On July 1, 2026, the One Big Beautiful Bill Act (OBBBA) will usher in a number of new student loan rules, and parent borrowers will be greatly impacted by these changes. It’s important to understand how these rules may impact you and if you need to take any action.
You must complete a Direct Consolidation Loan application before April 1, 2026 to maintain repayment flexibility and eligibility for loan forgiveness.
To maintain access to IDR plans or PSLF, you must apply to consolidate your Parent PLUS loans into a Direct Consolidation Loan (if the loans are not yet consolidated) before April 1st.
The April 1st deadline is important because it may take up to 90 days for a consolidation loan to be disbursed, and the loan must be disbursed before July 1st to preserve existing benefits. Consolidation loans disbursed on or after July 1st will be treated as “new” loans and will not be eligible for any IDR plans, or PSLF.
Parent borrowers that apply to consolidate by April 1st will be able to enroll their consolidation loan on the Income-Contingent Repayment (ICR) Plan. From there, they can either remain on ICR until July 1, 2028 when the ICR plan will be phased out, or they can switch to the Income-Based Repayment (IBR) Plan after making at least one payment on ICR.
Borrowers working towards PSLF should choose whichever IDR plan results in a lower payment to maximize their potential loan forgiveness. After July 1, 2028, IBR will be the only IDR plan available for parent borrowers with consolidated loans.
You will experience the most significant impact from these changes, which include:
Loss of flexible repayment and forgiveness options
Parent PLUS loans made after July 1st must be repaid on the New Standard Repayment Plan, with fixed payments based on the balance and interest rate. Borrowers aren’t eligible for lower payments on any other plans, including the income-driven repayment (IDR) plans. The rigid structure of the New Standard Plan may make repayment very challenging for some borrowers.
Without access to IDR plans, this means these borrowers also can’t take advantage of Public Service Loan Forgiveness (PSLF), as PSLF only works when you can make lower payments on an IDR plan. This also applies to borrowers who have already made PSLF progress on existing loans. If a parent borrower takes out any new federal loans after July 1st, all of their Parent PLUS loans (old and new) will be denied access to the IDR plans, and consequently PSLF.
Consider alternative options for borrowing
If you already have Parent PLUS loans or other student loan debt, new borrowing can have a major impact on your student loan situation moving forward. You should carefully consider whether it’s necessary to borrow additional federal loans after July 1st, or whether there are any alternatives to funding your or your child’s education.
If you’re planning to borrow for your child’s education; consider having the other parent take out the new Parent PLUS loans in their name. Remember these will only be able to be repaid under the new standard plan. Depending on your total student loan debt and plan for forgiveness, this preserves flexible repayment options on your existing Parent PLUS loans.
If you’re borrowing for your own education, such as graduate school, or the other parent is unable to borrow Parent PLUS loans for your child’s education, consider private student loans. Keep in mind that private student loans tend to have high interest rates and lack flexible repayment options.
New borrowing limit for Parent PLUS loans
For decades, Parent PLUS loans have had generous rules around borrowing limits. Parents could borrow up to the cost of attendance minus any other financial aid their child received. But starting on July 1st, the Department of Education will set a borrowing cap for Parent PLUS loans of $20,000/year per dependent, with a lifetime cap of $65,000 per dependent.*
*Important exception for families that have already started borrowing: If the student or parent has already borrowed a federal loan for their program before July 1, 2026, the parent can continue to borrow based on the previous rules for the lesser of 3 academic years or the remainder of the student’s program.
Higher education costs can vary widely, depending on where the student lives, if they plan to attend college in-state or out-of-state, and whether they select a public or private institution. With the new borrowing cap, it’s critical for families to consider how much they can afford before choosing a college.
Families may need to explore cost-saving alternatives, including applying for scholarships, starting out at community college, or having the student live at home to save money on housing.
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