For decades, Washington would lend a parent the full sticker price of any college. Whatever the school charged, the Parent PLUS program would finance. That era ended July 1.
The new rules land against roughly $1.7 trillion in student loans already outstanding. Here is what changed.
What changed July 1
Parent PLUS is now capped at $20,000 a year per child and $65,000 total. New PLUS borrowers get exactly one repayment option — the Tiered Standard Plan, running 10 to 25 years. And PLUS loans no longer qualify for Public Service Loan Forgiveness at all.
Graduate students keep their $20,500 yearly limit but get a new $100,000 total cap, down from $138,500. Professional degrees like law and medicine get $50,000 a year, up to $200,000.
One fight is still open. The Education Department wants to strip “professional” status from fields like nursing and accounting, which would push those students to the lower caps. A federal court has temporarily blocked that move.
Across a lifetime, no borrower can now take more than $257,500 in federal student loans, undergrad included. Undergrad limits barely moved: dependent students start at $5,500 a year and top out at $31,000.
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. Public servants — teachers, this means you — can still reach forgiveness through RAP after 10 years.
The gap trap
The old system let everyone skip a question: is this school worth the sticker price? If the dream school costs $85,000 a year and the federal parent ceiling is $65,000 total, the honest talk about state schools and merit aid is no longer optional. Painful — and, frankly, overdue.
The real trap is what stressed parents do about the gap. The tempting sources are the worst ones: 403(b) and 401(k) loans, hardship withdrawals, pausing contributions “for a few years,” or co-signing private loans.
A teacher who pulls $60,000 from retirement accounts at 55 loses far more than $60,000. She loses everything that money would have become over twenty years, plus taxes and penalties on the way out.
Your kid can borrow for school. Nobody — nobody — will lend you a retirement. That one sentence should settle nine out of ten college-funding arguments in your house.
So here is the order that protects both generations. A 529 — a savings account that grows tax-free for education — goes first. Student federal loans second, in the student’s name. True surplus cash third. Parent PLUS last and reluctantly. Retirement accounts: never.
A note for grandparents: under current FAFSA rules, money from a grandparent-owned 529 no longer counts as the student’s income. It can fill the gap without wrecking aid eligibility — one of the cleanest gifts in the code.
Deadlines that matter
On the SAVE plan? You have 90 days from July 1 to move — do not let that land by default. Borrowed before July 1? You have until June 30, 2028, to choose your lane.
And if forgiveness is part of your strategy, make sure you land on RAP. It is now the only income-based road there.