Loans for college? Maybe not

 As the costs of college continue to rise, how to pay for a college education is at the forefront for many families. Often, loans are a necessary component of affording a college education for both students and parents. But options for US families and students are changing.

Read on for what you need to know about how paying for a college education is changing dramatically–
Thinking of taking out a parent loan for college costs?
Your options have changed.
For parents considering taking a loan to afford the cost of college, government-backed Parent PLUS loans have always been the first option to consider. This Federal direct loan program makes loans available to the parents of undergraduate students enrolled at least half time. While in the past parents could take out up to the full cost of attendance annually, and could utilize income-driven repayment plans and loan forgiveness programs, these options are dramatically changing.
Included within the One Big Beautiful Bill Act of July 2025, were significant changes to lending rules. Beginning with students entering college in the 2026-2027 school year, parent borrowing is now limited to $20,000 per child per year, with a lifetime cap of $65,000. Repayment options are also limited, parents will not have access to income-driven repayment plans, and will no longer be eligible for loan forgiveness programs like Public Service Loan Forgiveness. These changes go into effect beginning July of 2026, thus impacting all borrowers for the 2026-27 school year and beyond.
What if my child is already in college?
Students already enrolled in college in the 2025-26 school year who have taken out a Federal Direct Student Loan or whose families have taken out a Parent PLUS loan are ‘grandfathered’ under the old rules. This means if you have already taken out a parent PLUS loan, you can continue to borrow with the higher borrowing limits for up to three additional years. Note that families whose children are already enrolled in college can take out a new Parent PLUS loan any time before July 1, 2026 to take advantage of the old rules. If you think there is a chance you may need this option to cover the costs of college for a currently enrolled student at any time in their undergraduate education, parents may wish to consider taking even a small loan before this cut off date to create the option for future borrowing.
What other options do families have?
Families who had intended to utilize federal parent loans for college costs exceeding the new cap will need to consider alternative options. This is a reality for many families. Forbes reported 2024 study data from Fidelity that noted while 73% of families name saving for college as the top financial priority in their lives, the majority have saved only 30% of the anticipated cost of college for one child. Each potential option for college payment comes with its own considerations which should be carefully weighed before committing. Families with the option to do so often consider home equity lines of credit or retirement saving withdrawals, while those without such options are often left with high or variable rate private loans as the only way to close the financial gap.
With rising college costs, we encourage families to talk honestly as early as possible about what realistic college options will look like and factor finances into the college selection process to ensure students and families have choices when decision time comes. Options will look different for each family’s situation, but expanding affordable college options may include submitting applications to in-state public institutions, intentionally applying to private colleges that provide high rates of merit aid that offset costs, and considering community colleges or commuter options. Above all else, clarifying what is really essential for a student to thrive in college and prepare for a successful future can open more doors than the singular ‘dream school.’
Ready to unstick your college process?
TBU Advisors are experienced in supporting students to reduce overwhelm, navigate their college choices, and prepare their most compelling applications. If you’d like to explore working with a TBU Advisor, get in touch here. We look forward to connecting with you.