Trump’s Financial Aid Changes: SAVE Plan, FAFSA, and Pell Grants

Federal student aid looks very different under the Trump administration than it did a year ago. The One Big Beautiful Bill Act, signed July 4, 2025, rewrote loan limits, repayment plans, and borrower protections. A March 2026 court order killed the SAVE repayment plan. An executive order directed the closure of the Department of Education. Taken together, the Trump student aid changes touch almost every borrower and applicant: graduate students face hard borrowing caps, current borrowers must pick a new repayment plan, and families filling out the FAFSA count assets differently. Here is what has actually changed and what you need to do about it.

New Borrowing Limits for Graduate and Professional Students

The biggest shift for graduate borrowers is the elimination of the Grad PLUS loan program. Grad PLUS let graduate students borrow up to the full cost of attendance, which is how six-figure debt loads for law, medical, and MBA programs became normal. That option is gone.¹

For loans covering the 2026–27 academic year and beyond, new federal borrowing limits are:

Graduate students: $20,500 per year, $100,000 aggregate cap.
Professional students: $50,000 per year, $200,000 aggregate cap.

If your program costs more than those caps allow, you will need scholarships, savings, employer tuition help, or private loans to cover the gap. Borrowers already enrolled and borrowing under the old rules keep their existing loan terms; only new borrowers face the new limits.¹

Part-time students also see reduced annual limits. The law scales annual borrowing proportionally to enrollment intensity, rounded to the nearest percentage point. Half-time enrollment means roughly half the annual cap of a full-time student.²

The SAVE Plan Is Gone. Pick a New Plan.

On March 10, 2026, a federal court struck down the SAVE Plan and blocked the Department of Education from using SAVE or REPAYE payment formulas.³ Borrowers who were enrolled in or had applied for SAVE were placed in administrative forbearance. That forbearance is not permanent, and interest continues to accrue while you sit in it.

If you are in SAVE forbearance, you need to choose a new plan. If you do not, your loan servicer will move you to one. Your current options are IBR, ICR, and PAYE for eligible borrowers. A new plan called the Repayment Assistance Plan (RAP) becomes available no later than July 1, 2026. The Loan Simulator at StudentAid.gov can estimate payments under each plan for your specific balance and income.³

The New Repayment Assistance Plan

RAP replaces SAVE as the flagship income-driven option. Monthly payments are a percentage of your adjusted gross income divided by 12, with a $50 deduction for each family member or dependent on your federal tax return. The minimum payment is $10. RAP includes an interest subsidy and a matching principal payment of up to $50 per month, so lower-income borrowers can still reduce their balance when their calculated payment is small. The repayment term runs up to 30 years.²

Income-Based Repayment Is Now Open to Everyone

IBR used to require a “partial financial hardship” test: your standard 10-year payment had to exceed your IBR payment. The One Big Beautiful Bill Act removed that test. All borrowers now qualify for IBR regardless of income. For loans made between July 1, 2014 and July 1, 2026, IBR payments stay at 10% of discretionary income with forgiveness after 20 years. Borrowers who consolidated a Parent PLUS loan can now enroll in IBR too, which was previously off-limits.²

A New Tiered Standard Plan

The standard repayment plan is no longer a flat 10 years. Timelines now scale with balance:

$25,000 or less: 10-year term.
$25,000 to $49,999: 15-year term.
$50,000 to $99,999: 20-year term.
$100,000 or more: 25-year term.

Larger balances get lower monthly payments and pay more interest over the life of the loan.

Public Service Loan Forgiveness Still Exists

PSLF is intact. After 120 qualifying monthly payments while working full-time for an eligible employer, your remaining federal balance is forgiven tax-free. Payments under RAP count toward the 120, as do payments under IBR and the new standard plan when the standard term is longer than 10 years.²

A March 2025 executive order directed the Department of Education to narrow the definition of “public service” for PSLF eligibility. The order proposes excluding employers the administration considers involved in aiding immigration violations, supporting terrorism, facilitating certain activities the order characterizes as child abuse, engaging in illegal discrimination, or violating state tort laws such as trespassing and vandalism.⁴ How broadly the Department applies those categories in rulemaking will determine the real-world impact. If you work for a nonprofit or government agency and are pursuing PSLF, watch for updates from your servicer about employer eligibility.

Borrower Defense Is Harder to Win

If a school defrauds you, federal law lets you seek forgiveness of the loans you took to attend. The One Big Beautiful Bill Act reinstates the 2020 Trump-era version of these rules for all loans originated before July 1, 2035, rolling back the more borrower-favorable Biden-era standards.²

Under the reinstated rules, you must prove three things: the school made a false statement about something important, you reasonably relied on that false statement when deciding to enroll, and you suffered financial harm as a direct result. The definition of financial harm is narrow. Simply having taken out a loan is not enough, and your claim fails if your losses were mainly caused by broader economic conditions or your own decision to change careers or work part-time. If you are attending a school with a questionable track record, document everything from the start: catalogs, marketing materials, promises made during enrollment, and job-placement claims.

FAFSA Changes for 2026–27

The 2026–27 FAFSA counts assets differently. Small businesses, family farms, and commercial fishing businesses are now excluded from the financial asset calculations. Families that own these operations will report lower asset figures and may qualify for more need-based aid.⁵ The exclusions apply to FAFSA forms submitted during the beta events that began August 5, 2025, and to all later submissions for the 2026–27 award year.

If your family runs a small business or farm, check that the FAFSA reflects the new rules and does not include business equity that is now excluded. The difference can be meaningful for Pell Grant eligibility and institutional aid.

Pell Grants Held Flat

The maximum Pell Grant for the 2025–26 award year is $7,395, and the 2026–27 maximum holds at that same amount for a fourth consecutive year.⁶⁷ Inflation continues to erode the value of that flat figure, but the maximum award itself has not changed. Administration budget proposals have targeted the Federal Supplemental Educational Opportunity Grant for elimination and Federal Work-Study for deep cuts, but Congress has not enacted those proposals as of this writing, so both programs continue to operate.

Endowment Tax and the American Academy

The One Big Beautiful Bill Act creates the American Academy, a federally backed online institution designed to offer tuition-free degrees and credentials focused on workforce skills. You would not file a FAFSA or take out federal loans to attend.

Funding comes from a new tiered tax on large private university endowments. The tax applies to private nonprofit institutions enrolling at least 3,000 students that hold endowment assets above $500,000 per student:

$500,000 to $750,000 per student: 1.4% tax on net investment income.
$750,001 to $2 million per student: 4% tax.
Above $2 million per student: 8% tax.

At the top tier, schools such as Harvard, Yale, Princeton, and Stanford would face substantial annual tax bills. Whether the American Academy will secure accreditation and employer recognition quickly enough to function as a real alternative remains open, but the funding mechanism is now law.

What the Department of Education Closure Order Means for You

On March 20, 2025, an executive order directed the Secretary of Education to take all steps permitted by law to facilitate the closure of the Department of Education and return authority over education to states and local communities. The order says services, programs, and benefits Americans rely on must continue without interruption during any transition.⁸

Fully closing the Department would require an act of Congress, and no such law has passed. Federal student aid programs are authorized by statute and continue until Congress changes them. In practical terms, the executive order has led to staff reductions and internal restructuring, but Pell Grants still flow, loan servicers still operate, and the FAFSA is still processed through StudentAid.gov.

1
U.S. Department of Education. U.S. Department of Education Concludes Negotiated Rulemaking Session to Implement One Big Beautiful Bill Acts Loan Provisions
2
Federal Student Aid. Federal Student Loan Program Provisions Effective Upon Enactment Under One Big Beautiful Bill Act
3
Federal Student Aid. IDR Plan Court Actions: Impact on Borrowers
4
The White House. Restoring Public Service Loan Forgiveness
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Federal Student Aid. One Big Beautiful Bill Act Updates
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Federal Student Aid. 2025-2026 Federal Pell Grant Maximum and Minimum Award Amounts
7
Federal Student Aid. Dont Miss Out on Federal Pell Grants
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The White House. Improving Education Outcomes by Empowering Parents, States, and Communities