New federal limits on Parent PLUS loans could make it more difficult for some families to afford their children’s college education, forcing parents to consider alternative ways to cover rising tuition and other education expenses.
The changes to the federal Parent PLUS Loan program took effect July 1, introducing new borrowing limits of $20,000 per year and $65,000 per student. Previously, parents could generally borrow up to the full cost of attendance, minus other financial aid received by the student.
With the new limits, families who depend on Parent PLUS loans may need to look for additional funding sources, including private student loans, institutional loans, scholarships, and grants.
WJZ spoke with a wealth management advisor about how parents can prepare for the changes and manage the cost of sending their children to college.
Community College Could Help Families Reduce Tuition Costs
With college expenses continuing to rise, financial experts are encouraging families to consider more affordable education options, including starting at a community college before transferring to a four-year university.
Gray Shannahan of Palmieri & Shannahan said some families are choosing this approach to reduce tuition expenses while still allowing students to complete a bachelor’s degree.
“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 added that although this route may not offer the traditional four-year college experience, it could reduce tuition costs by more than 50%.
For families facing the new Parent PLUS borrowing limits, this approach could provide a way to manage education expenses without relying as heavily on loans.
Some Existing Parent PLUS Borrowers May Have More Time
Not all families will immediately face the new borrowing restrictions.
Parents who borrowed through the Parent PLUS program before July 1 may continue using the previous borrowing rules for up to three years, provided their student remains continuously enrolled in the same program of study at the same school.
This transition period could give eligible families additional time to plan for upcoming college expenses and explore other financing options.
However, families should review their eligibility carefully because the temporary protection depends on meeting the enrollment and program requirements.
Parent PLUS Loan Repayment Rules Are Also Changing
The changes also affect repayment options for parents taking out new Parent PLUS loans after July 1.
Under the new rules, these borrowers are limited to a tiered standard repayment plan, which provides fixed monthly payments over a repayment period ranging from 10 to 25 years.
The new repayment structure could affect how families manage their monthly budgets after graduation, particularly those who need to borrow additional money to cover education costs.
As the new limits take effect, parents may need to compare available financial aid options, consider lower-cost colleges, and plan borrowing decisions carefully before committing to tuition expenses.
For families preparing to pay for college, understanding the new Parent PLUS rules and exploring alternative funding options could help reduce the financial pressure of higher education.
