Important Student Loan Changes Coming This Summer
Is a parent’s job ever over? Even after you’ve helped them through those first 13 years of education, college presents a whole new crop of challenges that you may be helping your young adult navigate! Finances are one big part of this journey.
Even if you’ve saved for their education using a Minnesota 529 Plan, many students still end up utilizing student loans to fund their college years. And even if this isn’t your first child heading into higher ed - keep reading! There are big changes coming to student loans in the summer of 2026, and may also impact college students who are currently enrolled.
So if you have a young adult heading to college this year or in the near future, take some time to familiarize yourself with the changes. Educators and school counselors would also be smart to learn about what’s coming.
One Big Beautiful Bill Act and Student Loan Changes
The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. This legislation includes significant changes to student loan provisions, particularly around Income-Based Repayment (IBR) plans.
Expanded IBR Access. As of July 4, 2025, the "partial financial hardship" requirement for Income-Based Repayment (IBR) has been eliminated. This means more borrowers now qualify for IBR plans, including those with loans made between July 1, 2014 and July 1, 2026, who previously didn't qualify. Under IBR, borrowers pay 10% of their discretionary income with a 20-year repayment period and loan cancellation after that time. Parent PLUS borrowers must consolidate their loans first to access IBR. Unconsolidated Parent PLUS loans remain ineligible for this repayment option.
Important Consolidation Deadline:June 30, 2026. If you need to consolidate loans to access IBR, ICR (Income-Contingent Repayment), or PAYE (Pay As You Earn) plans, your consolidation loan must be disbursed by June 30, 2026. After July 1, 2026, these legacy plans will no longer be available for new borrowers, and OBBBA will eventually phase out ICR and PAYE entirely. If you are considering consolidation, aim to apply at least three months before this deadline.
New Repayment Options for Future Borrowers. Beginning on July 1, 2026, all new borrowers will have access to only two repayment options: (1) a tiered standard plan with repayment terms of 10, 15, 20, or 25 years, depending on total loan balance, and (2) the new Repayment Assistance Plan (RAP). RAP ties monthly payments to total adjusted gross income, requires a minimum $10 monthly payment regardless of income, and extends repayment to 30 years. RAP offers a guaranteed pathway to forgiveness after three decades of consistent payments.
Borrowing Caps for Graduate and Parent PLUS Loans. Starting July 1, 2026, new limits apply to graduate and parent borrowing. Parent PLUS loans will be capped at $20,000 per year and at $65,000 per dependent student over a lifetime. Most graduate programs are capped at $20,500 annually with a $100,000 aggregate maximum, while professional programs (like law and medicine) may borrow up to $50,000 annually and $200,000 in aggregate.
Part-Time Student Loan Limits. Starting in the 2026/2027 academic year, students enrolled less than full-time will see their annual loan limits reduced in direct proportion to their enrollment status. For example, a student enrolled at 50% of full-time enrollment will have loan limits reduced by approximately 50%. The Department of Education is developing the specific reduction schedule, which will be issued later in 2026 for institutions to implement.
Accountability Standards for Educational Programs. OBBBA establishes a "do no harm" standard that ties federal loan eligibility to post-graduation earnings. Undergraduate and graduate programs whose graduates earn less than comparable education levels (high school graduates for undergraduates; bachelor's degree-holders for graduate programs) risk losing access to federal student loans. Only about 1.8% of students are expected to be affected.
Public Service Loan Forgiveness (PSLF) Considerations. Payments made under the new Repayment Assistance Plan (RAP) will count toward PSLF loan forgiveness once RAP launches (no later than July 1, 2026), provided all other eligibility criteria are met. While PSLF eligibility and the 10-year forgiveness period remain unchanged, because RAP requires higher payments for some borrowers and reduces the accumulation of unpaid interest, some PSLF borrowers may have smaller remaining balances after 10 years of qualifying payments, resulting in reduced forgiveness amounts.
Changes to Borrower Protections. The OBBBA delays implementation of more borrower-friendly rules from the Biden Administration regarding borrower defense claims and closed school discharges. The stricter Trump-era standards (effective July 1, 2020) remain in effect through July 1, 2035, making it harder for borrowers to have their debts canceled due to institutional misconduct or school closures. This change was effective immediately upon enactment of the OBBBA.
Please review these useful guides for more information about these programs:
Each of these will contain further details on your specific needs. Both sites offer options to log into a FAFSA account, so you and your college student can explore specifics related to your family’s needs.
Support for Your Financial Questions
We want to help you stay informed so you are aware of new opportunities and deadlines. Staying on top of these details helps you and your college-aged children make the best choices.
But navigating major changes in financial futures can be difficult. With the right help at your side, you can find the best path forward! Remember, my team and I are here to help you. We can help you figure out the logistics around financial questions, from your monthly budget to paying for children’s education to your own retirement. Let’s sit down to find that path together.
Participation in a 529 Education Savings Plan (529 Plan) does not guarantee that contributions and investment return on contributions, if any, will be adequate to cover future tuition and other education expenses or that a beneficiary will be admitted to or permitted to continue to attend an educational institution. Contributors to the program assume all investment risk, including the potential loss of principal and liability for penalties such as those levied for non-educational withdrawals. Check with your state’s guidelines prior to withdrawing the funds.
An investor should consider, before investing, whether the investor's or designated beneficiary’s home state offers any favorable state tax treatment or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Consult with your financial, tax or other adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances.
For more complete information, including a description of fees, expenses and risks, see the offering statement or program description.