How the Big Beautiful Bill Changes Parent PLUS Loan Borrowing

• You now face strict Parent PLUS Loan changes with federal borrowing caps starting July 2026. Proactive planning is essential to prevent unexpected financial shortfalls.

• If your child is entering college soon, strategically borrowing before the Parent PLUS Loan limits take effect can help you preserve critical borrowing flexibility.

• With new borrowing limits on Parent PLUS Loans, you’ll need to more aggressively explore scholarships, grants, or private loans to fully finance your child’s education.

The One Big Beautiful Bill Act caps Parent PLUS Loans at $20,000 per year and $65,000 total per student, starting July 1, 2026. Previously, families could borrow unlimited amounts up to their child’s total cost of attendance. With this new law, many parents will face immediate funding gaps, potentially forcing them into expensive private loans or reducing their child’s college choices. Families must now quickly decide how they’ll bridge these financial shortfalls.

For families already struggling with high tuition, these limits mean urgent financial decisions. Can they still afford their child’s chosen college? Will they need to fill gaps with private loans, scholarships, or personal savings? Addressing these questions early will help ensure that college plans stay within reach despite new borrowing limits.

Previously, parents could borrow without federal limits, fully funding the difference between other aid and the total cost of attendance. The new borrowing caps apply strictly per student (rather than per parent):

• $20,000 per year, per student.

• $65,000 total per student for their entire undergraduate education.

Historically, both parents could independently borrow uncapped amounts. For instance, one parent could borrow $80,000 and another an additional $50,000—totaling $130,000 for one child. Now, the combined total from all parents cannot exceed $65,000 per student.

In practical terms, if your child’s preferred college costs $45,000 annually (tuition, housing, and fees), you previously could borrow the full amount through Parent PLUS. Under the new rules, you’d face an immediate $25,000 shortfall each year. To cover this gap, you’ll need scholarships, family savings, or private loans.

These caps particularly impact families planning to attend private or out-of-state schools, making careful budgeting and early planning essential.

Families whose children start college in the 2026–2027 academic year or later must immediately adjust to the new Parent PLUS Loan caps. However, if your child begins college just before these changes, borrowing even a modest amount before the cutoff date preserves access to unlimited borrowing rules for up to three additional academic years, or until graduation, whichever comes first.

Given this limited grandfathering provision, act promptly. Create a realistic budget covering tuition, housing, and all related college expenses. Clearly identify potential funding gaps and determine where you’ll need scholarships, grants, or private loans.

Revisit your child’s college choices, prioritizing institutions offering significant merit aid, lower tuition costs, or robust financial aid packages. Taking these strategic steps now helps keep your child’s college aspirations within reach despite upcoming federal borrowing limits.

If you’re funding college for multiple children, each child receives an independent borrowing limit under the new rules, offering some flexibility for larger families. Each student qualifies individually for the federal loan caps described earlier, allowing borrowing up to the maximum per child.

However, tracking these separate limits adds complexity, especially if your children attend colleges with significantly different tuition costs or overlapping enrollment periods. You’ll need to carefully monitor each child’s borrowing to avoid reaching their limit prematurely.

To manage this effectively, create individualized funding strategies for each child. Prioritize scholarships, grants, or more affordable institutions for those who face larger financial gaps. Proactive planning will maximize your resources, maintain financial flexibility, and help keep college costs manageable despite the new borrowing restrictions.

With these new federal borrowing restrictions, private student loans may become necessary for many families. However, turning to private loans requires caution, as they differ substantially from Parent PLUS Loans.

Private loans typically have stricter approval criteria, depending heavily on your credit score and income. Interest rates vary widely and may exceed federal loan rates, increasing your total repayment amount. Unlike federal loans, private loans rarely offer repayment protections such as income-driven plans, deferment, or forgiveness—potentially leaving you financially exposed if your circumstances change.

Before considering private loans, maximize all other funding sources: scholarships, state grants, institutional aid, and work-study. If private loans become unavoidable, compare lenders carefully to secure the best terms. Proactive financial planning reduces risk and ensures affordability.

In addition to federal caps, colleges now have authority to independently set lower borrowing limits for Parent PLUS Loans. Schools might restrict annual borrowing below the federal maximum to reduce student and family debt.

This institutional discretion introduces uncertainty into your financial planning. For instance, a college may cap Parent PLUS borrowing at $15,000 annually rather than the federal $20,000, unexpectedly widening your funding gap.

To avoid surprises, contact prospective colleges’ financial aid offices early. Explicitly confirm their Parent PLUS Loan policies and factor these potential institutional limits into your budgeting. Clarifying borrowing policies ahead of time ensures your financial strategy remains realistic and manageable.

The new law also significantly alters repayment options for Parent PLUS Loans. Parent PLUS Loans taken out after July 1, 2026, will be completely ineligible for income-driven repayment (IDR) plans—even if consolidated. More critically, if you’re currently enrolled in an IDR plan for existing Parent PLUS Loans, borrowing any additional Parent PLUS Loans after July 1, 2026, could make all your Parent PLUS Loans ineligible for IDR moving forward, removing your ability to access affordable payments or pursue forgiveness, including through Public Service Loan Forgiveness (PSLF).

Given this risk, carefully evaluate any decision to borrow additional Parent PLUS Loans after the new rules take effect. Thoroughly review your repayment options and plan proactively to ensure you maintain eligibility for favorable repayment and forgiveness programs.

Black and Latino families have long disproportionately relied on Parent PLUS Loans, leaving them particularly vulnerable under these new restrictions. At Historically Black Colleges and Universities (HBCUs), nearly one in four families (23%) depends on Parent PLUS Loans—almost three times the national average.

Previous tightening of Parent PLUS eligibility led to significant enrollment declines at HBCUs, limiting college access for many students of color. The new borrowing caps risk deepening this impact, potentially forcing families toward expensive private loans or preventing students from attending college altogether.

To mitigate this risk, proactively engage with your school’s financial aid office and aggressively pursue additional funding like scholarships, grants, and institutional aid. Early, strategic planning helps preserve essential pathways to higher education for your child.