be eligible for the Grad PLUS loan under legacy rules (see below).
Student Financial Aid is here to help. If you have questions or would like to speak with a financial aid staff member, please click here for contact information.
Important disclaimer: The information contained on this page is provided by Penn to orient students to the changing landscape of federal student loan programs. While it is based on our understanding of the evolving federal standards, it is not official guidance and should not be regarded by students as definitive. Students should refer to federal governmental sources for official guidance. See studentaid.gov for more information.
Types of Federal Loan Borrowers
Beginning July 1, 2026 – federal student loan borrowers will fall into two categories: legacy and new.
New borrower: A person with no federal loans taken out prior to July 1, 2026 or someone who has paid their prior federal loans in full.
Legacy borrower: A person who has had a federal loan disburse prior to July 1, 2026, and will be enrolled in the same degree for the 2026-2027 academic year.
Eligibility:
- New borrowers will be eligible for the federal direct subsidized / unsubsidized loan / Parent PLUS loan
- Legacy borrowers will be eligible for the subsidized / unsubsidized loan and the Graduate PLUS loan / Parent PLUS loan
New Parent Plus Loan Limits for new borrowers, effective on or after July 1, 2026
Effective July 1, 2026, the Parent PLUS loan program annual and aggregate borrowing caps per dependent student are as follows:
- Annual limit: Parents can borrow up to $20,000 per academic year per student
- Aggregate limit: Total lifetime borrowing cap is $65,000 per student
Graduate and Professional borrowing limits for new borrowers, effective on or after July 1, 2026
New regulations regarding Graduate/Professional level borrowing under the Direct Unsubsidized Loan program that are effective July 1, 2026:
Graduate Student (Masters, PhD)
- Direct Grad Plus Loan is no longer available
- Annual Direct Unsubsidized Loan Limit: $20,500 per academic year
- Aggregate Unsubsidized Lifetime Limit: $100,000 total (does not include any Undergraduate borrowing)
- Total Lifetime Cap of $257,500 for all new borrowers in the federal loan programs (undergraduate, graduate and professional loans combined but excluding Parent Plus Loans)
Professional Students (JD, VMD, MD, DMD)
- Direct Grad Plus Loan is no longer available
- Annual Direct Unsubsidized Loan limit: $50,000 per academic year
- Aggregate Lifetime Limit: $200,000 total, does not include undergraduate borrowing
- Total Lifetime Cap of $257,500 for all new borrowers in the federal loan programs (undergraduate, graduate and professional loans combined but excluding Parent Plus Loans)
Key Changes to Federal Student Loans effective July 1, 2026
| Annual Loan Limits | Aggregate Loan Limits | |||
| Type of Loan | Legacy | After July 1, 2026 | Legacy | After July 1, 2026 |
Undergraduate – Dependent Direct | $5,500 - $7,500 | $31,000 | ||
| Undergraduate – Independent Direct | $9,500 - $12,500 | $57,000 | ||
Undergraduate – Parent PLUS Loan | Up to Cost of Attendance minus other aid | $20,000 | Up to Cost of Attendance minus other aid | $65,000 for each dependent student |
Graduate – Unsubsidized Direct | $20,500 | $20,500 | $138,500 | $100,000 (Not Including undergraduate loans) |
Graduate – Health Professional and Professional Direct (DMD,VMD,JD,MD degrees only) | $20,500 - $47,167 | $50,000 | $224,000 | $200,000 (Not Including undergraduate loans) |
| Grad PLUS Loan | Up to Cost of Attendance minus other aid | No new borrowers | Up to Cost of Attendance minus other aid | No new borrowers |
| Lifetime Borrowing Cap for All federal loans except Parent PLUS | No lifetime borrowing caps | No lifetime borrowing caps | $257,500 | |
No changes were made to the structure or availability of these loans. Students will continue to access Direct Subsidized and Unsubsidized Loans under existing rules. Click here to view existing borrowing limits.
Beginning July 1, 2026, Parent PLUS Loan borrowing is capped at:
• $20,000 per child per academic year
• $65,000 total lifetime per child
If a student or parent borrowed direct loans prior to July 1st, 2026, the parent could qualify for PLUS loan borrowing under the legacy rules for up to 3 years or until the student completes the current credentialed program, whichever is sooner.
No, as an incoming undergraduate student with no prior direct loan borrowing, your annual and aggregate limits will be under the new borrowing rules.
No, as an transfer undergraduate student your annual and aggregate limits will be under new borrowing rules.
Yes, the chart above illustrates the borrowing caps that will apply to federal unsubsidized loans and total lifetime limits.
No, the Graduate PLUS Loan program is no longer available for new borrowers, effective on or after July 1, 2026.
No, the chart above illustrates the borrowing caps that will apply to federal unsubsidized loans and total lifetime limits.
If the student borrowed direct loans prior to July 1st, 2026, the student could qualify for graduate PLUS loan borrowing under the legacy rules for up to 3 years in the same program or until the student completes their current credentialed program, whichever is sooner.
Changing my academic program is defined as transitioning to a different graduation credential. (i.e. BA, BS, MA, MS, PHD, etc.)
Under the new federal regulations, students who began borrowing federal students Loans before July 1, 2026, may keep “legacy eligibility,” which allows borrowing under the old rules for up to three additional years or until completing their current credentialed program, whichever is sooner. This legacy status requires continuous enrollment in the same graduation credentialed program.
A change in graduation credential program can impact legacy status, generally ends legacy eligibility, and places the student under the new borrowing limits.
For example, if you change your academic program from a MD to MPH you will lose legacy status.
Yes, withdrawing, leave of absence or stopping enrollment for any reason ends legacy eligibility immediately.
