For students and families taking out new college loans or repaying existing federal loans, major changes are right around the corner. Starting July 1, new borrowing limits and repayment plans go into effect.
Don Kerr, AAA Northeast’s director of student lending and college services, is guiding families through the changes and what they mean for covering the growing cost of higher education.
| Loan Type | Previous Structure | New Rules (Starting July 1) |
|---|---|---|
| Parent PLUS Loans | No formal annual cap | $20,000 per year; $65,000 per student |
| Grad PLUS Loans | Available for graduate students | Eliminated for new borrowers |
| Graduate Unsubsidized Loans | Higher borrowing flexibility | $20,500 annual / $100,000 aggregate (nonprofessional) |
| Repayment Plans | Multiple income-driven options | Repayment Assistance Plan (RAP) becomes primary option |
What are the biggest changes?
- Parent PLUS loans have new limits. Starting July 1, new Parent PLUS loans will be capped at $20,000 per year and $65,000 per student. Parents who borrowed prior to July 1 are not subject to the new limits for up to three additional academic years.
- Grad PLUS loans are no more. New borrowers are now limited in the amount they can borrow for graduate school attendance. The new annual unsubsidized loan limit for “nonprofessional” graduate degrees is set at $20,500, with an aggregate limit of $100,000. Students borrowing to pursue “professional” graduate degrees have higher limits, $50,000 per year and $200,000 aggregate. Graduate students with existing loans are not subject to the new limits for up to three additional academic years.
- Repayment plans will be significantly different. Borrowing limits for undergraduate students are not changing, but students who take out their own federal loans to pay for college are going to have limited repayment options beginning July 1. The length of standard repayment plans will vary from 10 to 25 years based on how much the student owes, rather than the previous 10-year standard term. Those who needed repayment assistance previously had several options available, but starting next month, the only option will be the Repayment Assistance Plan (RAP), where monthly payments are based on adjusted gross income. Existing borrowers who have already graduated will maintain access to old repayment programs but must sign up for them prior to July 1.
“These major changes to borrowing and repayment are right around the corner, and borrowers need to know that they must take action before the end of the month to access the plans changing or being eliminated starting in July,” said Kerr.
What other financing options do students and their families have?
With borrowing limits decreasing at a time when the cost of college is increasing, Kerr says students and families are searching for alternative resources, including scholarships, private student loans and, for parents fortunate to have equity in their homes, home equity loans. Parents and students considering private loans should prioritize their credit scores to secure the best possible rates.
Kerr says the changes to federal loans are making scholarships even more competitive, but given that they do not require repayment, investing time and energy into identifying and applying for scholarships could be well worth it.
Frequently Asked Questions About Federal Student Loan Changes
1. What federal student loan changes take effect on July 1?
Beginning July 1, new borrowing limits apply to Parent PLUS and graduate loans, and federal repayment options will be restructured for new borrowers.
2. How do the new Parent PLUS loan limits affect families?
New Parent PLUS loans will be capped at $20,000 per year and $65,000 per student, which may require families to seek additional financing sources.
3. Are existing borrowers affected by these changes?
Borrowers with loans issued before July 1 may retain access to prior borrowing limits and repayment programs for a limited transition period.
4. What happened to Grad PLUS loans?
Grad PLUS loans will no longer be available to new borrowers. Graduate students will instead rely on capped unsubsidized federal loans.
5. How are repayment plans changing for students?
New borrowers will have fewer repayment options, with the Repayment Assistance Plan (RAP) becoming the primary income-based alternative.
6. Do undergraduate borrowing limits change?
No. Federal borrowing limits for undergraduate students remain the same.
7. What alternatives can families consider if federal limits fall short?
AAA Northeast recommends exploring scholarships, private student loans, and home equity loans, while paying close attention to credit quality.
Last updated on July 13, 2026 by AAA Staff
Based in Rhode Island, Jillian Young is AAA Northeast’s director of public relations. She regularly appears in local TV, radio and print media to discuss traffic safety, travel, insurance and more.
