🎓 A new federal rule will cap how much parents can borrow through the Parent PLUS Loan starting July 1.

💰 New borrowers will be limited to $20,000 per year and $65,000 total per student.

⚠️ One NJ financial expert warns many families may scramble to cover tuition bills when the new limits take effect.

College Decision Day is May 1, and first-time parents sending their children off to college this fall need to be aware of a huge financial change affecting tuition payments.

New federal Parent PLUS loan limits could reshape how families pay for college

The One Big Beautiful Bill made some major changes to how parents will be able to borrow for college by way of a federal plus loan called the Parents PLUS Loan, said John Tillman, president of Ecliptic Financial Advisors in Sea Girt.

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Starting July 1, this federal plus loan, which parents use to pay for college, will be capped at $20,000 per year, with a total of $65,000 per student that they can borrow from the federal government.

“Prior to this, that loan was unlimited. Parents could borrow the full cost of a college education,” Tillman said.

This change is huge because it’s going to leave a lot of parents scrambling for ways to pay for their child’s education, he added.

Canva/Townsquare Media Illustration

Canva/Townsquare Media Illustration

Legacy rule offers temporary relief for parents already using PLUS loans

It’s important to note that this change is for new borrowers only.

Tillman said if a parent already has a child in college and they’ve used the PLUS Loan in the past to pay the parents’ portion of the tuition cost, they will then be eligible for a legacy provision that allows them to follow the old rules for the next three years of college. That means no cap.

However, he said the key is that parents must have already had a Parents Plus Loan in place.

“The legacy status for existing undergraduate students will be maintained if they change majors. However, if they transfer schools, they lose the legacy status, and have to follow the new guidelines,” Tillman said.

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Big changes are coming this summer that will affect the way parents pay for college tuition (Canva)

Big changes are coming this summer that will affect the way parents pay for college tuition (Canva)

NJ CLASS loan and private lenders may become alternatives for families

Another key change, also starting July 1st, is that the One Big Beautiful Bill will eliminate the PLUS Loan for graduate students for new borrowers, Tillman explained.

If your child is planning to attend college in New Jersey, there is some good news. The state has its own loan program called the NJCLASS Loan. Tillman said so far, there has been no change to this loan, which is similar to the federal Parent Plus Loan.

“In the past, the Class Loan was capped at $40,000 per year. So, New Jersey parents will have the option of using that loan instead of the federal plus loan. We’re still waiting to see if there are any changes to that. Usually in June, the state comes out with any changes that they have with that program,” Tillman said.

Outside of the Parents PLUS Loan and the NJCLASS Loan, parents have the option of going with private lenders to help pay for college, but Tillman warns that, unlike the Parent PLUS Loan and the CLASS Loan, the interest rate is not a fixed rate for everybody.

A private lender is going to put parents through underwriting like any other loan program, and then make an offer based on credit history and income.

Big changes are coming this summer that will affect the way parents pay for college tuition (Ecliptic Financial Advisors/Canva)

Big changes are coming this summer that will affect the way parents pay for college tuition (Ecliptic Financial Advisors/Canva)

Advice for parents to help pay for college

Unfortunately, not many parents know about these changes to the federal plus loans starting in July. Tillman said they’re usually faced with sticker shock when they get their first college tuition bill, usually in August.

Tillman said the best thing parents can do is to watch their budget for college because they won’t have the ability to borrow unlimited amounts of money on the federal loan anymore.

Also, parents should save enough to offset the price of the loan, and put limits on what they’re going to spend on college per student each year that fits their budget.

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