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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 July 2026. Future congressional action, changes to Senate rules, or executive actions may alter the implementation or impact of this legislation.

About the Changes

The Working Families Tax Cut Act of 2025 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 Working Families Tax Cut Act of 2025 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.

ProvisionDetails
New Lifetime Maximum $257,500 for all federal student loans combined (excluding Parent PLUS Loans) 
Legacy Borrowers May continue borrowing under previous limits for the remaining years of their program 
Transfer Students Lose legacy provisions upon transfer; subject to new borrower limits 

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 Course Program of Study-eligible. Loan eligibility will be adjusted based on actual credit hours:

Student Type Proration Threshold 
Undergraduate Students Fewer than 12 credit hours 
Graduate or Professional Students Fewer than 9 credit hours 

For example, if a student reduces enrollment mid-semester, loan amounts for the next semester of enrollment will be recalculated proportionally to reflect the actual annual credits or enrollment. This proration can be mitigated if a student makes up the difference in hours from dropped courses on top of their full-time enrollment in a future semester within the same academic school year. 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 by Borrower Type 

Borrower Type Available Repayment Plans 
New borrowers on or after July 1, 2026 New Standard Repayment Plan; Repayment Assistance Plan (RAP) only 
Borrowers with no new loans after July 1, 2026 Current Standard, Income-Based Repayment (IBR), Graduated, Extended Repayment — and may opt into RAP 
Borrowers in ICR, PAYE, or SAVE Must transition to a new plan by July 1, 2028; auto-enrolled in RAP if no selection is made 

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. 

Additional RAP Details 

Detail Information 
Minimum Monthly Payment $10 
Payment Basis Borrower’s Adjusted Gross Income (AGI) and number of dependents 
Married Borrowers Filing Separately Income and dependents calculated independently from spouse 
Partial Financial Hardship Requirement No longer required 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. 

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.

Provision Applies To Details 
PSLF Eligibility All borrowers Continues, including credit for time in medical or dental internship or residency programs 
Economic Hardship & Unemployment Deferment New loans on or after July 1, 2027 No longer eligible 
Forbearance Cap Loans disbursed on or after July 1, 2027 Maximum 9 months within any 24-month period 
Parent PLUS Loans (new, July 1, 2026+) New Parent PLUS borrowers Ineligible for IDR plans and PSLF; restricted to new Tiered Standard Repayment Plan only 

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

Effective July 1, 2026, new Parent PLUS Loans will be ineligible for income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF), as they will be restricted to the new Tiered Standard Repayment Plan only.

Undergraduate Students

Parent PLUS Loans

Effective July 1, 2026, new Parent PLUS Loans will have new borrowing limits. Historically, Parent PLUS borrowers could cover the full cost of attendance without a specific cap. These borrowing limits apply regardless of amounts previously paid, forgiven, canceled, or discharged.

Limit Type Amount 
Annual Borrowing Limit $20,000 per student 
Lifetime (Aggregate) Limit $65,000 per student 

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. 

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 proration 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.

Change Details 
SAI Threshold Students with an SAI equal to or greater than 14,790 (twice the maximum Pell Grant award) are not eligible 
Foreign Income Applicable foreign-earned income must now be included in the AGI used to calculate Pell eligibility 
Impact Some students who previously qualified may lose eligibility if SAI, assets, or foreign income exceed federal thresholds 

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 or Professional Students

Effective July 1, 2026, federal legislation introduces new loan limits for graduate or 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

Program Code Program Name 
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

Student Type Annual Limit Aggregate Limit 
Graduate Students $20,500 $100,000 (undergraduate loans excluded) 
Professional Students $50,000 $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. 

Eligibility Criteria Details 
Enrolled in same credentialed academic program at UT as of June 30, 2026 Required 
Must have received a Direct Loan disbursement prior to July 1, 2026 Required 
Duration of legacy eligibility Up to three academic years or remainder of program, whichever is less 

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. 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

Private Loan Comparison

An alternative (private) student loan is money you borrow from a bank, credit union, or other private lender to help pay for school. 

Alternative (private) loans are different from federal student loans. They often have: 

  • Credit-based approval 
  • May require a cosigner 
  • Different interest rates and repayment terms 
  • Fewer borrower protections and benefits 

Because of this, students should use federal aid, scholarships, and grants before considering an alternative (private) loan. 

UT’s ElmSelect Private Loan Comparison