New 2026–27 FAFSA and Pell Grant Rules: Who Gains, Who Loses, and What to Do Now

If you are filling out the FAFSA for the 2026–27 school year, the rules have changed. Some families will now qualify for more aid. Others may find they no longer qualify for the Pell Grant at all. These changes come from a 2025 law called the One Big Beautiful Bill Act (OBBBA), and they take effect with the 2026–27 award year.

Paying for college is already stressful, and rule changes can make it feel worse, especially when no one explains them in plain language. This guide does exactly that. We will walk through what changed, who is helped, who is hurt, and the practical steps you can take right now to protect your aid. None of this requires a finance degree. If you can read your FAFSA, you can follow along.

What changed for the 2026–27 FAFSA

Two big things changed: how the FAFSA counts certain assets, and who can receive a Pell Grant. The asset change is mostly good news. The Pell change is a mix of good and bad, depending on your family's numbers.

The federal government measures your family's finances using a number called the Student Aid Index, or SAI. A lower SAI generally means more aid. A higher SAI generally means less. The new rules change how that number is calculated and how it is used to decide Pell Grant eligibility.

Let's break each change down.

The asset change that helps small business and farm families

For years, families who owned a small business or a family farm had a frustrating problem. They had to report the value of that business or farm as an asset on the FAFSA, even though they could not simply sell the family farm to pay tuition. That raised their SAI and lowered their aid, sometimes by a lot.

Starting with the 2026–27 FAFSA, that changes. The U.S. Department of Education confirmed in its 2026–27 FAFSA and Pell Grant eligibility announcement that the following are no longer counted as assets and should not be reported on the FAFSA:

• The net worth of a family-owned business with 100 or fewer full-time (or full-time equivalent) employees.
• The net worth of a farm the family lives on.
• The net worth of a commercial fishing business owned and controlled by the family.

What this means for you

If your family owns one of these, your reported assets could drop sharply on the new FAFSA. A lower asset total can lower your SAI, and a lower SAI can mean a bigger Pell Grant or more need-based aid. This is one of the rare changes that puts money back in families' pockets.

The action step is simple but important: when you fill out the 2026–27 FAFSA, do not list the value of a qualifying family business, farm you live on, or family fishing business. Reporting it by mistake could cost you aid. If you already submitted a 2026–27 FAFSA during the beta testing period in 2025 and reported these assets, contact the Federal Student Aid Information Center at 1-800-433-3243 to make sure your form reflects the new rules.

The Pell Grant change that could cost some families their grant

Now the harder news. The Pell Grant is the largest federal grant for students from lower- and middle-income families. For 2026–27, the maximum award stays at $7,395. But two new rules decide who can get it, and some families who qualified before will not qualify now.

New rule 1: A hard SAI cutoff at $14,790

Under the old system, your Pell amount slowly shrank as your SAI rose. Now there is a firm line. If your Student Aid Index is equal to or greater than twice the maximum Pell Grant, you are not eligible for any Pell Grant.

For 2026–27, twice the maximum Pell award is $14,790. So if your SAI lands at $14,790 or higher, your Pell Grant is zero, even if you would have received a small amount under the old rules.

There is one exception. This cutoff does not apply to students who qualify for a Pell Grant under the Special Rule, which covers dependents of certain servicemembers and public safety officers who died in the line of duty.

New rule 2: Foreign earned income now counts toward Pell

If your family claims the foreign earned income exclusion on your taxes, that excluded income will now be added back to your adjusted gross income when the government decides your Pell eligibility. In plain terms, income your family earned abroad and excluded from federal taxes can now raise your SAI and reduce or eliminate your Pell Grant. This mainly affects families with income earned outside the United States.

What this means for you

If your SAI has been close to the old Pell limit, run your numbers carefully this year. A family that received a small Pell Grant last year could lose it entirely if their SAI is $14,790 or above. Losing even a partial Pell Grant of a few hundred dollars still widens the gap you have to fill from other sources.

The good news is that your SAI is not always fixed. The asset change above could lower it. And if your family's income has dropped because of a job loss, reduced hours, or another hardship, you may be able to ask the college to review your situation.

How to protect your aid: a step-by-step plan

You are not powerless here. Here is a clear order of operations to get the most aid you can under the new rules.

1. File the FAFSA accurately and on time. The FAFSA at studentaid.gov is the front door to all federal aid, including the Pell Grant. File it even if you think you might not qualify, because it also unlocks federal loans, work-study, and many state and college grants.
2. Leave off the newly excluded assets. Do not report a qualifying family business, the farm you live on, or a family fishing business. This single step can lower your SAI.
3. Check your SAI against the $14,790 line. If you are close, look for legitimate ways to lower it, and make sure every number on your FAFSA is correct. Small data-entry errors can push your SAI up.
4. Ask for a professional judgment review if your situation changed. If your family had a job loss, a medical event, a divorce, or another major change, the college financial aid office can review your case and may adjust your aid. This is sometimes called a special circumstances appeal.
5. Plan for any gap early. If you lose Pell eligibility, you will need to replace that money. Build a plan before the bill is due, not after.

For more on filing cleanly, see our guide to common FAFSA mistakes that cost families money. And if you do qualify for Pell, learn how to use every dollar in our guide to the year-round Pell Grant in 2026–27.

If you lose Pell, here is how to fill the gap

Losing a grant feels like a setback, but a grant is just one piece of the funding puzzle. Families fill gaps every year using a mix of strategies, and most cost nothing but time.

• Scholarships. Private and local scholarships do not depend on your SAI. Many smaller, local awards get very few applicants, which can make them easier to win than the big national ones.
• Appeal your award letter. If a college gave you less aid than a competing school, you can ask for a review. A polite, well-documented appeal is one of the highest-payoff hours you can spend.
• Compare colleges by net cost, not sticker price. The school with the scary price tag is sometimes the cheapest after aid. Always compare what you will actually pay out of pocket.
• Use payment plans before loans. Many colleges let you spread the bill across the year with no interest. That can shrink or remove the need to borrow.
• Borrow federal before private. If you must borrow, federal student loans usually come first because of their fixed rates and built-in protections.

For a fuller playbook, read our guide to reducing your college costs before you graduate.

A quick note on the bigger 2026 picture

These FAFSA and Pell changes are part of a larger set of 2026 reforms. Parent PLUS loans are now capped, Grad PLUS loans are ending for new borrowers, and a new repayment plan called RAP is launching. If you are mapping out how to pay for the next four years, it helps to see how these pieces fit together rather than reacting to each one alone.

That is exactly the kind of full-picture planning that is hard to do on a napkin. The numbers interact: a change in your SAI affects your Pell, which affects how much you need to borrow, which affects your future payments. Seeing it all in one place makes the path much clearer.

The bottom line

The 2026–27 rules give and they take. Small business, farm, and fishing families may see their reported assets fall and their aid rise. Families near the old Pell limit, and some with foreign income, may lose a grant they used to count on because of the new $14,790 SAI cutoff. The most important thing you can do is file an accurate FAFSA, know your SAI, and build a plan for any gap before the first tuition bill arrives.

You do not have to figure this out alone, and you do not have to guess. The right plan starts with knowing your real numbers and your real options.

Create your free CollegeLens plan to see how the new 2026–27 rules affect your aid and to build a clear, personalized plan for covering the cost of college.

-- Sravani at CollegeLens