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In my column last week about student loans, I focused on changes coming to the outstanding loan burden for graduates. But parents who have taken out Direct PLUS loans also have some critical deadlines as a result of changes made by the Department of Education. Starting July 1, 2026, you lose ALL of your options to lower your monthly payments — except by refinancing privately.

For many years, I advocated against PLUS loans — which are the responsibility of the parent, not the student, to repay — except as a last resort. They carried the highest interest rate every year, as well as additional distribution fees that added to the overall cost. And for a long time, there were few ways to reduce payments.

But in recent years, parents could take advantage of loan consolidation and income driven repayments on their PLUS loans. Soon all of that will soon come to an end. Student loan expert Rae Kaplan of FinancialRelief.com says parents need to act quickly both to deal with their existing PLUS loans and to revise their plans for paying for college for their children.

Parents who wish to have lower monthly payments on their PLUS loans must immediately consolidate all their loans and enroll in an income-driven repayment plan, such as the Income Contingent Repayment (ICR), before July 1, 2026.

After that date, PLUS borrowers who are not already enrolled in an income-driven repayment plan will be locked out permanently.

Then their only repayment option will be the standard 10-year plan, which carries large monthly payments, often as high as a mortgage.

There are two other big changes to the Parent PLUS loan program.

First, parents taking out new Parent PLUS loans on or after July 1, 2026 will find that these new loans will not be eligible for Public Service Loan Forgiveness — even if they work in government, public schools, hospitals, nonprofit clinics, police or fire departments or the military.

That is a big change from previous rules, which allowed parents an opportunity to pay off those loans after making 120 lower qualifying payments and submitting the necessary forms. No longer will they have the option of making lower monthly payments based on income. Their only PLUS repayment options will be limited to the Repayment Assistance Plan (or RAP, instituted under the One Big Beautiful Bill Act) or the standard 10-year plan.

The second big change is Parent PLUS borrowing will be capped. This will affect those who have been counting on using the program to finance college in the future.

Starting July 1, 2026, Parent PLUS loans will be capped at $20,000 per year, and a total of $65,000 total per child.

Many private and out-of-state public colleges charge more than $50,000 per year for tuition, room and board. So families will need to explore alternative financing, such as private loans with low, fixed interest rates, scholarships, and work-study opportunities.

It will become more difficult to borrow for college, potentially impacting your child’s school of choice.

Currently, grad students can currently borrow up to the full cost of attendance via Grad PLUS loans. But after the July, 2026, these loans will be eliminated. And federal borrowing will be capped at $20,500/year for masters programs — with a lifetime $100,000 limit.

Law and medical school borrowing limits are higher at $50,000 per year and a $200,000 lifetime limit.

It could be argued that these new loan limits will do students a favor, keeping them from being saddled with huge debt burdens. But a career in law or medicine could potentially justify that huge borrowing need. In the future, students will be forced to turn to private student loans, which lack income-driven repayment options and do not offer federal forgiveness programs.

The landscape is changing for student loan borrowers — past and future. Please see my recent column with advice for students currently in some of the payment plans that will be eliminated in July 2026.

And parents and grad students need to start dealing with their existing loans and future borrowing hopes right now. That’s the Savage Truth.

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(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

©2025 Terry Savage. Distributed by Tribune Content Agency, LLC.