What new education rules mean for FAFSA, Pell Grants, and loan repayment

Federal policy shifts and a slimmer Department of Education team are changing how student aid gets delivered. New legislation—the One Big Beautiful Bill Act (OBBBA)—plus agency reorganization are reshuffling who does what, how quickly decisions get made, and what borrowers and schools should expect. Below is a clear, practical guide for students, families, first-time borrowers and young investors on what’s changing and what to do next.

Top line: What’s happening and who it affects
– What: Changes to FAFSA rules, Pell Grant eligibility, income-driven repayment plans, and how loan servicing is managed (including large account transfers and a new Unified Servicing and Data Solution).
– Who: Students, borrowers, families, colleges, loan servicers and investors tracking education-related risks.
– Why it matters: These shifts can change aid amounts, alter repayment timelines, create temporary servicing glitches, and increase the need for careful record-keeping.

Quick takeaways (for skimmers)
– File FAFSA early and double-check submissions.
– Verify your loan servicer at StudentAid.gov after any transfer.
– Keep dated records of payments, emails and call notes.
– Recalculate budgets if repayment plans change or forgiveness timelines slow.
– Review 529 plan rules—new uses may affect your strategy.

What the restructuring means in plain language
The Department of Education is shrinking some teams and moving tasks to regional offices, contractors, or even other agencies in certain proposals. The programs themselves—Direct Loans, Pell Grants, income-driven plans—still exist, but who operates them and how fast they respond could change.

Practical effects you might notice
– Slower processing: Pell awards, FAFSA verifications and income recertifications could take longer.
– More automation and contractor work: Expect more online portals and fewer human touchpoints, at least temporarily.
– Servicer transfers: Accounts moving from one servicer to another often produce misapplied payments, missing statements, and a flurry of borrower questions.
– Data protection concerns: Greater use of third parties raises the need to confirm how your data is handled.

What borrowers should do now (immediate checklist)
– Confirm your servicer: After any reported transfer, check StudentAid.gov and print or screenshot confirmation.
– File FAFSA early: Even with rule changes, FAFSA starts the aid process—earlier filings reduce risk of delays.
– Keep every record: Save payment receipts, emails, screenshots of portals, and notes from phone calls (date, time, rep name).
– Recertify income on time: Missing recertification can push you into a higher-pay plan and increase interest.
– Set up autopay carefully: Only switch autopay after the new servicer confirms your account details.
– Consider advice before consolidating: Consolidation can change forgiveness eligibility and interest accrual—get help from your school’s aid office or a trusted advisor.

Income-driven plans and forgiveness programs: what to watch
Income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF) still provide relief paths, but their administration may slow during transitions. Mistakes in certification or missed recertifications are common reasons borrowers lose progress toward forgiveness—so document everything and follow up proactively.

529 plans and FAFSA/asset rules: family-saving implications
OBBBA restored some exclusions for family businesses and farms, which means fewer family assets might count against aid eligibility. Also, 529 plan rules have been expanded to allow certain credential programs and broader K–12 expenses—great news for some savers. Steps to take:
– Revisit your 529 strategy in light of the broader permitted uses.
– If you own a family business or farm, keep clear valuation and ownership records to support FAFSA exclusions.
– Work with a tax or financial advisor for complex situations.

What colleges and servicers should be doing
– Audit contracts and tighten data protections with vendors.
– Update communications so students understand processing timelines and who to contact.
– Run scenario tests (tabletop exercises) for large account migrations and reconciliation.
– Map changes to internal controls and adjust reporting processes.

For young investors and employers
– Investors: Model for potential delays in forgiveness and servicing that could affect loan-related cash flows and default rates.
– Employers: Update any student loan repayment benefits information you provide to employees and coordinate with payroll/HR systems if contributions or deductions are involved.