Student Loan Shake-Up: What the OBBB Means for Parent PLUS Borrowers, From a Financial Aid Expert

For students starting a new program on/after July 1, 2026, loans will be capped at $20,000 annually, and parents can borrow no more than $65,000 total, a big change from the unlimited borrowing setup.

By Elaine Rubin

published 28 September 2025

in Features

A mom takes a selfie with her daughter, who's holding a box that says college. — (Image credit: Getty Images)

With the passage of the One Big Beautiful Bill (OBBB), drastic changes are coming to federal student loan programs. One major change is the new loan limits for Parent PLUS Loans beginning July 1, 2026.

These Direct PLUS Loans, part of the federal student loan program, have been a lifeline for parents helping their children cover the costs of college.

If you have a child who'll be college-bound in the next few years, these changes could directly impact your college financing plans — and could require you to look for other methods to cover financial aid gaps.

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Understanding the Parent PLUS Loan changes

The Direct PLUS Loan program has offered parents the ability to borrow federal student loans to help cover the cost of college when financial aid comes up short.

Last academic year, we saw the average Parent PLUS Loan recipient receive about $20,000 per year.

However, with no annual loan limit, this average can be deceiving, as parents borrowing a PLUS Loan to help them cover the costs of college have been able to borrow up to the student's cost of attendance minus other financial aid received.

Without strict loan limits, and with the current costs of college, parents could be borrowing a small amount or tens of thousands per year, with minimum credit requirements when compared with other types of private debt.

This accessibility has come with consequences. Many parents found themselves carrying substantial debt well into retirement, with the outstanding federal student loan balance for borrowers age 62 and older totaling about $132 billion.

About 480,000 borrowers in this age group carry balances exceeding $80,000, and more than 100,000 of these borrowers owe more than $200,000.

The New Parent PLUS Loan limits

For any student beginning a new program on or after July 1, 2026, Parent PLUS Loans will be capped at $20,000 annually, and a student can receive no more than $65,000.

This is a significant change from the previous unlimited borrowing structure. Students who started programs before July 1, 2026, and parents who have already borrowed Parent PLUS Loans will be grandfathered into the current terms until the student completes their program or for an additional three years.

It's important to note, that these limits are tied to the recipient — the student. While this doesn't necessarily prevent parents from overborrowing, as a parent can borrow these amounts for each dependent undergraduate student seeking an undergraduate degree or credential, it will affect financial planning for the student and their family going forward.

What these limits mean for your family

There are some considerations parents should take — including a mathematical challenge for students attending four-year programs.

If you need to borrow the full $20,000 limit for your child in the first year, you'll use most of the aggregate limit by the time the student completes their third year.

This could leave a significant funding gap for the student's final year of college if other plans aren't put into place.

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Consider this scenario: Your child attends a private four-year university with a total annual cost of $60,000. After grants, scholarships and student loans are offered, the student has a $25,000 gap. It's expected that a gap of this size, if not larger, will continue for all four years.

Under the new rules, you could borrow $20,000 in a Direct PLUS loan as a parent, and you would still need to find a way to cover the remaining $5,000.

By your child's junior year, you would have already borrowed $60,000 of the $65,000 total limit, leaving only $5,000 for your child's senior year.

In addition, you might face tuition increases, which average 5% to 8% annually. If you were feeling a financial strain during freshman year, it might get worse each year — which is why it's crucial to assess affordability from the start of your child's college career.

Protecting your child's educational success

If your child hits a financial barrier they can't mitigate, they can face serious risks. Chances are, if you're borrowing a parent student loan — federal or private — your child is likely to also be borrowing student loans.

Colleges have strict deadlines for when tuition is due, and any delays in payment might result in your child being dropped from classes until the issue is resolved, or the student might be forced to leave the school entirely.

Typically, this leaves families scrambling to find ways to cover the tuition bill — which could lead to high-interest emergency funding.

Even if the issue is resolved, the student could be left with the stress of financial uncertainty, which can impact academic performance.

Unfortunately, if the student did borrow funds and is forced to drop out, that immediately puts them at an elevated risk of default on their loans.

To prevent these outcomes, it's important to have an honest conversation with your child about college affordability.

If your dream school requires borrowing significant debt, consider more affordable alternatives that won't jeopardize degree completion and the financial stability of the family.

Creating your financial action plan

Don't wait until acceptance letters arrive to address affordability. Start these conversations during your child's sophomore or junior year of high school, when there's still time to create savings plans, adjust college lists and explore scholarship opportunities.

Use tools such as Edvisors' financial aid gap calculator to run estimates or use your financial aid offers to determine your financial aid gap. (Note: I am the director of corporate communications for Edvisors.)

1. Establish a college budget

Take some time to look at your own resources, and create a realistic budget for how much you and your child can afford.

It's helpful to calculate realistic annual education costs from each prospective school, including tuition, room, board and other living expenses.

Factor in increases to tuition each year. This will give you a baseline of affordability for you and your child.

2. Develop a loan strategy

Set limits on how much you're willing to borrow. Keeping this open-ended can create issues further down the line.

In addition, look at all your options, such as the Direct PLUS Loan, as well as private student loans.

If you plan to borrow a Parent PLUS Loan, keep the new limits in mind. If you can keep your borrowing to $15,000 or less each year, you can help cover the costs of a four-year program.

3. Explore alternative financing options

Private student loans might fill gaps left by federal loan limits, but they typically need stronger credit qualifications and offer fewer protections than federal loans.

Many times, borrowers might see lower interest rate options with private student loans, but only borrowers with strong credit will qualify for the lower rates.

4. Start saving now

Even if your child is starting college next year, it's not too late to start saving for college.

If your child is in a four-year program, and you find yourself with a financial aid gap, it might be worth it to set money aside while they're in their first and second year to use toward their junior and/or senior year.

Even modest monthly contributions to either a 529 plan or a high-yield savings account can reduce your borrowing needs in the future, which can reduce your need to borrow.

The end of unlimited Parent PLUS borrowing marks a significant shift in college financing. It's hard to say if this is the protection parents need from overborrowing, but it does offer an opportunity to organize and create a plan.

By understanding the changes, creating realistic budgets and exploring all funding options, you can help ensure your child's educational success without compromising your financial future.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Elaine Rubin is the Director of Corporate Communications at Edvisors. She has been a financial aid and student loan expert for more than 15 years and provides advice from both personal and professional experiences. Elaine has become a trusted resource in the industry, known for her ability to translate complex financial aid and student loan topics into clear, actionable insights.