Parents who take out student loans for their kids are set to see repayment changes in the new year. Here's what to know.
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- The Education Department is rolling out changes to the Parent PLUS student-loan program.
- The changes include a $65,000 lifetime borrowing cap, or $20,000 per year.
- It could leave some parents without sufficient financing to pay for their kids' education.
Parents could see big student-loan changes in the new year.
Beginning July 1, 2026, the Department of Education will begin implementing President Donald Trump's student-loan repayment overhaul, which he signed into law in his "big beautiful" spending legislation.
The overhaul includes new income-driven repayment plans and lower borrowing caps — including for the Parent PLUS program, which allowed parents to borrow up to the full cost of attendance for their kids' educations. The department is planning to impose a $65,000 lifetime borrowing limit per dependent student, or $20,000 per year, which will limit parents' ability to use federal financing to help send their children to college.
The new borrowing cap would apply to parents taking out new loans in 2026. Existing Parent PLUS borrowers who took out loans before July 1, 2026, can continue borrowing at their existing terms until 2028.
Additionally, parents who take out loans after July 1 will only have access to the standard repayment plan and will not be able to enroll in the new Repayment Assistance Plan, which the Department of Education is rolling out to replace existing income-driven repayment plans.
A September analysis from the Brookings Institution said that, based on data from the National Postsecondary Student Aid Survey and the College Scorecard, 7.7% of undergrad students had parents who took out Parent PLUS loans at an average amount of $16,272 in the 2019-2020 school year. Higher-income families borrowed higher amounts: the analysis said that among families earning more than $130,000 annually, 46% took out more than $20,000 in Parent PLUS loans each year.
"However, these patterns mask a crucial insight: While lower-income families borrow smaller absolute amounts, they face significantly higher debt-to-income ratios," the analysis said, meaning that the repayment burden tends to be greater for lower-income families despite borrowing at lower amounts.
Parent PLUS loans also tend to have the highest interest rates among federal student loans, currently standing at 8.94%. Still, the analysis said, they have several advantages, including access to more flexible repayment options and interest deductions on federal taxes.
The new limits could leave parents looking for alternative options to help pay for their kids' educations, including turning to private lending, which tends to have higher interest rates with riskier terms. They come as the department is also eliminating the Grad PLUS loan program and placing new borrowing caps for graduate and professional students, with the goal of curbing excessive student-loan borrowing.