By Megan Walter, Senior Policy Analyst

Updated May 1, 2026: This article was updated to correct language related to the interim exception eligibility for students whose schools closed or merged.

On Friday, the Department of Education (ED) issued its final rule detailing changes to the federal student loan programs under the One Big Beautiful Bill Act (OBBBA). While ED responded to over 80,000 comments, including NASFAA’s, received in response to the proposed rule issued in January, it made few changes to the regulatory language agreed upon during the fall 2025 negotiated rulemaking session.

One of the more significant clarifications in the final rule concerns the new lifetime maximum loan limit. ED amended the proposed rule text to explicitly state that the “lifetime maximum aggregate amount of loans made, insured, or guaranteed … that a student may borrow, shall be $257,500, excluding Federal Direct PLUS or Federal PLUS loans made to that student as a parent on behalf of another dependent undergraduate student.” This change makes clear that Graduate PLUS loans are to be counted against the lifetime maximum limit, and reflects a recent shift from the position the department had communicated in its proposed rule and in earlier trainings and other communications since the conclusion of negotiated rulemaking, where it was stated that Graduate PLUS was excluded from the lifetime borrowing cap.

ED also made a technical change to ensure clarity that prior subsidized loans received as a graduate student are reflected in the graduate aggregate limit calculation, bringing that provision into alignment with the language in place for professional students, and a fix that NASFAA had identified and flagged. While graduate and professional students lost the ability to borrow subsidized loans in 2012, if a borrower subject to the new aggregate limits had borrowed subsidized loans prior to 2012 for graduate or professional study, those subsidized loans would count toward the graduate and/or professional aggregate limits for students subject to those limits.

The final rule also added specific regulatory language addressing how the schedule of reductions (SOR) for student loans for less-than-full-time enrollment applies to subscription-based programs, a question NASFAA had raised in its comments and asked ED to address. The new language specifies that for the first and second subscription periods, institutions must apply the SOR based on the student’s enrollment status and the number of credit hours the institution has calculated for the student to complete before receiving subsequent disbursements. For the third subscription period, and any following periods, the institution treats the student as enrolled full-time in a non-term program, effectively removing the SOR requirement from that point forward.

Related to the SOR, in response to NASFAA’s concerns about the potential for double-proration, where students could be subject to both the new SOR for less than full-time enrollment and the existing requirement to prorate loans for programs that are shorter an academic year or for students only enrolled in their final period of study shorter than an academic year, could see their loans reduced twice, ED declined to make changes. The department argued that “the rule will not reduce the same amount twice for the same reason,” explaining that less-than-full-time enrollment affects the size of the annual cap, while the loan period and payment periods affect how that cap is distributed or limited. ED maintained that because those two steps address different questions, their combined application does not constitute double proration. NASFAA is still seeking clarification on this point.

There were multiple comments about the SOR provision, including requests for more examples that cover scenarios such as one-term graduating borrowers, transfers, quarter calendars, summer trailers, variable enrollment, non-standard terms, modules, dropped/withdrawn/failed coursework, and incomplete grades. The department, in its response, said that it has been working on scenario guidance and committed to a resources page with FAQs and additional examples to address some of the concerns. They added that they will not make any additional changes to the final language, as they believe it sufficiently addresses all scenarios.

Notably, ED explicitly addressed what constitutes a change in the program of study for purposes of the interim exception for graduate and professional-level students. While not included in the regulatory text itself, ED confirmed in its preamble text to the final rule that graduate and professional students who shift within the same 4-digit CIP code, at the same credential level, and at the same institution, are not considered to have changed program of study and would remain eligible for the limited exception. This would allow students to change concentration within the same degree program without losing limited exception protection.

The final rule also changed the process for rehabilitating defaulted loans. Beyond the new statutory requirement to permit defaulted borrowers two opportunities for rehabilitation, ED also amended its regulations to allow for a defaulted borrower to transition directly to an IDR plan once they have completed the required rehabilitation payments. This will be possible through the addition of a single rehabilitation and IDR application that will allow the borrower to request IDR on their rehabilitation application, eliminating the two-step application process. 

The rule also clarified what counts as a rehabilitation attempt for purposes of the new requirement, allowing two lifetime opportunities to rehabilitate a defaulted loan. ED clarified that an attempt that does not result in the loan returning to good standing does not count against the two lifetime rehabilitation attempts, meaning that if a borrower makes several qualifying payments but ultimately does not complete the rehabilitation process, that incomplete attempt is not tallied as one of the borrower’s rehabilitation attempts. ED also confirmed that participation in the Fresh Start program does not count as a rehabilitation attempt, as stated during the negotiated rulemaking session.

In response to a commenter’s reading of the OBBBA, ED amended the regulatory text to disallow payments under the new income-driven repayment plan, the Repayment Assistance Plan (RAP), from counting toward a borrower's time-based forgiveness under the Income-Based Repayment (IBR) plan. This means that for borrowers who move from IBR to RAP and then back to IBR for any reason, the payments made while in RAP will not be credited toward IBR forgiveness, and will be lost as progress toward time-based forgiveness.

Even though a significant portion of the discussion in the preamble addressed comments related to the professional degree, ED opted not to expand the list of degree programs it deemed professional for purposes of eligibility to borrow at higher unsubsidized loan limits. ED noted in the preamble that it believes its analysis is sound but brought up the concept of severability, stating that “if a court disagrees with our analysis, we believe and intend that this portion of the regulation is entirely severable,” meaning that even if successfully challenged in court, a change to the professional degree definition would not affect the rest of the final rule.

NASFAA noted in its comments that the OBBBA did not require students to remain continuously enrolled to maintain eligibility for the limited exception to the new borrowing limits and requested that ED remove that regulatory stipulation. However, ED declined to amend that regulatory text.

NASFAA had also asked ED to explicitly address the limited exception for students enrolled in combined degree programs, such as a 3+2 Bachelor's/J.D. program. NASFAA's position was that these students should remain eligible for the limited exception for the full duration of the program, up to the three-year cap. ED addressed combined undergraduate-to-graduate degree programs by stating that students would qualify for the limited exception for these programs "since this dual degree program is considered a single program of study," but did not specify what constitutes a single program of study or whether that simply means maintaining the same CIP code throughout. Regarding dual graduate or professional degrees, ED provided more detail, noting that eligibility for the interim exception in such programs depends on the program's structure. If the dual degree program is treated as a single program that grants two degrees upon completion, enrolled students who received a Direct Loan prior to July 1, 2026, will maintain eligibility for the interim exception during their expected time to credential. If students enroll in one program for some number of years and then enroll in the other for the remaining years, they would lose eligibility for the limited exception when changing programs. While this guidance offers some clarity for dual graduate and professional degree programs, it still leaves questions regarding undergraduate-to-graduate combined degree programs that NASFAA will continue to seek answers on.

ED addressed limited exception eligibility for Parent PLUS borrowers when an undergraduate student transfers from an associate's program to a bachelor's program at a different institution, stating these borrowers would not qualify for the limited exception. ED’s reasoning is that they will “treat the transfer to a four-year institution as enrolling in a new program of study,” meaning the parent of an undergraduate student will be subject to the new Parent PLUS Loan annual and aggregate limits once the student transfers to the new school. ED goes on to state this is the case “even if the student is under an articulation or transfer agreement or if an associate degree has not been awarded at the time of transfer.” This is contrary to guidance provided during a 2026 FSA Training Conference session, in which ED stated that parent borrowers of students in these types of articulation agreements would remain eligible for the limited exception.

ED also clarified that the existing regulatory text allows for students whose institution’s location is realigned after a merger, two-step change in ownership, or campus reaffiliation to qualify for the interim exception.

Several commenters requested a delay to the rule’s effective date, but ED declined. In response, the department pointed to the timeline since the legislation’s enactment, noting that “affected stakeholders will have had nearly a year since enactment of the Working Families Tax Cuts Act [the department refers to the OBBBA using this name] to assess the potential effects of the statutory provisions and to begin planning any necessary policy and operational changes.”

The final rules also drew objections from commenters who raised concerns about changing loan terms for borrowers who had already agreed to borrow under previous conditions. In response, ED pointed to the Master Promissory Note (MPN), noting that by signing the MPN, borrowers acknowledged that the terms and conditions of their loans may be changed and that “any changes or amendments to the HEA could change the terms of the MPN and the MPN would still be valid”. They also added that changes to the HEA apply based on the amendment's effective date rather than the date of the MPN, meaning amendments may modify or remove benefits that existed at the time a borrower originally signed.

The majority of the rule's provisions take effect July 1, 2026. Provisions related to rehabilitation, deferment, and forbearances are effective July 1, 2027, and the sunsetting of certain repayment plans is effective July 1, 2028.

Publication Date: 5/1/2026