In the One Big Beautiful Bill (OBBB), there are many changes directed at college affordability and student loan repayment.  The item I will be discussing is the impact of the new federal loan limits on undergraduate and graduate programs.  These changes will alter the college planning process for most families, and it’s surprising how little attention they’re getting.

Because of the new federal loan limits, parents will play a much larger role in financing education than ever before. Currently, the federal government covers about 92% of all student loans. However, beginning with newly enrolled students in July 2026, that share will drop to below 50% due to reduced Parent PLUS loan limits and the elimination of Grad PLUS loans.

Why Did the PLUS Program Change

The current Federal PLUS borrowing rules are very kind since there is minimal loan underwriting.  Under the current PLUS loan rules, the parent or student could borrow up to the fully loaded cost of attendance (COA) for the program, minus any financial aid received per year.  With some colleges’ COA exceeding $100,000, the federal government needed to make changes.

In the chart below, you can see the growth rate in the PLUS loan program since 2014.  An understated number is Unsubsidized Loans, since a significant portion is related to graduate school financing.  The combination of both would significantly increase graduate financing costs even higher.

Student loan growth has been a growing problem and has been discussed across multiple administrations.  According to the Congressional Budget Office (CBO), under current lending and repayment rules, including forgiveness, the federal government is losing approximately $0.20 per dollar lent.

We Need to Change to HOW We Will Pay and Not WHAT

Under current federal loan limits, students and parents could make borrowing decisions with minimal risk or understanding of the financial consequences.  The focus was on admission and not affordability.  This approach is the most significant change that families will face starting 7/1/26.

Now, families will be limited to a combined $92,000 in federal student loan debt per child.  It includes specific annual and lifetime limits for the student and parents over the first four years.  This limit is in comparison to unlimited under the current rules.

Many parents will initially assume that a private loan will be the answer, which may be a great solution to the funding shortfall.  Private student loans offer some benefits, but borrowers should understand the repayment estimates before making that decision.  Federal loans offer more repayment options and benefits than most private student loans.

Private loans have a formal underwriting process similar to that of a mortgage.  The borrower is the student with the parent as the co-signer.  The credit history will determine the loan interest rate, amount, and term.

If the parents have multiple children or have borrowed for older siblings, the parents’ debt-to-income ratio will be affected, making the interest rate less attractive.

Listed below is an AI-generated simple matrix using your FICO score and Debt to Income Ratio to help you see what interest rate would be anticipated for a private loan.

Risk of Not Planning Properly

I have spoken with numerous college guidance counselors and administrators over the past few months.  To my surprise, most guidance counselors are still using the old loan limit assumptions.  Only some of the college administrators were aware of the changes and were starting to identify the issues, but had no plan.

For parents and students entering undergraduate or graduate programs, you need to understand these changes.  If proper planning is avoided, the family risks not having the funding to graduate or incurring very high loan repayment costs after graduation.

Under these new rules and the current cost, many families will need to use a combination of federal and private student loans.  This planning will be critical not only to securing the funding but also to estimating your payment at graduation.  This planning is the missing transparency needed to make the best decision.

The chart below compares the new loan limits and explains why additional debt planning is required.

Existing Enrolled Students and Parents Get a Three-Year Runway, But Positioning is Critical

As part of the OBBB, existing students and parents were granted a three-year runway to continue using the legacy rules.  It allows them to use the existing rules depending on their status and enrollment.

To qualify for this benefit, families will need to review their graduation date and how they have funded their education before the Spring semester.  Each situation is unique based on funding requirements, and it is not just for the enrolled student.  It could help parents fund other siblings if done correctly.

New College Funding Transparency Is Needed

Congress has four proposed bills to address these problems with college cost transparency.  Now that COVID is over, borrowers are starting to see the lack of transparency in the process, since student loan repayment has returned.  PayForEd has just finished the first two phases of our software enhancements to address these new loan limits and loan repayment rules.

What families need to realize is that this decision is a journey with twists and turns.  It is not a straight line.  Our solutions help students and parents project their debt to graduation.  We now allow you to see the repayment options and the monthly payment amount based on the debt structure.  This information is what is missing from the process.

College Funding Biggest Change Conclusion

At PayForEd, we help families navigate the complex world of college funding so they can make informed decisions. The landscape of college financing has shifted dramatically, yet these changes are largely going unnoticed. For many families, choosing how to pay for college is one of the biggest financial decisions they’ll ever face—and for parents, it’s often the most significant choice before retirement.

Many families assume that college financing will proceed as usual, while others may plan to rely on private student loans. While that might seem like an easy solution for the first year, it’s essential to understand the full debt picture. Without careful planning, the total repayment amount at graduation can come as a shock to both students and parents. Ensuring transparency and clarity in these decisions is crucial.

That’s why we’re here: to guide families through the complexity, provide clarity, and ensure they make choices that set their students—and themselves—up for long-term success.

The PayForEd software solutions and trained advisors can help families better navigate these changes.