The OBBB Act is bringing sweeping changes to how families finance higher education and manage student loan repayment. Financial advisors and families alike need to understand these shifts to plan effectively for college expenses and debt management.
What’s Changing with College Funding and Student Loans?
New Borrowing Limits
Starting July 1, 2026, federal loan limits will be significantly reduced, forcing many borrowers to turn to private student loans with formal underwriting processes. This represents a fundamental shift in college and post-graduate financing, as federal exposure to rising education costs becomes more restricted.
As an example, the student and parents will be limited to $92,000 over the first four years of an undergraduate degree. There are also annual limits, so proper cash flow and student debt planning will be required going forward. Post-graduate programs face much lower limits than under the current rules.
Simplified Repayment Options
The complex landscape of nine repayment plans is being streamlined to just two methods for borrowers with loans after July 1, 2026. The new Revised Affordability Plan (RAP) offers some advantages:
- More straightforward calculations
- No negative amortization
- Possible principal reduction
- Lower tax implications for forgiven amounts
Graduate Education Changes
With Grad PLUS loans being eliminated, parents may need to take on a larger role in financing graduate education, potentially impacting their own retirement planning and other siblings’ financing. Private student loans have a formal underwriting process, so parents’ debt-to-income ratios will become a factor as a cosigner.
What This Means for Families
The OBBB Act shifts the college decision-making process from affordability to access. Families will need to:
- Plan earlier and more strategically to manage borrowing limits
- Consider the cumulative impact when multiple children attend college
- Adjust college selection criteria based on new financing constraints
- Factor career planning into undergraduate decisions
- Prepare for increased reliance on parent cosigning for private loans
Who Needs to Act Now?
Several groups should begin planning immediately:
- Current high school senior parents – First class facing new Parent PLUS loan limits
- Graduate school students – Facing new federal loan restrictions
- Class of 2029 – May encounter funding challenges as the three-year runway expires
- Parent PLUS borrowers – Need to decide on legacy repayment options by early 2026
- Current federal loan borrowers – especially those in SAVE plans who need to evaluate their options
New Employer Benefit Opportunity
A permanent student loan repayment assistance benefit now allows employers to offer tax-free reimbursements up to $5,250 annually under IRS Section 127. This benefit applies to both federal and private loans but excludes Parent PLUS loans and doesn’t affect loan forgiveness programs.
Employers are expected to implement this benefit as a new recruitment and retention benefit. The initial adoptions were delayed due to the multiple non-payment extensions.
The Bottom Line
The OBBB Act represents a major overhaul of college financing. While it simplifies some aspects of repayment, it also places greater responsibility on families to plan and potentially rely more on private financing. Financial advisors have a critical opportunity to guide clients through these changes, helping them navigate new borrowing limits, repayment strategies, and emerging employer benefits. +
Early planning and professional guidance will be essential for families to navigate the transition to this new college funding landscape successfully.
Advisor Training Course – OBBB Impact on College Fundng and Loan Repayment
The PayForED Advisor training course breaks down the OBBB changes into four practical sections.
Advisors who understand OBBB can better guide families through college funding and student loan decisions — a service in high demand since these rules affect every family with college-bound students. The PayForED Advisor Training course breaks down the OBBB changes into four practical sections. We help you understand the new Parent PLUS limits, Grad PLUS funding, and student loan repayment changes.
The four sections covered in the course are listed below:
- Introduction, OBBB Changes, Status & Important Dates
- Impact on College Funding & Saving for College Items
- Student Loan Repayment & Forgiveness Changes
- New Employer/Employee Benefit & Case Study
- CFP CE credits: Earn 4 CFP CE credits while learning new ways to serve families and borrowers.
The One Big Beautiful Bill (OBBB) is reshaping college funding and student loan repayment. Be part of this change!
