New Pell Grants Limits

Pell Grants are the free money the government gives to American students who need financial help. Starting in fall 2026, the rules are getting much tougher.

If you want the full Pell Grant, you now need to take at least 15 credits per semester (that's typically 5 classes instead of 4). The old standard of 12 credits for full-time status no longer qualifies you for the maximum aid. Even more concerning, if you are taking fewer than 7 credits, you get nothing at all. Previously, part-time students could still get some aid, but that safety net is disappearing.

Middle-class families are also getting squeezed out by a new income cutoff. Starting in July 2025, families with household incomes typically around $60,000 to $80,000 will lose Pell Grant eligibility entirely, though the exact amount varies based on family size and assets. Previously, these middle-income families could still receive partial Pell Grants, but now there is a hard cutoff that eliminates aid for families above the income limits. 

However, there is one new upside coming with the new law: you can now use Pell Grants for job training programs like welding or coding bootcamps, as long as they are between 150 and 600 hours long.

What You Should Do

Plan to take 15 credits each semester if you want full financial aid. This might mean a heavier course load, but it is the only way to get maximum help. Whatever you do, don't drop below part-time status (7 credits) or you will lose your Pell Grant completely. If you are interested in learning trade skills instead of a traditional degree, look into those new job training programs starting in 2026.

New Parent PLUS loan limits

To understand why this matters so much, consider what students can borrow on their own: dependent students can only borrow $5,500 to $7,500 per year in federal loans, with a lifetime limit of $31,000 for undergraduates. When college costs $30,000 to $80,000 per year at many schools, that leaves a massive gap that Parent PLUS loans currently fill by allowing parents to borrow pretty much whatever college costs. That system—where parents could borrow up to the full cost of attendance—is coming to an end under the new bill, which will cap how much parents can take out in loans for their children. 

What's Changing

Starting July 2026, parents will only be able to borrow $20,000 per year and $65,000 total per child. This is a massive reduction from the current system where parents could borrow up to the full cost of attendance.

But here is the exception: If you take out even one Parent PLUS loan before July 2026, you can keep borrowing under the old rules for three more years. This "grandfather clause" could save families tens of thousands in borrowing capacity. Additionally, if you already have Parent PLUS loans, you need to consolidate them and sign up for income-driven repayment plans by July 2028 to keep flexible payment options that are disappearing for new borrowers.

What You Should Do

The grandfather clause creates a difficult decision for families. While taking out a Parent PLUS loan before July 2026 would preserve your ability to borrow under the current unlimited system for three more years, this strategy comes with significant risks. You would be taking on debt earlier than necessary, and there is no guarantee you will actually need the higher borrowing limits later. Only consider this option if you are absolutely certain your family will need substantial loans and you have exhausted other funding sources first.

More importantly, put July 2026 and July 2028 on your calendar as critical deadlines you cannot miss if you already have Parent PLUS loans. These dates determine whether you keep flexible repayment options, since these are disappearing for new borrowers.

If your child starts college in fall 2026 or later, focus on building alternative funding strategies now. Start saving more aggressively, research merit scholarships early, and explore schools with lower costs or better financial aid packages. Consider whether community college for the first two years makes financial sense for your family.

No More Federal Loans for Grad School 

Graduate students are facing the most dramatic changes under this new law. The federal government is essentially getting out of the business of funding unlimited graduate education.

What's Changing

The Grad PLUS loan program, which allowed graduate students to borrow up to the full cost of attendance, is being eliminated entirely. Instead, you will only be able to borrow $20,500 per year in federal Direct Unsubsidized loans. There are also new lifetime limits: $100,000 for most graduate degrees and $200,000 for professional degrees like medical school or law school.

Many graduate programs cost far more than these limits. A typical MBA program or medical school could easily cost $200,000 to $300,000, but federal loans will only cover a fraction of that expense.

What You Should Do

Start by looking up exactly how much your intended graduate program costs and comparing it to these new federal limits. The gap between cost and available federal aid might be enormous. You will need to get creative about funding: research scholarships and fellowships aggressively, apply for graduate assistantships that provide tuition waivers, look into employer tuition reimbursement programs, and understand that private student loans may become necessary.

Most importantly, apply for funding opportunities early since many scholarships and assistantships have deadlines months before school starts. 

New Rules for Schools
The law doesn't just target students and families - it also puts pressure on colleges themselves through new taxes, accountability measures, and transparency requirements.

What's Happening
Wealthy colleges will pay much higher taxes on their investment earnings, with rates ranging from 1.4% to 8% depending on their endowment size. Schools also face new performance standards: any academic program whose graduates earn less than the average high school graduate for two out of three years could lose access to federal financial aid entirely. Additionally, colleges must now publish detailed information about costs, graduation rates, financial aid packages, and how much graduates earn by program.

What This Means for You
Expect schools to shut down programs with poor job prospects rather than risk losing federal aid eligibility. More resources will shift toward majors that lead to good-paying jobs. The upside is that yo w'll have much better information to compare schools and programs, making it easier to choose options that provide good value for your investment.

The smartest approach is to minimize or eliminate student loans altogether. College debt can burden you for decades, and with these new restrictions making federal loans harder to get, it is more important than ever to explore alternatives.

Loan-free Financing Strategies

Start with community college for general education requirements, then transfer to a four-year school to cut costs dramatically. Look for schools that offer generous merit scholarships based on your grades and test scores, not just financial need. Apply for countless scholarships - even small $500 awards add up, and many go unclaimed each year. Choose in-state public universities where you will pay significantly less than private or out-of-state schools.

Work while in school through campus jobs, internships, or part-time employment, and consider cooperative education programs where you alternate between studying and working in your field. Some employers offer tuition reimbursement programs, so you could work full-time and attend school part-time with your company paying the bills. Military service through ROTC programs or enlisting can provide full college funding through programs like the GI Bill.

Don't overlook alternative paths like trade schools, apprenticeships, or professional certifications that cost far less than traditional college but still lead to well-paying careers. Many successful people have built careers without traditional four-year degrees.

However, if you do decide that borrowing is necessary for your educational goals, understanding these new rules becomes critical. These changes are significant, but they are not insurmountable if you start preparing now and make informed decisions about college financing.

This law makes the biggest changes to American college funding in decades. Most changes mean less help from the federal government, so families will need to be much smarter about planning and finding alternative ways to pay for college. The good news? If you know what is coming, you can prepare. The families and students who act early, explore all their options, and adapt their strategies will be in the best position when these changes take effect in 2026.

Questions about how this affects your specific situation? Feel free to ask - we can help you think through the numbers and options for your family.