New student loan rules come into effect in July
Americans with federal student loans could be affected by some changes coming next month. A new analysis also reveals that 3.5 million Americans will lose food stamps and SNAP benefits under President Trump’s “One, Big, Beautiful Bill.”
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One of the biggest federal student loan changes in decades is set to go into effect on July 1, and Parent PLUS borrowers need to act quickly before then or face irreversible consequences, experts say.
The new law, passed last July as part of President Donald Trump’s tax and spending package, changes how families borrow money for college and repay some federal loans. It will phase out some current repayment plans, create new options and add new borrowing limits on some loans.
For many families, the most pressing issue is the parent plus loan. These loans won’t go away, but parents who already have them may lose access to income-based repayment plans or public service loan forgiveness if they fail to consolidate their loans by July 1. Experts also urge borrowers enrolled in other plans to check studentaid.gov now, as some of the options available now may no longer be available to them later.
Parent Plus Borrowers May Need to Act Now
Parent PLUS loans will not be terminated, but parents who already have those loans and have not borrowed on a Parent PLUS loan since July 1st will have until July 1st to consolidate their loans into a Direct Consolidation loan.
Parents who do not integrate by that date will permanently lose access to forgiveness programs such as income-driven repayment plans and Public Service Loan Forgiveness (PSLF). Instead, you’ll be limited to a standard repayment plan, which could result in higher monthly payments and no path to PSLF.
According to the nonprofit National Association of Student Financial Aid Administrators, the new standard repayment plan will not count as a qualified repayment plan for PSLF purposes.
Borrowers should visit studentaid.gov now to explore their repayment options instead of waiting until the changes take effect. Consolidations must be processed and issued by July 1 or you will lose access to all income-based repayment plans for consolidated loans, including Parent PLUS loans, according to the nonprofit National Consumer Law Center (NCLC).
Once Parent PLUS loans are consolidated, parents have until July 1, 2028 to sign up for an income-driven repayment plan.
How do I consolidate my Parent PLUS loans?
To consolidate your Parent PLUS loans, please log into your Studentaid.gov account and complete the online application as soon as possible. Select the loans you want to consolidate and be sure to include your Parent PLUS loan. If your loan is in arrears, you will need to manually fill out an online form.
Applications can also be made on paper or in PDF format.
Only two repayment options for new borrowers
The Department of Education said that from July 1, only two repayment plans will be available to new borrowers: the Standard Repayment Plan and the Repayment Assistance Plan (RAP).
The Standard plan is the default option and provides fixed monthly payments for 10 to 30 years, depending on the loan amount and whether the loan is a consolidation loan. Monthly payments may be higher than other plans, but the total interest paid is typically lower and the repayment period is typically shorter. This is a plan in which Parent PLUS loans are automatically applied if parents receive a Parent PLUS payment after July 1 or do not consolidate their loans by July 1.
RAP is an income-driven plan with payments ranging from 1% to 10% of adjusted gross income, with a flat rate of $10 per month for borrowers earning less than $10,000 per year. The remaining balance may be forgiven after 30 years of repayment.
Parent PLUS loan limit will also change.
Parent PLUS loans are also capped at $20,000 per student per year and $65,000 per dependent over a lifetime. Unless the borrower already has one of these loans. In this case, the parent can continue to borrow at the old limit for up to three academic years or until graduation, whichever comes first.
What Borrowers Should Do Now
Borrowers should check studentaid.gov now. Yrefy’s Jack Wallace said borrowers should consider what repayment options are available to them before July 1. This is because even if you can use it now, you may not be able to use it later.
Parent PLUS borrowers should consider whether they need to consolidate into a Direct Consolidation Loan by July 1 if income-driven repayments and maintaining access to PSLF are important to their household finances.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday..
