Federal Student Aid: New Borrowing Caps Hit Parents
The Parent PLUS program now limits borrowing to $20,000 annually, forcing families to seek alternative funding.
By Lucas Navarro ·
Federal Parent PLUS loan limits took effect on July 1, capping annual borrowing at $20,000 and total borrowing at $65,000 per student. These new restrictions may force families to find other ways to cover rising college costs, including institutional loans, private loans, scholarships, and grants.
The change alters how parents can finance education at four-year institutions. While the caps apply to all new loans, parents who borrowed before the July 1 deadline are not immediately subject to the new limits. Those borrowers may continue under previous rules for up to three years, provided they remain continuously enrolled in the same program at the same school.
Wealth management advisor Gray Shannahan of Palmieri & Shannahan recommends that affected families consider community colleges to reduce expenses. Shannahan noted that starting at a community college and transferring to a four-year school could cut tuition costs by more than 50%. He stated that this strategy, while not providing a conventional college experience, is a smart financial decision for many clients.
Repayment terms for new loans have also changed. Parents who take out loans after July 1 are limited to a new tiered standard repayment plan. This plan offers fixed monthly payments over a period of 10 to 25 years, replacing prior repayment options for this loan type.
Families must now evaluate these new constraints when planning for the upcoming academic year. The shift requires a closer look at institutional aid and private financing options to bridge the gap between the new loan cap and total tuition costs.
