The incoming wave of changes set to upend the federal student loan landscape will impact many borrowers, but there’s one specific group that student loan advisors and observers are keeping a close eye on: parents.
Parent borrowers taking out loans for students through the federal direct PLUS program will soon be locked out of more affordable repayment plans. They’ll also face tighter loan caps that could leave some scrambling for funds to pay for the final college years.
Student loan experts say these changes could lead to a rise in parent defaults as well as some challenging fourth-year borrowing situations.
The Trump administration is overhauling federal student loans, with officials saying they want to simplify a complex system, prevent borrowers from taking on too much debt, and bring down the cost of education. Starting on July 1, 2026, new borrowers will have fewer repayment options, and some will also face more restrictive limits on the amount of loans they can take out. Some existing borrowers will be forced to transition to new repayment plans with different terms in the coming years as theirs get phased out.
The Parent PLUS program will undergo considerable changes. Here’s a look at what to expect.
[Read: Best Parent Student Loans: Parent PLUS and Private.]
Parent PLUS Loans: What’s Changing
Parents who want to borrow to help pay for their student’s education can do so using Parent PLUS loans. These loans are often taken out to fill funding gaps when grants, scholarships and other federal loans don’t cover college costs.
Parent PLUS loans differ from those given to students in several ways. While federal loans offered to dependent undergraduate students are limited to between $5,500 and $7,500 per year ($31,000 lifetime), parents have for years been able to take out PLUS loans of up to the cost of admission for each student they have.
Parent loans are also more expensive. For the 2025-26 school year, Parent PLUS loans had a fixed interest rate of 8.94% compared with the student rate of 6.39%. Additionally, a parent loan comes with a 4.228% origination fee, which is higher than the 1.057% that students pay.
But new federal rules usher in two major changes to Parent PLUS loans. First, parent borrowing will now be capped at $20,000 per year and $65,000 total for each student. Second, parents will no longer have access to more affordable income-driven repayment plans or even the graduated or extended options available with the old standard plans.
Starting on July 1, 2026, new Parent PLUS borrowers will all be placed in the new tiered standard repayment plan, where their repayment window will range from 10 to 25 years based on the total balance they borrowed. Interest rates, which are determined by a formula, aren’t impacted by the changes.
[Read: Best Private Student Loans.]
More Defaults Ahead? Why Trouble May Loom for Parent Borrowers
The federal loans offered to parents have long consisted of a risky concoction that hints at potential default. There are higher interest rates and fees. Astronomical borrowing limits. And as long as you don’t have a glaringly adverse credit history, you qualify.
Parent PLUS loans account for about 7% of the $1.7 trillion in total outstanding federal student loan balance, and parent debt is growing at a relatively rapid clip.
About 3.6 million borrowers owe $116 billion in Parent PLUS loans, according to the most recent Department of Education data. While the number of Parent PLUS loans taken out has gradually increased, the total outstanding balance has risen significantly, nearly doubling in a little over a decade. In 2014, 3.1 million parent borrowers had about $62 billion in PLUS loan debt.
These loans may once have been designed to help middle- and upper-income families cover college costs, but they’re increasingly relied upon by those who may not have the means to pay them back. According to a Brookings Institution analysis, 56% of Parent PLUS borrowers have students who qualify for Pell Grants, need-based financial aid the federal government provides only to those with lower incomes.
So, why would the new changes make default or delinquency any more likely than before? Experts point to several factors.
Up until now, parents who found themselves drowning in PLUS debt have had a financial lifeline available. By consolidating their loans, they could qualify for more affordable repayment plans that provided the relief of lower monthly payments and eventually loan forgiveness. That option is going away.
Starting July 1, 2026, new parent borrowers and those who didn’t consolidate their existing Parent PLUS loans will no longer have access to income-driven repayment plans. Furthermore, any parent borrower currently in an income-driven repayment plan will forfeit that status if they take out another federal student loan after July 1. That could create a particularly sticky situation for parents with another student entering college in the coming years, as they could potentially be adding a second loan while also watching their existing monthly payments jump as well.
While the new caps put on Parent PLUS loans are intended to help reduce defaults and overborrowing (and to try to force colleges to lower prices), the overhaul didn’t add any ability-to-pay component to qualifying for the loans. Plus, even with the caps, parents can still pile up as much as $65,000 in loans per student.
“I predict that Parent PLUS loans are going to jump as far as defaults,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. “Because these borrowers are not going to be able to get an affordable payment, but they’re still going to be given an amount of loans that’s unaffordable to them.”
[Read: Best Student Loan Refinance Lenders.]
Borrow Private First? Changes May Challenge the Old Advice
Another scenario may potentially develop as a result of parent borrowing caps. Some parents may hit the limit before their student has completed studies.
For example, consider a student attending a college that costs $120,000 over four years. If the student takes out their allotted $31,000 in federal loans and the parent maxes out at $65,000, that would still leave $24,000 that would need to be covered either by savings or additional loans. But counting on qualifying for a private loan for the final year of college could be risky, says Jack Wang, a college financial aid advisor at Innovative Advisory Group and the host of the “Smart College Buyer” podcast.
He notes that the federal student debt you racked up paying for the first years of your student’s college may work against you in the eyes of some lenders. Conversely, if you took out the private loans first, you would know you could likely rely on the federal loans to be available on the back end. In the past, income-driven repayment and other benefits still made federal loans more appealing for parents, but with those going away, the calculations may change for some.
“If the family uses the PLUS loan first and then tries to get a private loan, they may not qualify,” says Wang. “Historically, standard advice has always been to max out federal loans before using private loans. That may not be true anymore, particularly for PLUS loan borrowers.”
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Why Parents Could See a Big Jump in Student Loan Payments originally appeared on usnews.com
