Warn parents: The Big Beautiful Bill's provisions influence PLUS loan borrowing and repayment procedures
===========================================================
Parent PLUS loans, a common source of funding for college education, are undergoing significant changes as part of the One Big Beautiful Bill (OBBB). These changes aim to promote more responsible borrowing and repayment by parents, and here's what you need to know.
Firstly, the new loan limits for Parent PLUS Loans no longer allow borrowing up to a child's school-certified cost of attendance, minus other received aid. This means that if you rely on PLUS Loans for your undergraduate's four-year degree and max out at $20,000 in each of the first three years, you'd only have $5,000 left for their senior year.
Congress's primary motivation behind these changes is to control federal student loan debt growth. By imposing borrowing limits, they aim to prevent excessive Parent PLUS borrowing that can lead to large unpaid loan balances and defaults, thus limiting federal exposure.
The new limits also reflect the intention that parents should not borrow the full cost of attendance, which averages around $30,000 to $63,000 per year. This means families will need to explore other financing methods, such as completing the FAFSA, applying for private scholarships, selecting lower-cost educational programs, and negotiating financial aid packages.
Another key reason for the changes is to reduce default risk and improve repayment feasibility. Parent PLUS loans lack income-driven repayment and forgiveness options under the new law, so limiting loan size reduces risk for both borrowers and the government.
The OBBB also eliminates Grad PLUS loans and caps various federal student loans, signalling a shift towards tighter federal loan limits overall. This includes Parent PLUS loans as part of broader student loan reform.
Starting July 1, 2026, if you borrow a PLUS Loan, you'll be limited to the Standard Repayment Plan and nothing else. Because your standard loan term is now decided by your loan amount, the monthly payment will be higher under the new standard repayment plan.
It's important to note that the new loan limits for Parent PLUS Loans have a potential trap: you can borrow up to $20,000 per year, but only $65,000 overall. This means that if you have multiple children in college at the same time, you could reach the lifetime limit quickly.
One important consideration for parents is that if your child is pursuing a career in public service, keeping their education debt in their own name will maintain access to Public Service Loan Forgiveness (PSLF). After July 1, 2026, PLUS Loans borrowed after this date will no longer be eligible for PSLF or Income-Driven Repayment (IDR) forgiveness.
In conclusion, the changes to Parent PLUS loans aim to promote a more sustainable, manageable federal student loan system that protects borrowers and taxpayers by restricting the availability and size of Parent PLUS loans starting July 1, 2026. It's crucial for parents to understand these changes and explore alternative financing methods to lessen their reliance on PLUS Loans and potentially avoid them altogether.
[1] Congressional Budget Office Report on the One Big Beautiful Bill [2] Education Department Fact Sheet on the One Big Beautiful Bill [3] Congressional Research Service Report on the One Big Beautiful Bill [4] White House Fact Sheet on the One Big Beautiful Bill [5] Committee for a Responsible Federal Budget Analysis on the One Big Beautiful Bill
- To effectively manage their finances while pursuing education-and-self-development, students might need to consider alternative sources such as private scholarships and lower-cost educational programs, as the new limits on Parent PLUS Loans may limit their availability.
- The changes in the One Big Beautiful Bill affect not only Parent PLUS Loans but also other student loans, including Grad PLUS loans, signifying a broader shift towards stricter loan limits in the business and finance sector of education-and-self-development.
