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    Financial Aid

    Federal Aid Updates

    Navigating financial aid can feel complex, especially as federal policies evolve. Recent legislation has introduced changes to how student aid is funded, regulated, and administered across higher education– not just the University of Tennessee, Knoxville.

    Disclaimer: This information reflects current federal law, legislative rules, and administrative guidance as of January 2026. Future congressional action, changes to Senate rules, or executive actions may alter the implementation or impact of this legislation.

    About the Changes

    The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, through the federal budget reconciliation process. The legislation reshapes student financial aid, specifically federal student loan programs. These changes take effect for periods of enrollment beginning on or after July 1, 2026.

    This page serves as a resource outlining our current understanding of the OBBBA and its potential impact on Volunteers. Because final regulatory guidance and Higher Education Act compliance language have not yet been issued, some federal aid resources linked may not fully reflect the upcoming changes. We expect official language to be disseminated on or after July 1, 2026.

    All Students

    Federal student loans are subject to rules set by federal law, including loan limits, which cap the total amount a borrower may receive, and proration, which adjusts loan eligibility based on enrollment level or program length. Recent federal legislation has changed how these limits are calculated and applied. These updates affect only federal loan programs regulated by the US Department of Education, including Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS Loans. Alternative (private) loans are not impacted, as they are not part of the federal loan system.

    The following changes impact all students who do not have a federal loan disbursement by July 1, 2026, and students currently in loan repayment. Students who complete their initial academic program (associate, undergraduate, or graduate) either prior to July 1, 2026, or during the three-year legacy period will lose legacy loan limit eligibility and Graduate PLUS Loan eligibility. While many provisions take effect beginning July 1, 2026, certain changes, such as new federal loan limits, will be phased in over multiple years, and some current borrowers may be permitted to continue borrowing under existing limits.

    Loan Limits & Proration

    Annual, Aggregate, and Lifetime Loan Limits

    Effective July 1, 2026, federal legislation establishes new rules for annual, aggregate, and lifetime loan limits. Current borrowers with legacy provisions may continue to borrow under their existing limits for three academic years or the remainder of their expected time to complete their program at UTK, whichever is less. If a student transfers to another institution, they will lose their legacy provisions and will be subject to the new borrower limits outlined below. The new lifetime maximum for all federal student loans combined (excluding Parent PLUS Loans) is $257,500. This cap applies regardless of amount previously paid, forgiven, canceled, or discharged.

    Borrowing Limit

    The lifetime borrowing limit means students cannot exceed $257,500 for all federal loans over their entire academic career (excluding Parent PLUS Loans). For students currently enrolled, legacy provisions allow continued borrowing under previous limits for the remaining years of their program. For example, if your program’s length is four years and you have completed two, you may borrow under legacy limits for the remaining two years; borrowing beyond that point will fall under the new lifetime maximum.

    Loan Proration

    The legislation also requires loan proration for students enrolled less than full-time. Loan eligibility will be adjusted based on actual credit hours:

    • Undergraduate students: less than 12 credit hours
    • Graduate or professional students: less than 9 credit hours

    For example, if a student reduces enrollment mid-year, loan amounts will be recalculated proportionally to reflect the actual credits. UT monitors this closely to ensure proper adjustments during the Spring semester each year.

    Loan Repayment

    Recent legislation significantly restructures the federal student loan repayment system by streamlining repayment options and redefining eligibility based on when a borrower receives new loans. Over time, existing income-driven repayment plans will be phased out and replaced with a simplified system.

    Repayment Plans for New Borrowers & Current Students with New Loans

    Borrowers who receive new federal student loans on or after July 1, 2026, will
    have access to two repayment options only

    • New Standard Repayment Plan: Fixed monthly payments with fixed repayment terms ranging from 10 to 25 years, depending on the total amount borrowed.
    • Repayment Assistance Plan (RAP): A new income-based repayment plan designed to align monthly payments with a borrower’s financial circumstances.

    Borrowers with new loans on or after July 1, 2026, including currently enrolled students who take additional loans to complete their program, must select one of these two repayment plans.

    Repayment Options for Borrowers with No New Loans

    Borrowers who do not receive new federal loans on or after July 1, 2026, may continue to enroll in existing repayment options, including:

    • Current Standard Repayment
    • Income-Based Repayment (IBR)
    • Graduated Repayment
    • Extended Repayment

    These borrowers may also choose to opt into the new Repayment Assistance Plan (RAP).

    However, borrowers currently enrolled in Income-Contingent Repayment (ICR), PAYE, or SAVE must transition to a new repayment plan by July 1, 2028. If no selection is made by that date, the borrower will be automatically enrolled in RAP. This requirement also applies to currently enrolled students who are not taking additional loans.

    Additional Repayment Updates

    Under the new legislation:

    • RAP requires a minimum monthly payment of $10.
    • RAP payments are based on a borrower’s Adjusted Gross Income (AGI) and number of dependents.
    • For married borrowers who file taxes separately, income and dependents are calculated independently from their spouse.
    • Borrowers are no longer required to demonstrate a partial financial hardship to enroll in an income-based repayment plan.

    After completing required loan exit counseling, students are strongly encouraged to work directly with their assigned loan servicer for personalized repayment guidance and ongoing support.

    Loan Forgiveness, Deferment, and Forbearance Updates

    Federal student loan programs include several borrower protections designed to provide relief during specific circumstances. Public Service Loan Forgiveness (PSLF) forgives the remaining balance on eligible Direct Loans after 120 qualifying monthly payments made under a qualifying repayment plan while working full time for a qualifying employer. Deferment allows borrowers to temporarily pause loan payments for approved situations, such as active-duty military service or reenrollment in school. Forbearance permits a temporary stop in payments due to financial hardship or other qualifying extenuating circumstances.

    Recent federal legislation updates how some of these protections apply to new loans. PSLF eligibility continues, including credit for time spent in medical or dental internship or residency programs. However, for borrowers who receive federal student loans on or after July 1, 2027, those loans will not be eligible for economic hardship or unemployment deferments. In addition, loans disbursed on or after July 1, 2027, may qualify for forbearance for no more than nine months within any 24-month period, placing a limit on how long payments may be temporarily postponed.

    These changes apply only to loans first received on or after July 1, 2027, and do not retroactively affect earlier federal loan disbursements.

    Undergraduate Students

    Parent PLUS Loans

    Effective July 1, 2026, new Parent PLUS Loans will have an annual borrowing limit of $20,000 per student and a lifetime (aggregate) limit of $65,000 per student, regardless of amounts previously paid, forgiven, canceled, or discharged.

    Historically, Parent PLUS borrowers could cover the full cost of attendance without a specific cap. Under the new limits, parents will only be able to borrow up to $20,000 per year until the $65,000 lifetime maximum is reached per dependent/student. It is not yet clear whether previous Parent PLUS Loans will count toward this maximum.

    Direct Loans

    For undergraduate students, the Direct Subsidized and Direct Unsubsidized federal loan program will continue to follow the current annual and aggregate limits, subject to pro-ration if a student falls below full-time enrollment status (12 credit hours or more per semester).

    Federal Pell Grant Program

    The Federal Pell Grant is a need-based grant for undergraduate students pursuing their first bachelor’s degree. Beginning with the 2026-27 academic year, federal legislation changes how eligibility is calculated.

    Asset, Student Aid Index (SAI), and Foreign Income Considerations

    Under prior rules, Pell Grant eligibility was largely determined by domestic income. Beginning with the 2026-27 academic year, federal law requires consideration of both domestic and foreign income, and certain reported assets when calculating eligibility.

    Students and families with a Student Aid Index (SAI) equal to or greater than 14,790 (twice the maximum Pell Grant award) are not eligible to receive a Pell Grant. This means that students who previously qualified for the Pell Grant may lose eligibility beginning with the 2026-27 academic year if their calculated SAI or reported assets exceed federal thresholds.

    Additionally, beginning with the 2026-27 academic year, federal law requires applicable foreign-earned income be included in the Adjusted Gross Income (AGI) used to calculate Pell Grant eligibility. As a result, some students and families who previously qualified for the Pell Grant may no longer be eligible if foreign income increases their calculated eligibility index.

    Note: Income and asset information are transferred directly from the IRS when students complete the FAFSA and provide consent. The university does not define what qualifies as income or assets for federal aid purposes. Students and families with tax-related questions should consult the IRS or a qualified tax professional.

    Non-Federal Grant and Scholarship Considerations

    Beginning with the 2026-27 academic year, students whose total non-federal grants and scholarships (including institutional, state, and private sources) fully cover their Cost of Attendance (COA) will not be eligible to receive a Federal Pell Grant. This represents a change from prior years when Pell-eligible students could receive a Pell Grant even if other non-federal aid covered their full COA.

    Graduate & Professional Students

    Effective July 1, 2026, federal legislation introduces new loan limits for graduate and professional students and eliminates the Graduate PLUS Loan program for new borrowers. For eligibility for federal student loans, professional programs are defined by law and include the following University of Tennessee, Knoxville, programs:

    University of Tennessee, Knoxville, programs

    • JD-Law: Law
    • JD-Law-A: Advocacy & Dispute Resolution
    • JD-Law-B: Business Transactions
    • JD-MA-Law: Dual Law/Philosophy
    • JD-MBA-Law: Dual Law/Business Administration
    • JD-MPA-Law: Dual Law/Public Admin
    • JD-MPP-Law: Dual Law/Public Policy
    • JD-MS-Law: Dual Law/Social Work
    • DVM-VM: Veterinary Medicine
    • DVM-MPH-VM: Dual Vet Med/Public Health
    • DVM-MS-VM: Dual Vet Med/Animal Science
    • DVM-MS-VM-CM: Dual Vet Med/Comp & Exp Med
    • DVM-PHD-VM: Dual Vet Med/Comp & Exp Med

    Direct Unsubsidized Loans

    • Graduate Students: For graduate students, the Direct Unsubsidized Loan annual limit remains $20,500, with a new aggregate limit of $100,000 (undergraduate loans excluded).
    • Professional Students: For professional students, the Direct Unsubsidized Loan annual limit is $50,000, with a new aggregate limit of $200,000.

    Graduate PLUS Loans

    Graduate PLUS Loans remain available under legacy provisions for students continuing their program of study at UT. It is not yet known whether legacy provisions will apply for students transferring between institutions. Students enrolling in an academic program after June 30, 2026, are ineligible for Graduate PLUS Loans.

    A student qualifies for Graduate PLUS Loans if they were enrolled in the same credentialed academic program at UT as of June 30, 2026, and receive a Direct Loan disbursement (Subsidized, Unsubsidized, or Graduate PLUS) for that program of study prior to July 1, 2026. Eligible students may continue borrowing through the Graduate PLUS Loan program for up to three academic years or for the remainder of their program of study, whichever is less.

    For example, a student who borrowed only Direct Unsubsidized Loans during their program of study may still qualify to borrow Graduate PLUS Loans in subsequent years, provided they remain in the same academic program and within the three-year timeframe.

    Next Steps

    File Your FAFSA

    To maximize your financial aid, submit your FAFSA by UT’s Priority Filing Date of March 2, 2026. All students, regardless of income, should file using UT’s federal school code 003530 to be considered for the widest range of aid. If you are currently receiving aid, missing this date could affect your funding.

    Learn More About FAFSA

    Understand Your Student Loans

    It’s important to stay informed about your loans and repayment options:

    • Review Your Loan Information: Log in to your loan servicer’s website or studentaid.gov to verify your contact information, loan balances, and repayment status. Print or screenshot your information for your records.
    • Explore Repayment Plans: Learn about available repayment options and estimate your monthly payments using official calculators. While some plans are changing under new legislation, current repayment options still exist for eligible loans.
    • Stay Informed About Forgiveness Programs: If you work in public service or teaching, confirm your enrollment in the PSLF program and check whether recent changes could help you qualify for forgiveness sooner.

    Student Loan Support

    Navigating loans can feel overwhelming, but you’re not alone. The Center for Financial Wellness (CFW) is here to help you make informed borrowing decisions, build strong financial habits, and prepare for repayment. Whether you are borrowing for the first time or planning for life after graduation, the CFW team is ready to support you every step of the way.

    Schedule Center for Financial Wellness Appointment

    Explore Federal Student Aid Repayment Resources