For decades, the federal Parent PLUS program would lend a parent the full cost of attendance — whatever the school charged, Washington would finance. That era is over. As of July 1, Parent PLUS is capped at $20,000 per year per child and $65,000 total. New Parent PLUS borrowers get only one repayment option — the new Tiered Standard Plan, with terms of 10 to 25 years — and Parent PLUS loans no longer qualify for Public Service Loan Forgiveness at all.
Graduate students kept their $20,500 annual limit but picked up a new $100,000 total cap, down from $138,500. Professional degrees — law, medicine — get $50,000 a year up to $200,000 total. (The Education Department also wants to strip “professional” status from fields like nursing and accounting, which would push those students down to the lower caps; a federal court has temporarily blocked that move.) Over a lifetime, no borrower can now take more than $257,500 in federal student loans, undergrad included.
Undergraduate limits barely moved: dependent students can borrow $5,500 the first year, rising by $1,000 a year to a $31,000 maximum; independent students start at $9,500 and top out at $57,500. And repayment simplified dramatically: new borrowers choose between just two plans, down from seven — the Tiered Standard Plan or the income-based RAP, which runs 30 years to forgiveness and is now the only forgiving plan (public servants can still reach PSLF through RAP after 10 years). Borrowers on the old SAVE plan have 90 days from July 1 to transition; anyone who borrowed before July 1 has until June 30, 2028.
Here’s the uncomfortable truth the old system let everyone avoid: when the government would lend a parent the full sticker price of any school, nobody ever had to ask whether the school was worth the sticker price. The $65,000 cap ends that. If your child’s dream school costs $85,000 a year, the honest conversation — the one about state schools, merit aid, community-college pathways, and what the degree actually buys — is no longer optional. That’s painful. It’s also, frankly, overdue.
The trap I’m watching for isn’t the caps themselves. It’s what stressed parents do about the gap the caps create. When the federal spigot narrows, the tempting sources are the worst ones: 403(b) and 401(k) loans, hardship withdrawals, pausing retirement contributions “for a few years,” or co-signing private loans at rates that make the federal terms look quaint. A teacher who pulls $60,000 out of retirement accounts at 55 doesn’t just lose $60,000 — she loses what that money would have become over the next twenty years, plus the taxes and penalties on the way out. The student has forty working years to repay a loan. You may have ten. The math is not close.
1. 529 money first. It exists for exactly this, grows tax-free for education, and spending it has no effect on your retirement income. 2. Student federal loans second — within the undergrad limits, in the student’s name. 3. Cash flow third, if it truly is surplus. 4. Parent PLUS last and reluctantly, knowing it now has one repayment plan and no PSLF path. Never the retirement accounts. And a note for grandparents: a grandparent-owned 529 is now one of the cleanest gifts in the code — under current FAFSA rules, distributions from it no longer count as untaxed student income, so it can fill the gap without wrecking aid eligibility or anyone’s retirement.
Two deadlines matter. If you’re on the SAVE plan, you have 90 days from July 1 to move to a new plan — don’t let that land by default. If you borrowed before July 1, you have until June 30, 2028 to choose your lane. And if anyone in the household works in public service — teachers, this means you — make sure the plan you land on is RAP if PSLF is part of your strategy, because it’s now the only income-based road there.
First, if you have a student within five years of college, price the schools honestly against a $65,000-per-child federal parent ceiling — on paper, this month. Second, fund the 529 before you promise anything out of future cash flow; if grandparents want to help, point them at their own 529, not a check. Third, write down the ordering rule above and treat your retirement accounts as legally off-limits — because functionally, they are. Fourth, if you carry loans yourself, calendar the SAVE 90-day window and the 2028 deadline today. A college plan and a retirement plan are the same plan; fund them in the right order and both survive.