FAFSA Updates

Starting in 2026, the way students get and repay federal financial aid is going to look a lot different. These changes come from a new law called the One Big Beautiful Bill Act. Here’s a clear breakdown so you know what’s coming and how it might affect you.

1. Pell Grants

• Extra Funding: The government is adding $10 billion to keep Pell Grants fully funded. (Maximum Pell $7,395)
• Workforce Pell Grants: Starting July 1, 2026, short career-focused programs (8–15 weeks long, 150–600 hours) may qualify for a special “Workforce Pell.” These must:
  • Lead to a credential that works across multiple employers or prepares you for a specific entry-level career.
  • Have at least a 70% completion rate and 70% job placement rate.
  • Be approved by your state’s governor as meeting in-demand job needs.
  • Be affordable compared to the earnings boost it gives.
  • You can’t get a regular Pell and a Workforce Pell at the same time.

2. Federal Student Loans

Changes effective July 1, 2026:

• Parent PLUS Loans – capped at $20,000 per year and $65,000 total per child.
• Grad/Professional Loans – annual caps of $20,500 (grad) or $50,000 (professional); total caps of $100,000 and $200,000.
• Overall Lifetime Limit – $257,500 across all federal student loans (Parent PLUS not included in this total).
• Schools Can Set Lower Limits – colleges can choose to lower borrowing limits for entire programs.
• Loan Proration – loans will match your enrollment level (full-time vs. part-time).
• Legacy Provision –  If the student or parent borrower has a Federal Direct Loan made before July 1, 2026, while the dependent student is enrolled in a program of study or a credentialed  program, the parent can continue to borrow under current loan limits for 3 academic years or the remainder of their dependent student’s expected time to credential, whichever is less.

3. Loan Repayment

For new loans after July 1, 2026:

• Only two repayment options:
  • New Standard Plan – fixed payments over 10, 15, 20, or 25 years (based on loan size).
  • New Income-Based Repayment Plan (RAP) – payment is 1–10% of income (based on AGI), with discounts for dependents and no interest piling up faster than you pay.
• Current borrowers can keep their old plans for now, but some plans will be phased out by 2028.
• Parent PLUS loans taken after July 1, 2026, must use the Standard Plan.

4. FAFSA & Eligibility

Starting with the 2026–27 school year:

• Family Farms, Small Businesses, and Fisheries – assets won’t count against you in aid calculations.
• Foreign Income – must be counted when figuring Pell eligibility.
• Full Scholarships – if non-federal grants & scholarships fully cover your cost of attendance, you can’t also receive a Pell Grant.
• High Student Aid Index (SAI) – no Pell Grant if your SAI is more than double the max Pell award ($14,790).

5. Other Changes

• Borrower Defense & Closed School Discharge – stricter rules delayed until 2035.
• Private College Endowment Tax – higher rates for very wealthy schools (based on per-student endowment).
• Deferment & Forbearance – starting in 2027, fewer options and shorter time limits.
   

Bottom Line

If you’ll be in college or grad school in 2026 or later, these changes will affect how much you can borrow, how you repay, and in some cases, whether your program qualifies for aid. Parents of future students should pay close attention to the new loan caps and repayment rules.

MSUN's Financial Aid Office will continue to provide updates on the changes affecting federal student aid as more information becomes available. You may also go to https://www.nasfaa.org/ob3 for more in-depth information.

Major changes came to the Free Application for Federal Student Aid (FAFSA) for the 2024-25 academic year! The FAFSA Simplification Act was passed by Congress in 2020 and represents one of the biggest changes to federal student aid in over 40 years. Among other things, it has required a complete rewrite of the FAFSA application and processing system.

Changes and Highlights:

• Streamlined Application Process: fewer questions, fewer requirements, and enhanced exchange of income with the IRS.
• Invitations to parent(s) or spouse will be sent via email and they will be known as contributors.
• Students and contributors will need FSA ID's. Create one now if you don't already have one. How To Video
• Contributors will be required to provide consent to use required tax and financial data. Lack on consent will result in a rejected FAFSA.

Terminology Changes:

• Contributor: anyone who is asked to provide information on the FAFSA – student, student spouse, parent(s), and stepparent(s) for example. 
• Consent: each contributor will now need to provide their consent to their Federal Tax Information (FTI) being included in the FAFSA, even if they did not file a U.S. tax return. 
• SAI: Student Index Aid (SAI) replaces the Expected Family Contribution (EFC). The EFC was used to calculate the amount a family could contribute to a student’s education. The SAI is now based on an actual index of the federal poverty level guidelines.
• FTI: Federal Tax Information (FTI) transferred directly from the IRS. 

FAFSA Form Changes

• Student housing choice:
  • MSUN may assume living arrangements based on prior FAFSA information. If our assumption is incorrect, please complete the appropriate Student Data Form below so we can update your Financial Aid Offer based on your actual living arrangements.
    • 2025-2026 Student Data Form
    • 2026-2027 Student Data Form
• The student’s interest in Federal Work-Study (FWS) employment:
  • MSUN will package work study on a first-come, first-serve basis. Early filing will ensure a better chance of a work study offer.
  • Please see the Financial Aid Office if you are interested in receiving Federal Work-Study and it is not on your initial Financial Aid Offer.
• No benefit for having siblings in college:
  • Previously, the FAFSA divided the EFC proportionally based on the number of household members in college. The elimination of this "sibling discount" will be the biggest change in aid eligibility for some students. The SAI will not use the number in college as a factor in calculation of eligibility. MSUN students with siblings in college may see a change in their aid eligibility at MSUN as well as with the aid received by their sibling(s) at MSUN or elsewhere. The determination to no longer consider the number in college was made by Congress and can only be changed by Congress.
• For 2025-2026, Family Farms and small businesses must be reported as assets:
  • When required, families must now report the value of their small business or family farm. If the family farm includes the principal place of residence, applicants should determine the total net value of all farm assets and subtract the net value of their principal residence to determine the final value of their farm assets.
• Excluded income for the student, spouse, and parents. This includes other income items that have been reported under "Additional Financial Information" on the FAFSA and excluded from need analysis in prior years (such as taxable combat pay, or special combat pay and cooperative education program earnings). Child support received is still reported, but as assets rather than income.
• Applicants will be required to use the IRS Direct Data Exchange:
  • Previously, users had the option to enter their tax information manually or use the IRS Data Retrieval Tool. Beginning with 2024-25, all contributors on the FAFSA must provide consent for the Department of Education to receive tax information or confirmation of non-filing status directly from the IRS. In a very small number of cases, students and families will have to enter their tax data manually, but for most, that data will be automatically transferred into the application. This change makes it easier to complete the FAFSA and reduces the number of questions to be answered.
• All “contributors” must provide financial information:
  
  • Contributors will receive an email informing them that they've been identified as such and will need to log in using their own FSA ID to provide the required information on the student's FAFSA.
  • Being a contributor does not mean they are financially responsible for the student's education costs, but it does mean the contributor must provide information on the FAFSA or the application will be incomplete, and the student will not be eligible for federal student aid.
• The parent responsible for submitting the FAFSA in cases of divorce or separation has changed.
  • For dependent students, financial information was previously needed from the parent(s) the student had lived with the most in the last 12 months. With the new FAFSA, financial information will be required from the parent(s) who provided the most financial support to the student.