New caps limit Parent PLUS borrowing to $20,000 annually

The federal government adjusted the Parent PLUS Loan program on July 1 to restrict the amount parents can borrow for higher education. These new regulations set an annual cap of $20,000 for each parent. The total limit per student stands at $65,000 across all years of study.

These constraints may force many households to look beyond federal aid. Families might need to secure institutional or private loans, or rely on scholarships and grants to cover the difference in tuition. The changes arrive as college expenses continue to climb nationally.

Gray Shannahan, a wealth management advisor at Palmieri & Shannahan, suggested that parents reevaluate their approach to higher education. He advised clients to consider starting at a community college before transferring to a four-year institution. "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 noted this strategy could reduce tuition costs by more than 50%.

Parents who took out Parent PLUS loans before the July 1 deadline are not immediately subject to the new caps. These borrowers may continue under previous rules for up to three years. This transition period applies only if the student remains continuously enrolled in the same program at the same school.

Repayment terms have also shifted for new loans. Parents borrowing after July 1 are restricted to a tiered standard repayment plan. This structure requires fixed monthly payments over a period ranging from 10 to 25 years.