By Shane Cummings, CFP®, AIF®, Wealth Advisor & Director of Technology/Cybersecurity
As you likely know, the U.S. government signed the One Big Beautiful Bill Act (OBBBA) into law on July 4. The bill contains a multitude of new laws—including enacting some substantial changes to student loan borrowing. This article covers the critical changes that are likely going to impact you if you are already a student borrower, or if you’re planning to fund your or your child’s future education using various government grant and loan options.
PLUS Loans Have Been Severely Limited
One of the biggest changes? Parent and Grad PLUS loans are getting scaled back. PLUS loans originally allowed parents to help borrow for college on behalf of their children; parents were ultimately responsible for repaying the loan. While this may have been a benefit to some student loan borrowers, it could also lead to situations where parents were over-extended financially under the loan terms. Parent PLUS loans will be capped at $20k per student per year starting July 1, 2026, with a lifetime limit of $65k.
Graduate student PLUS loans are being phased out completely by July 1, 2026. Instead, graduate students will have access to direct unsubsidized loans, but with an annual cap of $20,500, and a total lifetime aggregate loan limit of $100k.
If you’re holding Parent PLUS loans, you’ll want to consolidate before July 2026 and get into an income-driven plan before July 2028. That’s a possible way to avoid falling into a category that’s excluded from affordable repayment options.
Anyone who fails to consolidate (via a Direct Consolidation Loan) their PLUS loans by this date will lose access to more flexible deferment and forbearance rules. Consolidation also gives the borrowing student the opportunity to certify their PSLF progress and may protect that progress if anything changes with your job or the rules. Otherwise, missing the consolidation deadline could mean the borrowers are now stuck with a stricter and higher payment for their loan.
Income-Driven Repayment (IDR) Plans Are Getting Axed
The OBBBA also eliminates the Income-Contingent Repayment (ICR) statute and all the income-driven repayment plans that came with it. That’s a huge deal for borrowers who rely on plans like PAYE (Pay As You Earn) or REPAYE (Revised Pay As You Earn) to keep monthly payments manageable. If you’re already on one of these plans, you may be grandfathered in—but new borrowers won’t have access after July 2026. Existing borrowers on the current IDR plans will have until July 1, 2028 to switch to one of the new repayment plans the bill introduced: the standard repayment plan or new Repayment Assistance Plan.
Beginning July 1, 2027, new federal loan borrowers won’t qualify for economic hardship or unemployment deferments, and access to forbearance options will be very limited. Existing borrowers (loans originated before July 2027) retain eligibility for deferment under current rules.
Enter the Repayment Assistance Plan (RAP)
Replacing those old plans is something called the Repayment Assistance Plan (RAP). It’s designed to simplify repayment, but it comes with strict borrowing caps—especially for graduate programs. For example, medical school students will be capped at $200,000 in federal loans. That’s still a lot, but it’s a ceiling that didn’t exist before.
If the cost of a professional program exceeds that $200k cap, the borrower will need to look to fill the gap elsewhere. The repayment period can vary from 10 years (for a loan principal of $25k or less) to up to 25 years for student loan principal in excess of $100,000.
Married Filing Separately? You’re Back In
Earlier drafts of the bill would’ve penalized married borrowers by forcing them to file taxes jointly to qualify for RAP. Thankfully, that’s been reversed. Married borrowers can now file separately and still qualify for RAP, which helps avoid the dreaded “marriage penalty.”
This may prove to be beneficial as RAP payments are based solely on each borrower’s individual income. This could be especially helpful if one spouse earns significantly more or only one spouse has loans. Alternatively, filing jointly might mean higher student loan payments.
New IBR Plan Is Safe (For Now)
If you’re on the New Income-Based Repayment (New IBR) plan, you’re in luck. The final version of the bill protects this plan, so you can keep paying 10% of your discretionary income for 20 years, or a lower percentage if you work in public service.
PSLF Still Counts Medical Residency
There was a scary moment when it looked like Public Service Loan Forgiveness (PSLF) wouldn’t count medical residencies anymore. But that part of the bill got scrapped. So if you’re a resident or fellow, your time still counts toward PSLF eligibility. But there could be future executive orders challenging PSLF in specific industries, adding to uncertainty.
What OBBBA Changes Mean For Current Student Loan Borrowers
If you already have student loans, you’re probably wondering: “Am I safe?” The short answer is—mostly—yes. If you’re already in a repayment plan or have consolidated your student loans, you’ll likely be grandfathered in. But if you’re planning to borrow more after July 2026, you’ll face stricter limits and fewer repayment options.
So what should you do?
- Review your current repayment plan and make sure it’s still the best fit.
- Consider consolidating if you’ve got Parent PLUS loans.
- Talk to a financial advisor (or your loan servicer) about how these changes might affect your long-term strategy.
If you are planning to fund college education for yourself or a loved one, these substantial changes may impact your long-term plans and how you seek to achieve those. If your expected cost of education (undergraduate and graduate) exceeds new federal loan limits, determining where else to source funding is going to be more critical.
Contact a Wealth Advisor for Guidance on the OBBBA
The OBBBA is a massive piece of legislation—nearly 900 pages long—and it’s not just about student loans. But for borrowers, the changes are real and they’re coming fast. Whether you’re a current student, a recent grad, or a parent helping your kid through college, now’s the time to get informed and get prepared.
Got questions? Contact your wealth advisor here at HH to talk about savings or debt paydown strategies. And we’re always here to help you plan for your family’s educational aspirations.
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