Federal Student Loan Changes: What Families Need to Know
October 2, 2025
Paying for college has never been simple—but starting in 2026, new federal rules will reshape how parents and students borrow for higher education. These changes could alter how families plan, borrow, and repay student loans, so now is the time to understand what’s coming and prepare accordingly.
What’s Changing?
The One Big Beautiful Bill Act will bring sweeping reforms to federal student loans beginning July 1, 2026. While the details are complex, here are the highlights most likely to affect families:
● Parent PLUS Loans will be capped at $65,000 per child, with a yearly borrowing limit of $20,000.
● Income-driven repayment (IDR) options for Parent PLUS Loans will disappear for new borrowers. Existing borrowers can still access these options, but only if they act before the deadline.
● Grad PLUS Loans will be eliminated, leaving future graduate and professional students with capped federal loan amounts.
● Most current IDR plans will be phased out and replaced by a new option with stricter repayment terms.
● Colleges will face accountability rules tied to graduates’ post-degree earnings.
Let’s break down what this means for parents, students, and anyone considering graduate or professional school.
Parent PLUS Loans: New Borrowing Limits
Parents will still be able to borrow through Parent PLUS Loans, but the new cap could create challenges. The maximum will be $65,000 per child with a yearly limit of $20,000.
For example: If a family needs $30,000 for a child’s junior year at a private college, they won’t be able to borrow the full amount under the new rules. That extra $10,000 will need to come from another source.
Fewer Repayment Options for Parents
Currently, Parent PLUS borrowers can use federal income-driven repayment (IDR) plans to keep payments manageable. Starting July 2026, that option goes away for new Parent PLUS borrowers.
Good news for current borrowers: If you consolidate into a Direct Consolidation Loan before July 1, 2026, you’ll retain access to IDR. Families who rely on this flexibility should act sooner rather than later.
Graduate School Funding Will Shrink
Graduate students face perhaps the biggest changes. The popular Grad PLUS Loan will disappear starting in 2026. Instead, students will rely on capped federal Direct Loans:
● Graduate programs: $20,500 annual cap, $100,000 lifetime cap.
● Professional programs (law, medicine, dentistry, etc.): $50,000 annual cap, $200,000 lifetime cap.
These restrictions may push some students toward private loans—which often carry higher interest rates and stricter qualification requirements.
Repayment Plans Are Changing Too
By 2028, most existing IDR plans (like SAVE, PAYE, and ICR) will be phased out. The only surviving option will be the Income-Based Repayment (IBR) plan, but it will be closed to new borrowers.
Instead, future borrowers will choose between:
● A standard fixed repayment plan, with terms ranging from 10 to 25 years depending on the loan amount.
● A new Repayment Assistance Plan (RAP), which comes with longer repayment timelines (up to 30 years) and higher required payments than today’s most popular plans.
Accountability for Colleges and Universities
For the first time, schools could be penalized if graduates fail to meet minimum income thresholds compared to high school or bachelor’s degree holders. This may put pressure on expensive graduate programs with low job-placement rates, potentially leading to tuition cuts—or even program closures.
What This Means for Families
These changes represent the most significant overhaul of federal student loans in decades. For families, the key takeaways are:
● Plan borrowing early. Don’t assume unlimited access to PLUS or Grad PLUS Loans.
● Act quickly if you already have Parent PLUS Loans. Consolidation before 2026 may preserve valuable repayment options.
● Reconsider graduate school affordability. With federal loan limits in place, students may need to explore scholarships, employer support, or alternative funding sources.
● Expect private lenders to step in. But be cautious—private loans often carry higher costs and fewer protections.
Bottom Line
While it’s too early to know how every detail will play out, the upcoming loan changes will require families to rethink how they approach college and graduate school financing. If you or your children could be affected, now is the time to start planning.
Sources:
Taylor, Debra. “How The One Big Beautiful Bill Act is Changing College Planning." www.horsesmouth.com. 30 Sept. 2025. https://www.horsesmouth.com/how-the-one-big-beautiful-bill-act-is-changing-college-planning. Accessed on 30 Sept 2025.
Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.