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Working Families Tax Cut Act (WFTC)

What Is the Working Families Tax Cut Act (WFTC)?

The Working Families Tax Cut Act (WFTC), also referred to as the One Big Beautiful Bill Act (P.L. 119-21), was signed into law on July 4, 2025. It makes the most significant changes to federal student aid programs in decades. The law restructures loan limits, phases out certain loan types, alters repayment options, and modifies Pell Grant eligibility.

At SUNY Cobleskill, these changes will affect how much students and families can borrow beginning with the 2026–27 academic year. Current students should pay close attention to legacy (grandfather) provisions — in many cases, students who have already borrowed a federal loan may be able to continue under prior rules for a limited period.

Important Notice: No Changes to 2025–26 Aid

If you are currently enrolled and receiving aid, your existing loans and awards remain under their current terms for the remainder of this award year. Changes apply starting with loans disbursed on or after July 1, 2026. Federal implementation regulations were finalized May 1, 2026 — some details are still being interpreted by institutions and servicers. This page reflects current guidance as of June 2026 and will be updated as additional federal guidance is issued.

Changes That Apply to Everyone

Legacy (Grandfather) Protections

Several WFTC changes include a legacy provision that protects current borrowers. If you borrowed a federal Direct Loan before July 1, 2026, you may be able to continue borrowing under the prior rules for a limited time, as long as you remain enrolled in the same program at the same institution.

Protection lasts for the lesser of:

  • 3 academic years, OR
  • The remaining time needed to complete your program (your “time to credential”)

Important: Time already spent enrolled before July 1, 2026 counts toward the 3-year window. If you have been enrolled for 2 years, you have approximately 1 year of legacy protection remaining.

Legacy status is lost if you:

  • Transfer to a new institution
  • Change to a different program of study
  • Take a leave of absence exceeding 180 days in a 12-month period (treated as a withdrawal under 34 CFR § 668.22)

If you are thinking about transferring, changing your program, or taking a leave, contact our office first.

Leave of Absence (LOA)

Under existing federal Title IV rules (34 CFR § 668.22), a student whose approved leave of absence exceeds 180 calendar days within a 12-month period is treated as withdrawn for federal aid purposes. If you are protected under a legacy provision and exceed this threshold, you would likely lose legacy status upon return. A properly approved LOA within the 180-day window preserves legacy eligibility.

Additional Department of Education guidance on LOA and legacy status is still being finalized. Contact our office before taking a leave.

New Lifetime Loan Limit

Beginning July 1, 2026, there is a lifetime cap of $257,500 on all federal Direct Loans combined (Subsidized, Unsubsidized, and Graduate/Professional).

  • Applies to students who have not borrowed a federal Direct Loan prior to July 1, 2026.
  • Does not include Parent PLUS loans borrowed by parents on a student’s behalf.
  • Includes all loans across all degrees — undergraduate and graduate borrowing combined.
  • Cannot be reset by repaying, refinancing, or receiving forgiveness. Any amount previously borrowed counts toward the cap, even if paid off.

If you plan to attend graduate school after Cobleskill, your undergraduate borrowing will reduce how much you can borrow at the graduate level.

Schedule of Reduction (Less-Than-Full-Time Enrollment)

Beginning with Summer 2026, federal Direct Loan amounts will be prorated if you are enrolled less than full-time. Full-time at SUNY Cobleskill is 12 credit hours per semester.

  • Loan amounts reduce in direct proportion to your enrollment percentage.
  • You may not receive more than 50% of your annual limit in any single semester.
  • If you skip the fall semester, you cannot request the full annual amount in spring.

Changes for Undergraduate Students

Direct Subsidized and Unsubsidized Loan Limits — No Change

The annual and aggregate limits for Direct Subsidized and Unsubsidized Loans for undergraduates are unchanged by the WFTC.

  • 1st Year, Dependent: $5,500 ($3,500 subsidized) annual / $31,000 aggregate (max $23,000 sub)
  • 2nd Year, Dependent: $6,500 ($4,500 subsidized) annual
  • 3rd+ Year, Dependent: $7,500 ($5,500 subsidized) annual
  • Independent students: $9,500–$12,500 annual / $57,500 aggregate (max $23,000 sub)

Parent PLUS Loan Changes

Effective July 1, 2026, Parent PLUS Loans will have new caps for students whose parents have not previously borrowed a Parent PLUS loan:

  • Annual cap: $20,000 per dependent student per year
  • Lifetime cap: $65,000 per dependent student (includes all prior Parent PLUS borrowing, regardless of repayment)

Legacy provision: If your parent borrowed a Parent PLUS loan on your behalf before July 1, 2026, they may continue borrowing under the prior (higher) limits for up to 3 years or your remaining time to complete your degree, whichever is less — as long as you stay enrolled in the same program at SUNY Cobleskill.

Pell Grant Changes

The current maximum Pell Grant is $7,395 (subject to annual adjustment by Congress). WFTC introduces two new eligibility restrictions effective July 1, 2026:

  • Students with a Student Aid Index (SAI) of $14,790 or higher — twice the current maximum Pell Grant — are no longer eligible. This threshold will adjust if the Pell maximum changes.
  • Students whose entire cost of attendance is covered by non-federal grants or scholarships (institutional, state, or private) are no longer eligible for Pell, even if otherwise qualified.

Changes for Graduate Students

Graduate PLUS Loans Eliminated for New Borrowers

The Federal Direct Graduate PLUS Loan program will be discontinued for new borrowers beginning July 1, 2026. Students who have not borrowed any federal Direct Loan before that date will not be eligible for Grad PLUS.

Legacy provision: If you borrowed a federal Direct Loan before July 1, 2026 and remain enrolled in the same program at the same institution, you may continue to access Graduate PLUS loans for up to 3 academic years or your remaining time to credential, whichever is less.

New Direct Unsubsidized Loan Limits for Graduate Students

New graduate loan limits apply to students who do not have legacy provision protection:

  • Non-professional graduate programs: $20,500 per year / $100,000 aggregate
  • Designated professional programs: $50,000 per year / $200,000 aggregate

Professional programs include: Pharmacy (PharmD), Dentistry (DDS/DMD), Veterinary Medicine (DVM), Chiropractic (DC), Law (JD/LLB), Medicine (MD), Optometry (OD), Osteopathic Medicine (DO), Podiatry (DPM), Theology (MDiv/MHL), and Clinical Psychology (PsyD/PhD). ED is not currently expanding this list, though it may be updated in future regulatory action.

Repayment Plan Changes

Repayment Plan Glossary

The following plans are commonly referenced in relation to WFTC changes. Understanding the differences will help you make informed decisions about your loans.

SAVE (Saving on a Valuable Education)

SAVE was an income-driven repayment plan that capped payments at 5–10% of discretionary income and offered accelerated forgiveness timelines. SAVE was ended by a federal court order on March 10, 2026 — before the WFTC even passed. Borrowers previously enrolled in SAVE were placed in a general forbearance. If you were on SAVE, you need to choose a new repayment plan.

PAYE (Pay As You Earn)

PAYE is an income-driven repayment plan that caps monthly payments at 10% of discretionary income and offers loan forgiveness after 20 years of qualifying payments. PAYE is still active but will be eliminated on July 1, 2028 under WFTC. Borrowers on PAYE should plan to transition to IBR, RAP, or a standard plan before that deadline.

IBR (Income-Based Repayment)

IBR is an income-driven repayment plan that caps payments at 10–15% of discretionary income depending on when you first borrowed, with forgiveness after 20 or 25 years. IBR is not being eliminated by WFTC — it remains available indefinitely. WFTC also made IBR easier to access by removing the partial financial hardship requirement, meaning any borrower with eligible Direct Loans can now enroll in IBR regardless of income level.

New Repayment Assistance Plan (RAP)

WFTC eliminates PAYE and ICR for new loans and replaces them with the Repayment Assistance Plan (RAP), available July 1, 2026.

  • Monthly payment: 1–10% of adjusted gross income, scaled to income level
  • Minimum payment: $10/month for borrowers with AGI of $10,000 or less
  • Dependent discount: $50/month reduction per dependent claimed on taxes
  • Interest subsidy: if your payment is less than interest owed, the difference is waived — your loan balance will not grow
  • Forgiveness: 30 years of qualifying payments
  • Parent PLUS loans: not eligible for RAP
  • PSLF: RAP payments count toward the 120-payment Public Service Loan Forgiveness requirement

Important: RAP and IBR Forgiveness

If you switch from IBR to RAP, payments made under RAP do not count toward IBR’s 20- or 25-year forgiveness clock. That progress is lost if you return to IBR. RAP payments do count toward PSLF. Talk to a financial aid advisor before making any plan changes.

Who Is Affected by the RAP Change?

  • New borrowers (loans on or after July 1, 2026): RAP and the new tiered Standard Repayment Plan are the only options.
  • Existing borrowers who also take out new loans after July 1, 2026: All loans must be repaid under the same plan. New loans force options to RAP or new Standard only.
  • Existing borrowers with no new loans: SAVE is already gone. PAYE and ICR sunset July 1, 2028. IBR remains available indefinitely. Borrowers who take no action by July 1, 2028 will be automatically moved to RAP.

Deferment Changes

Economic Hardship and Unemployment deferments will be eliminated for loans first disbursed on or after July 1, 2027. Forbearance will remain available for up to 9 months in any 2-year period for those loans.

Public Service Loan Forgiveness (PSLF)

PSLF is unchanged by WFTC. Effective upon enactment (July 4, 2025), payments made under RAP count toward the 120-payment PSLF requirement. Switching from IBR to RAP does not reset your PSLF payment count. PSLF forgiveness remains tax-free.

Frequently Asked Questions

Does WFTC affect my 2025–26 aid?

No. There are no changes for this award year. WFTC changes begin with loans disbursed on or after July 1, 2026.

What is a legacy provision and do I qualify?

A legacy provision protects current federal loan borrowers by allowing them to continue under pre-WFTC rules for a limited time. You generally qualify if you borrowed a federal Direct Loan before July 1, 2026 and continue in the same program at SUNY Cobleskill. Protection lasts for up to 3 years or your remaining time to degree, whichever is shorter. Note that time already spent enrolled counts toward the 3-year window. You lose legacy status if you change programs, transfer institutions, or take a leave of absence over 180 days in a calendar year.

My parents use Parent PLUS loans. Will they be affected?

If your parent borrowed a Parent PLUS loan before July 1, 2026, the legacy provision allows them to continue borrowing at prior limits during your remaining time at Cobleskill (up to 3 years). After that, Parent PLUS will be capped at $20,000/year and $65,000 lifetime per student. Families who may face a funding gap should contact our office to explore other options.

I was on SAVE. What do I do?

SAVE was ended by a court order in March 2026. If you were on SAVE, you have been placed in a general forbearance and need to choose a new repayment plan. Your options are IBR, RAP, or a standard repayment plan. Contact our office or your loan servicer before switching — some changes cannot be undone.

What happens to PAYE and ICR?

PAYE and ICR will sunset on July 1, 2028. If you are currently on PAYE or ICR, you should transition to IBR, RAP, or a standard plan before that date. If you take no action, you will be automatically moved to RAP.

Will PSLF still work under RAP?

Yes. RAP payments count toward the 120-payment PSLF requirement. Switching to RAP does not reset your PSLF payment count. PSLF forgiveness remains tax-free.

I’m starting graduate school. Can I still get a Grad PLUS loan?

Only if you already borrowed a federal Direct Loan before July 1, 2026. New graduate students without prior federal borrowing will not have access to Grad PLUS starting in 2026–27. New Direct Unsubsidized limits for graduate students are $20,500/year with a $100,000 aggregate cap for non-professional programs.

Does WFTC affect my TAP or Excelsior Scholarship?

No. WFTC is a federal law and does not directly change New York State programs like TAP or Excelsior. Those programs operate under separate NYS rules. Contact our office for questions about your eligibility for state aid.

Additional Resources

  • Federal Student Aid (studentaid.gov) — official WFTC student loan updates and FAQs
  • FSA Dear Colleague Letter GEN-25-04 — official ED guidance on provisions effective upon enactment
  • NASFAA Loan Changes Web Center (nasfaa.org) — detailed regulatory breakdown and Q&A for financial aid administrators
  • HESC (hesc.ny.gov) — New York State TAP, Excelsior, and other state aid programs
  • SUNY Cobleskill Financial Aid: cobleskill.edu/admissions/financial-aid/

Disclaimer

This page is intended as a student-facing summary of changes under the Working Families Tax Cut Act (WFTC), also known as the One Big Beautiful Bill Act (P.L. 119-21), as understood by the SUNY Cobleskill Financial Aid Office. It is based on the statutory text of P.L. 119-21, the FSA Dear Colleague Letter GEN-25-04 (July 2025), and ED’s final RISE regulations published May 1, 2026. Federal implementation guidance continues to be released and interpreted. Some provisions summarized here reflect the current best understanding of applicable institutions and may be subject to revision as additional Department of Education guidance becomes available. This page is not legal or financial advice. For questions specific to your financial aid package, please contact our office directly.

 

Financial Aid Office  |  Knapp Hall, Room 118  |  518-255-5623  |  financialaid@cobleskill.edu  |  studentaid.gov

Last reviewed: June 2026  |  Next review: August 2026