Federal Parent PLUS Loans Are Now Limited to $20,000 a Year and $65,000 per Student

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New federal caps on Parent PLUS loans may make it harder for some families to pay for college, pushing parents to seek other ways to cover tuition and related education costs.

The revised rules for the federal Parent PLUS Loan program took effect July 1 and set borrowing limits at $20,000 annually and $65,000 per student. Before the change, parents could typically borrow up to the full cost of attendance after subtracting other financial aid received by the student.

Families that rely on Parent PLUS loans may now have to turn to other sources of funding, such as private student loans, institutional loans, scholarships, and grants.

WJZ spoke with a wealth management advisor about how parents can get ready for the changes and handle the cost of sending a child to college.

Community College May Help Reduce Tuition Costs

As college prices continue to climb, financial experts are urging families to look at lower-cost options, including starting at a community college and later transferring to a four-year university.

Gray Shannahan of Palmieri & Shannahan said some families are taking that route to cut tuition costs while still working toward a bachelor’s degree.

“One of the really smart decisions we’re seeing a lot of clients make is that they can start out with a community college for the first few years and then transfer to a four-year college to finish,” Shannahan said.

He said the approach may not provide the traditional four-year college experience, but it could lower tuition costs by more than 50%.

For families dealing with the new Parent PLUS borrowing caps, this can be one way to manage education expenses without leaning as heavily on loans.

Some Current Parent PLUS Borrowers May Get Extra Time

Not every family will face the new limits right away.

Parents who borrowed through the Parent PLUS program before the rule change may still use the old borrowing terms for up to three years, as long as their student stays continuously enrolled in the same program of study at the same school.

That transition period could give eligible families more time to prepare for future college costs and look into other financing options.

Still, families should check their eligibility carefully, since the temporary protection depends on meeting the enrollment and program requirements.

Repayment Rules for Parent PLUS Loans Are Changing Too

The new policy also changes repayment options for parents who take out new Parent PLUS loans after the rule change.

Under the updated rules, those borrowers are restricted to a tiered standard repayment plan with fixed monthly payments over a term of 10 to 25 years.

This repayment structure could affect how families budget after graduation, especially if they need to borrow more to cover education costs.

As the limits take effect, parents may need to compare financial aid options, consider lower-cost schools, and think carefully about borrowing before committing to tuition bills.

For families planning for college, understanding the updated Parent PLUS rules and exploring other funding sources may help ease the pressure of paying for higher education.