Breaking down the OBBBA: impacts on Workforce Pell Grants and PLUS Loan limits

Months have now passed since the One Big Beautiful Bill Act (OBBBA) was signed into law, with plenty of news coverage to go with it. Amid all the headlines that seemingly don’t relate to the higher education field, the OBBBA’s impacts on Pell Grants and PLUS Loans certainly do. There will be a new form of grant for students in job training programs called Workforce Pell Grants, and the requirements for PLUS Loans will change. Higher education administrators should understand the operational significance these policy shifts will have on their institutions, which take effect starting July 1, 2026.

Workforce Pell Grants

This new form of Pell Grant provides expanded access to federal financial aid for students in short-term job training programs. Unlike traditional college degrees, these programs are for credentials and certifications – often faster and more affordable routes to in-demand careers. Workforce Pell Grants aim to more quickly fill these workforce needs.

Program eligibility criteria

To qualify for Workforce Pell funding, a program must:

• Be offered at an accredited, Title IV-eligible institution
• Be eight to 15 weeks long and offer 150 to 599 instruction hours
• Be reviewed by a state workforce board, recognized accreditor or appropriate federal agency
• Meet the state workforce board’s definition of a high-skilled, high-wage or in-demand occupation
• Lead to a postsecondary credential
• Require the program administrator to report student outcomes, including completion rates, job placement and median earnings

Eligible program category examples

Program categories that may meet Workforce Pell criteria include:

• Skilled trades: construction, plumbing or electrical work
• Healthcare: nursing assistants or medical technicians
• Information technology: coding, cybersecurity or IT support
• Advanced manufacturing: manufacturing processes and technologies

Student eligibility and award amounts

The introduction of Workforce Pell Grants does not change a student’s normal eligibility for Pell Grants. It expands access by allowing students to use Pell funds for eligible short-term programs. Previously, the main federal aid option for these programs was the Direct Loan program, along with the repayment and default concerns that came with it. Workforce Pell Grants will be prorated based on the maximum Pell amount set forth by the Department of Education each award year. The award amount depends on the number of clock or credit hours and the program’s length.

Key student considerations

• Workforce Pell usage counts toward the lifetime Pell eligibility limit (12 semesters)
• Students with a bachelor’s degree (but not a graduate degree) may qualify if they have unused Pell eligibility
• Students cannot simultaneously receive both Workforce Pell and regular Pell Grants

Institutional readiness and risks

Institutions considering Workforce Pell participation must consider their readiness and potential risks. Programs must meet all eligibility criteria and must have been in operation for at least one year. This means that a program must have been running by mid-2025 to be eligible when Workforce Pell funding launches in July 2026.

Many institutions may already have systems in place to track student outcomes like job placement and earnings due to existing state or accreditation requirements. But Department of Education timelines may not align with state or accreditor reporting requirements, and meeting federal benchmarks could be difficult – especially if relevant labor market demand declines. 

Institutions with existing short-term programs (under 600 clock hours) that already participate in the Federal Direct Loan Program may find Workforce Pell to be right up their alley and an opportunity to reduce student loan debt. For schools new to short-term programming, additional administrative burdens should be considered, including:

• Additional reporting requirements
• Accountability for meeting 70% completion and 70% job placement thresholds
• Uncertainty around future guidance or rulemaking

While careful planning and consideration is essential, the expansion of Pell Grant eligibility to short-term programs can benefit all parties: students, institutions and employers.

Direct PLUS Loans

Direct PLUS Loans are federal loans from the Department of Education designed to help cover education expenses not covered by other financial aid. They are available to two borrower groups:

• Graduate or professional students borrowing for their own education (Grad PLUS Loans)
• Parents of dependent undergrad students (Parent PLUS Loans)

Key changes for the 2026–2027 award year

Starting with the 2026-2027 award year, these changes will take effect:

• Grad PLUS Loans will be phased out 
• New loan limits will apply for graduate and professional students 
• Parent PLUS Loan limits will change
• New federal loan repayment plans will be implemented

Grad PLUS Loan changes

Starting July 1, 2026, new graduate and professional students will no longer be able to borrow Grad PLUS Loans. Students enrolled in 2025-2026 or earlier may continue borrowing Grad PLUS Loans for up to three more years or until graduation, only if they do not change programs. For these purposes, “graduate student” is defined as a student pursuing a master’s or doctoral degree. A “professional student” is pursuing a professional license.

New loan limits for graduate and professional students

The new loan limits for graduate and professional students are:

• Graduate students:
  • $20,500 per academic year
  • $100,000 lifetime
• Professional students:
  • $50,000 per academic year
  • $200,000 lifetime

Parent PLUS Loan changes

New loan limits for undergraduate Parent PLUS Loans are as follows:

• $20,000 per academic year
• $65,000 lifetime

Beginning with the upcoming academic year, parents who borrowed during the 2025-2026 academic year or earlier can continue under the current limits for up to three more years, or until their student graduates.

Federal loan repayment changes

For new federal loan repayment plan loans disbursed after July 1, 2026:

• A new Repayment Assistance Program (RAP) will replace income-driven repayment plans. 
• Borrowers can choose between:
  • RAP
  • A standard 10-year repayment plan
  • A standard 25-year repayment plan

For those loans disbursed before July 1, 2026:

• Borrowers can remain in existing income-driven repayment plans (e.g., IBR, PAYE, SAVE) if they enroll by June 30, 2028. 
• Students unenrolled by this deadline will automatically move to RAP.

Schools should advise borrowers to contact their loan servicer or review Department of Education materials for the most up-to-date repayment information.

Next steps

We’re in the middle of the 2025-2026 award year, but the 2026-2027 Free Application for Federal Student Aid (FAFSA) form is already available. Students and institutions should take proactive measures to prepare for upcoming changes.

For students:

• Encourage your students to complete the FAFSA to determine eligibility for grants and loans. 
• Inform them about significant changes to federal financial aid programs that may impact: 
  • Eligibility requirements 
  • Loan options
  • The types of programs they can pursue with federal support
• Advise your students to review current and future program plans with their academic advisor or the financial aid office.

For institutions:

Stay aware of forthcoming official guidance from the Department of Education. Begin preparing now by:

• Conducting staff trainings on new eligibility criteria, loan limits and compliance reporting
• Updating financial aid policies, counseling materials and internal processes
• Communicating proactively with students and parents about upcoming changes to financial aid and repayment options

The next award year is just around the corner. Early preparation ensures that your institution can support students while staying compliant with evolving federal requirements. Contact us for consulting on your Title IV needs from experienced compliance auditors.

More OBBBA analysis can be found on our OBBBA resource hub.