Direct Loan Updates & Changes

One Big Beautiful Bill Act (OBBBA)

What is OBBBA?

The One Big Beautiful Bill Act, sometimes referred to as OBBBA or OB3, was signed into law on July 4, 2025 and includes many changes to the Higher Education Act of 1965 (HEA). These changes affect several key aspects of federal financial aid programs, especially the Pell Grant and Direct Loans.

Below are the key changes that will affect students requesting student loans at Shasta College.

Federal Direct Loan Changes

Annual Loan Limits: Colleges are allowed to, but not required to, set lower annual loan borrowing limits by program of study. Shasta College does not currently have a loan limit that is less than the federally allowed limits.

Schedule of Reductions: For all 2026-27 Federal Direct Subsidized and Unsubsidized loans, colleges are required to reduce a student’s annual loan limit if the student is enrolled less than full-time over the course of the academic year (24 units, minimum 6 units in each term). This process is called the Schedule of Reductions (SOR). This reduction applies to all programs/majors measured in academic credits and applies to all students.

The financial aid department will evaluate the student’s loan amount eligibility according to the student’s most current, up-to-date education plan to determine what the student is eligible for at the time the student loan application is submitted. It is imperative that we have an up-to-date comprehensive education plan on file. If you do not have an up-to-date comprehensive education plan on file, please schedule an appointment with your counselor as soon as possible. For more information regarding scheduling a counseling appointment, please visit the Shasta College Counseling page.

Less Than Full-Time Formula for Loan Eligibility:

(number of credit hours enrolled for academic year) 
----------------------------------------------------------------------------  X 100 = reduced annual loan limit percentage
(number of credit hours considered full time for that)
         academic year for the program of study

This adjustment rule applies to all undergraduate Direct Loan borrowers utilizing Direct Subsidized and Direct Unsubsidized Loans. 

Example of SOR Adjustment Before a Fall Loan is Disbursed

Let’s say you’re a 1st year independent student (have completed less than 30 units) who can borrow up to $9,500 ($3,500 subsidized + $6,000 unsubsidized) in student loans over the course of the full academic year. You plan to take 12 credit hours in the fall and 12 credit hours in the spring, which makes you a full time student (full time = at least 12 credits each term). Your calculated eligibility would be concluded as the following:

  • Full-time for the year = 24 credits (12 fall + 12 spring)
  • Your loan will come in two equal payments:
    • Fall: $4,750 ($1,750 subsidized + $3,000 unsubsidized)
    • Spring: $4,750 ($1,750 subsidized + $3,000 unsubsidized)

This means a student in this category cannot receive more than these loan amounts for the entire academic year. In prior years, students could take as few as six credits per term and still receive the full loan amount. Now, loan eligibility is adjusted based on a student’s scheduled enrollment. 

What Happens If a Student Drops a Class

Let’s say the student drops from 12 credits to 9 credits in the fall before the first installment of the student’s loan is disbursed, the loan must be reduced because the student is now on track to complete 21 hours instead of 24 hours.

Schedule of Reductions Calculation:

  • Fall: 9 credits
  • Spring (expected): 12 credits
  • Total: 21 credits

Originally, full time for the year was 24 credits, but now the student will only have 21 credits.

Percent of Full-Time Completion:

(21 ÷ 24) x 100 = 87.5% (rounded to 88%)

This means the student is scheduled to complete 88% of the credits needed to be considered full time for the combined fall and spring terms.  

How This Affects the Student Loan – Schedule of Reductions Calculation

Reduce the Federal limit by the Schedule of Reductions

  • Subsidized - $3,500 x 88% = $3,080
  • Unsubsidized - $6,000 x 88% = $5,280
  • $3,080 + $5,280 = $8,360 or 88% of $9,500

These figures represent the students’ new annual loan limits. Shasta College will disburse the loans based on their credit proportion by term.

Subsidized:

Fall = 9 / 21 = 42.8571429%

New Subsidized Total of $3,080 x 42.8571429% = $1,320

Spring = 12 / 21 = 57.1428571%

New Subsidized Total of $3,080 x 57.1428571% = $1,760

Unsubsidized:

Fall = 9 / 21 = 42.8571429%

New Unsubsidized Total of $5,280 x 42.8571429% = $2,263

Spring = 12 / 21 = 57.1428571%

New Unsubsidized Total of $5,280 x 57.1428571% = $3,017

How a Student Can Regan Full Academic Year Loan Eligibility

If a student takes 15 credits in the spring, then the total for the academic year becomes:

  • Fall: 9 credits
  • Spring: 15 credits
  • Total: 24 credits

Now the student is back to full-time status and is scheduled to complete a full time course load on the year. If the loans were reduced for the spring term based on the fall enrollment change, this means they can be increased back to the total of the federal academic year loan limit of $9,500 for a first-year independent student (assuming the student still meets the rest of the eligibility criteria to receive that amount). 

Changes to Loan Repayment Options:

  • Borrowers that take out loans on or after July 1, 2026 will be limited to two repayment options:
    • Tiered standard repayment plan.
    • Income-driven repayment plan called the Repayment Assistance Plan (RAP).
  • Existing income-driven repayment plans will sunset in 2028.