What’s New for the FAFSA for 2026-27

Since the comprehensively revised Free Application for Federal Student Aid (FAFSA) was introduced in December, 2023, for the 2024-25 academic year, FAFSA operations have been unsettled, to say the least. However, they have slowly and painfully been improved over the last two years. The FAFSA system for the upcoming 2026-27 year is expected to be stable and back on the traditional FAFSA timetable. The form will be available online on October 1 of this year at the Studentaid.gov website. There will be a few changes to ongoing FAFSA processes and to the underlying Federal student financial aid programs.

Although the final deadline for submitting the 2026-27 FAFSA will be June 30, 2027, it is highly recommended that applicants submit it as soon as possible after it becomes available, since Federal, state, and institutional aid is often distributed on a first-come, first-served basis. The U.S. Education Department (ED) is beta testing the form through the end of September to ensure that its systems are operating properly. Students can request access to join the beta test on the FAFSA website. If a student submits their FAFSA during the beta test, they will not be required to resubmit the form for the 2026–27 year. This means that applicants accepted in the beta test will be first among all FAFSA submitters for first-come, first-served programs.

For the 2026-27 FAFSA, the new features include a streamlined contributor invitation process where an applicant only needs to enter a contributor’s email to send them a unique code to serve as an invitation to provide their personal information for the FAFSA. The 2026-27 application also features real-time identity verification when creating a FAFSA account, which eliminates the waiting period for account setup and tax retrieval. Additionally, the 2026-27 FAFSA will request 2024 tax information instead of 2023 in order to establish a more up-to-date financial profile. It will also update the Pell Grant eligibility criteria by adding foreign earned income to the calculation of eligibility.

Key Changes to the 2026-27 FAFSA:

1. Simplified Contributor Invitation: Instead of requesting personal details, students will simply enter a parent’s or spouse’s email to send them an invitation to contribute their information to the FAFSA. The system generates a unique code that is emailed to them. A contributor uses this code to accept the invitation and link to the FAFSA form.

2. Real-Time Identity Verification: Applicants creating a Studentaid.gov account with a Social Security number will now have their identity verified immediately, removing the previous one-to-three-day waiting period. This allows for quicker access to the IRS Data Retrieval Tool to import tax information.

3. Updated Financial Information: The 2026-27 FAFSA will require applicants to provide 2024 prior tax year information instead of 2023 prior-prior tax year information.

4. Pell Grant Eligibility Update: For the 2026-27 award year, the foreign earned income exclusion amount will be included in Adjusted Gross Income (AGI) to determine Pell Grant eligibility.

5. Asset Exemptions for SAI: The net worth of a family-owned business with up to 100 employees or a family farm or commercial fishing business will be excluded from the Student Aid Index (SAI) calculation.

In addition to the FAFSA form and processes, there will be significant changes to the underlying Federal student aid programs in 2026–27. These changes, primarily stemming from the One Big Beautiful Bill Act (OBBBA) passed in July 2025, impact Federal loan borrowing limits, repayment plan options, and grant eligibility, as noted below.

1. Student Loan Changes:

• • Student loan program changes are effective July 1, 2026.

• • The Graduate PLUS loan program is terminated.

• • New loan borrowing limits:

• • Graduate students: Unsubsidized Federal student loan borrowing will be capped at $20,500 per year, with a $100,000 lifetime limit.

• • Professional students (e.g., medical, law): Unsubsidized borrowing will be capped at $50,000 per year, with a $200,000 lifetime limit.

• • Parent PLUS loans: New annual and lifetime borrowing limits will be set at $20,000 and $65,000 per student, respectively.

2. Repayment Plans: Most existing IDR plans, including SAVE, PAYE, and ICR, will be phased out. For new loans disbursed on or after July 1, 2026, borrowers will have only two repayment options:

• • A new standard repayment plan: Fixed payments over a fixed period of time.

• • A Repayment Assistance Plan (RAP): RAP calculates payments based on a borrower’s Adjusted Gross Income(AGI) and has a 30-year path to forgiveness for borrowers. RAP requires a minimum monthly payment of $10, regardless of income. It is considered less generous for low-income borrowers than the SAVE plan, which it replaces. Current borrowers have until July 1, 2028, to remain on their current IDR plan (SAVE, PAYE, or ICR) if they so choose.

3. Repayment Plan for Parent PLUS Borrowers: Parents taking out new PLUS loans on or after July 1, 2026, will be ineligible for the RAP.

4. New Deferment and Forbearance Limits: After July 1, 2027, unemployment and economic hardship deferments will no longer be available for new loans. Forbearance will be capped at 9 months within any 24-month period.

Pell Grants:

1. Expanded Pell Grant Eligibility: The new Workforce Pell Grant program will launch for the 2026–27 year. This will extend Pell Grant eligibility to students in eligible short-term certificate programs lasting between 8 and 15 weeks.

2. Earnings-based Accountability: Effective July 1, 2026, many academic programs will be subject to new accountability measures. They could lose Federal aid eligibility if the earnings of their graduates do not exceed a certain threshold compared to their non-degreed peers.

3. “Stacking” of Grant Aid: A student will become ineligible for a Pell Grant if they receive other non-Federal grant aid (such as state or private scholarships) that causes them to exceed their college’s Cost of Attendance (COA).

Tax Provisions:

1. Section 127 Educational Assistance: The tax exclusion for employer-provided education assistance will be made permanent and indexed to inflation.

2. 529 Plan Expansion: Tax law expands eligible expenses for 529 educational savings plans to include postsecondary credentialing programs, homeschooling, and educational therapies.