Parent plus loan changes everyone should know about

What is a Parent PLUS loan?

A Parent PLUS loan is a federal education loan made to the parents of dependent undergraduate students to pay for college costs. Paying back the loan is the responsibility of the parent and cannot be transferred to the student. The interest rates are set by the government and the current rates for the 2026-2027 school year are 9.07% with an origination fee of 4.228%.

What are the changes?

Beginning July 1st 2026 the new limits on Parent PLUS Loans are capped at $20,000 per year with a lifetime cap of $65,000 per dependent student. If you are an existing Parent Plus borrower who has already borrowed for your student prior to 7/1/26 you can continue under the previous limits for 3 more years or until they graduate (note: Existing Parent PLUS borrowers can continue to borrow under the old limits but will lose the ability to use an IDR repayment plan if they consolidate or take out a new PPL after 7/1/26)

Why this matters?

The Parent PLUS Loan has been used by many families to cover the tuition balances that financial aid and other sources are not able to cover. The Parent PLUS loan has a much less stringent approval process than private loans so it has been a good backup plan for parents that may not have the credit or debt to income ratio to be approved for private loans. This new limit will have a negative impact on many families who will now be scrambling to find ways to cover the balance of tuition that the new limits will not cover.

Summary

I believe this change will catch a lot of families off guard when trying to pay for college. Is the parent plus loan the best loan? No, the interest rate and origination fee generally make it a lot more expensive of a loan than private loans but the fact that parents with even weak credit could borrow up to the cost of attendance provided a backup plan for most families. Now a lot of these families will either be paying higher rates on private loans or be shut out from borrowing over the new limits altogether. 

I get it, the government is trying to get out of the business of student loans considering they historically lose money for every dollar they lend out for college but I think a more gradual phased in approach may have been the better move here. The government also believes this will slow down the crazy inflation rates we have seen with college tuition over the years and may even force some colleges to lower tuition.

Do I think that these changes will lower the cost of tuition at some colleges? Maybe, but it will take a few years and in the meantime it will cause some people to be put into some tough situations. I wouldn’t be surprised at all if we some adjustments to these limits over the next few years but that’s just my opinion.