A new law reshapes how students and parents borrow
Big changes are on the way for federal student loans. If you’re a student, a parent paying for college, or someone thinking about grad school, it’s important to know what’s coming.
The One Big Beautiful Bill (OBBB), passed in July, makes some of the biggest changes to student loans in more than a decade. While many of the rules don’t start until July 1, 2026, there are a few changes that will start phasing in early. The new law changes how much parents can borrow, shuts down a popular loan option for grad students, and streamlines repayment plans.
Let’s break down what it all means to you.
What doesn’t change for undergrads
If you’re an undergrad, your main federal loan options—Direct Subsidized and Unsubsidized Loans—won’t change. You can still count on them as the foundation for borrowing.
But the actual change impacts parents. For the first time, Parent PLUS Loans have a borrowing ceiling: families can borrow up to $20,000 a year for each of their children and no more than $65,000 total.
That’s noteworthy. Parent PLUS loans total about one-third of all undergraduate borrowing. Many families who use them to cover full-bill tuition bills may now hit the cap sooner than they used to. That can mean contemplating private loans or alternative college choices.
Big changes for grad students
Grad students are being affected the most. Starting July 1, 2026, the Grad PLUS Loan program is being phased out.
If you have already borrowed a Grad PLUS loan by then, you will be able to keep borrowing under existing rules until you finish your degree or within three more years. But new grad students will not be able to do so.
As a concession, the government is modestly raising the borrowing limits on Direct Unsubsidized and Subsidized Loans. The increase will be 14% to 23%, depending on the type of grad loan. However, the increase will not fully cover the gap that students have been filling with Grad PLUS. Most grad students may be forced to seek out private lenders to fill this gap.
Repayment gets simpler—and menu-simpler
- Repayment plans are like a maze now. Beginning July 1, 2028, they won’t be. Borrowers will have just two alternatives:
- Standard Repayment Plan — fixed payments for 10, 15, 20, or 25 years, depending on the amount you owe.
- Repayment Assistance Plan (RAP) — an income-based plan where payments start as low as 1% of family income and cap out at 10%.
That will make things simpler, but it eliminates some of the payment plans available today. For some borrowers, that will result in larger monthly payments.
What if you already have PLUS loans?
If you’ve borrowed Parent PLUS or Grad PLUS loans already before July 1, 2026, you’re fine. You’ll be grandfathered under current rules. That means you can still borrow as you go about school.
However, today is a great day to reconsider your borrowing strategy. Since the interest rates on PLUS loans change each year in May, comparing your rates to private loans could help you save. Most private lenders let you see your potential rate without performing a hard credit check, which won’t hurt your score.
Planning for families
For parents just starting the college journey, the new rules make it even more important to look closely at each school’s “net price” — what you’ll actually pay after scholarships and grants. Sticker price alone doesn’t tell the whole story.
If you think you will need to borrow more than federal loans offer, start shopping around for private loan interest rates early. You’ll know what’s out there then and can get your credit in shape or line up a co-signer, if needed.
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What to do if you’re already repaying
If you’re already paying student loan repayments, nothing changes overnight. You can stay in your current plan until 2028. Then you’ll need to opt for the Standard Plan or RAP.
When making your selection, consider more than the monthly installment. Consider how much you’ll end up paying in interest in the long run and how much room each plan will leave to adjust in your budget. Refinancing with a private bank might save you money, too, if you can secure a better rate, but keep in mind—refinancing loses you federal benefits such as income-driven repayment or future forgiveness programs.
Bottom line
The new law may look scary, but it also gives families a chance to borrow more responsibly. Understanding your options, comparing repayment terms, and planning ahead, you can manage the changes confidently.
With smart planning, you can keep your higher education goals in place without letting debt control your future.
