Changes to Federal Financial Aid
New Students: First year, transfer, and graduate students starting after June 30, 2026, will be subject to the new program policies.
Returning Students: You may qualify for legacy provisions, allowing you to complete your current program under previous financial aid policies if you borrowed federal student loans before July 1, 2026.
Our office is actively reviewing the legislation and will continue to update this page as additional guidance becomes available from the U.S. Department of Education and other federal agencies.
Loan Proration for less than full-time students
Beginning with the 2026-27 academic year, your annual federal Direct Loan amount may be reduced if you are enrolled less than full time at the time your loan disburses. This federal requirement is called the Schedule of Reductions (SOR).
Who is affected?
- Students receiving Direct Subsidized Loans, Direct Unsubsidized Loans, and Graduate PLUS Loans who are enrolled in fewer than 12 units.
Example:
A student enrolled in 18 credits during the academic year would be enrolled at 75% of full-time status (18 ÷ 24 = 75%), and their annual loan eligibility may be adjusted accordingly.
Withdrawing or Taking an Educational Leave
The federal legacy provision requires continuous, uninterrupted enrollment. If you withdraw from UC Merced or take a break and return after July 1, 2026, you will lose your legacy status and become subject to the new OBBBA loan caps.
This strict federal rule applies to all forms of enrollment separation, including:
- Approved Educational Leaves
- Complete Withdrawals
Before planning a break or completely withdrawing from a term, we strongly recommend speaking with a financial aid advisor to understand exactly how your future loan limits will be impacted.
Parent PLUS Loans
Effective July 1, 2026
- Parents can borrow up to $20,000 per student each academic year.
- The maximum lifetime borrowing limit a parent can borrow per student is $65,000.
If a parent's loan is first disbursed before July 1, 2026, they may continue borrowing under the previous repayment rules for the rest of the student's current academic program, as long as the student:
- remains in the same major,
- does not start a new program of study, and
- maintains full-time enrollment status.
Graduate Plus Loans
Effective July 1, 2026
- The Grad PLUS loan will no longer be available for new borrowers
- New annual federal loan limits
- Up to $20,500 for graduate students
- Up to $50,000 for professional students
- Students who borrowed Grad PLUS Loans before July 1, 2026, may still qualify under transition rules, subject to these lifetime borrowing limits:
- Up to $100,000 for graduate students
- Up to $200,000 for professional students
Student Loan Repayment
The repayment options available after you graduate depend on when you first borrow a federal student loan.
For loans first borrowed on or after July 1, 2026, you'll have two federal repayment options:
- Standard Repayment Plan: Fixed monthly payments over a set repayment period.
- Repayment Assistance Plan (RAP): Monthly payments are based on your income and family size, with a minimum payment of $10 per month.
If you borrowed federal student loans before July 1, 2026:
Most existing repayment plans remain available. However, borrowers enrolled in certain current repayment plans may be required to transition to a different repayment plan by July 1, 2028.
What can students do now?
No immediate action is necessary but planning ahead can help.
- Review your financial aid and borrowing plans for the academic year.
- If you are considering borrowing federal loans, keep in mind the new rules and limits take effect for loans first disbursed on or after July 1, 2026.
Questions?
The Office of Financial Aid and Scholarships is available to help you understand how these federal changes may affect your financial aid and borrowing options. Contact our office or visit our drop-in hours for assistance.
