Federal student loan changes cause delays, recalculations and uncertainty for students and universities

Manual calculations, recalculations, careful documentation and delayed award letters.

This is the latest new normal for financial aid officials across higher education institutions after changes to federal loans by the Department of Education. 

Changes to federal financial aid take effect on July 1, but with official rules and FAQs being issued only weeks ago, the entire process has been delayed by months. Financial aid award letters that would have normally gone out in February are just now hitting students’ mailboxes.

“It’s the end of May and we’re getting that out now,” said Marivel Ojeda, Director of Financial Assistance at St. Mary’s University. “Students are already doing their [enrollment and housing] deposits and they’re moving into that status and it’s kind of scary that they’re giving deposits without knowing what their full financial aid picture is like.”

Under the Trump Administration’s One Big Beautiful Bill Act, the Department of Education is phasing out Graduate PLUS loans, or Direct PLUS loans, which were federally subsidized or unsubsidized loans for students entering graduate programs. 

Federal officials have also implemented new loan limits for undergraduate and graduate students plus new loan disbursement rules, new annual and lifetime borrowing caps based on the degree a student is pursuing and new repayment options for those who took out federal loans in the past.

These changes, coupled with the delays in issuing rules, have contributed to students getting unclear answers on financial aid awards. At St. Mary’s, university officials began including disclaimers, letting students know that the delayed financial aid offer they are getting might not be final.

“Please note that your enclosed initial financial aid award letter is based on the standard annual federal loan limits. However, these amounts remain subject to change pending our review of your individual aggregate federal loan limits and borrowing history,” the disclosure states. 

Ojeda is far from alone in her concerns. The National Association of Student Financial Aid Administrators issued a statement in late April after the Department of Education reversed its earlier decision on whether or not Grad PLUS loans would count toward the lifetime borrowing cap of $257,500 for all federal direct loans established under the One Big Beautiful Bill Act. 

“When significant policy changes are rolled out without clear, formal and widely distributed guidance, there are severe consequences that directly affect students who need definitive answers now in order to make plans to pay for college,” said NASFAA President and CEO Melanie Storey in a news release. 

With limited time to adjust their processes and conflicting guidance from federal officials, Ojeda resorted to the lessons she learned during the confusing 2024 Free Application for Federal Student Aid (FAFSA) changes rollout, which was full of glitches. Like with FAFSA, Ojeda chose to self-document every decision based on that day’s information.

“We’re having to manually review these students, and that’s so scary because manual review can always [have] human error,” Ojeda said. “[We are] documenting everything that we’re looking at, printing out what we see on the government website so that if we come back and it changes, we say, ‘Well, on this day, this is what we [saw].’”

Federal officials have advertised these changes as a way to make sure students don’t take on more debt than necessary, adding that current outstanding U.S. student loans total nearly $1.7 trillion and nearly 25% of borrowers are in default. But local financial aid officials say their job has always focused on helping students get to the finish line: graduation.

“Access, affordability and completion is still our reason to do what we do,” Ojeda said.

Courses start while confusion persists

University of the Incarnate Word Financial Aid Director Cristen Alicea said the final regulations came in as some of her students were starting courses and others were sending in questions regarding the changes that will become effective in July. 

“We’re trying to interpret hundreds of pages of regulations in like a month before implementation and trying to answer students’ questions,” Alicea said. “And just because some thing is written in the law, it doesn’t mean you have what you need to really be able to implement that correctly and handle every scenario.”

Some of the more pressing questions have revolved around the new Schedule of Reductions, or SOR, which is a new form of disbursement for students receiving loans at all levels. 

This new rule means financial aid officials have to assess every single student’s award and prorate their award if they are taking less than a full-time course load, or if they drop a class in the middle of a semester. 

“If a student is not full-time, their loans now have to be prorated, which has never been something we had to do before unless a student was graduating early in the academic year,” Alicea said. “Now, every single student and every single semester is subject to proration if they’re not full-time.”

Other students have reached out with many questions regarding the changes to the Graduate PLUS, or Grad PLUS, loans. 

For the purposes of borrowing, the Department of Education is enforcing its designation of professional degrees, or graduate degrees. A professional degree is one that requires the completion of the academic requirements before anyone can begin to practice in the field, as well as “a level of professional skill beyond that normally required for a bachelor’s degree,” according to the federal guidelines.

A total of 11 degrees were designated as professional, including Medicine (M.D), Pharmacy (Pharm.D.), Dentistry (D.D.S. or D.M.D.) and Optometry (O.D.). Students will have higher borrowing caps of $50,000 annually and an aggregate lifetime cap of $200,000.

But other professions including those in healthcare and social services, such as nursing and physical therapy, were designated as graduate degrees and will have lower caps of $20,000 annually and a lifetime cap of $100,000.

Some students who received loans before July 1, 2026, could qualify for an exemption under a legacy, or grandfathered, provision to continue borrowing through the Grad PLUS programs with higher loan limits if they meet certain requirements. 

These include not having any gaps on their enrollment, no degree changes, and you can only borrow for a total of three years, or for the remainder of the “expected time to credential” for their degree plan. 

“For these students, the loss of that Graduate PLUS loan, if they don’t meet the interim exception, for some of them means they’re not going to be able to finish their program,” Alicea said. 

Protecting students, or burdening them?

At UIW, the Ila Faye Miller School of and Health Professions houses many of the programs that will be affected by borrowing caps. Alicea said she wasn’t at liberty to discuss specific programs, but added that in one health professions program, there are at least two dozen students affected by these changes.

“The immediate impacts are the ones that we know are off-schedule on their degree that don’t have eligibility for their last one or two years, or maybe they have one year of eligibility left, but two years of classes left,” Alicea said.

Ojeda expressed similar concerns, adding that for a large portion of their students, leaving work to attend college full time is not an option. Some might have taken a semester or two off to take care of other responsibilities and are attempting to get back to their studies with lesser options, she said. 

“I don’t think that that’s necessarily going to force people not to borrow,” Ojeda said. “But then what’s going to happen on the private side? I think that that’s where you’re going to see all of the increase which is not necessarily making a correction to anything. Now it’s just going to be whoever has good credit and whoever can borrow.”

Ojeda and her team have made it a point to learn more about private loans in order to answer questions for students, she said. But they worry that these loans often come with fewer borrower protections and repayment flexibilities.

Some students might choose to pause or end their studies based on what type of loan they can access, officials worry. And while fall student head counts might offer a glimpse of the immediate impact, Alicea notes even those numbers won’t give them the full picture.

“That doesn’t take into account students who enroll who think they’re going to be able to get a private loan and maybe find out that they can’t, then they can’t register for spring because they still have a balance,” she said. “There [are] going to be longer effects than just what our fall class looks like.”

The San Antonio Report partners with Open Campus on higher education coverage.