The One Big Beautiful Bill Act clearly had an impact on many areas of financial planning, most notably retirement. There is another important area of planning that is affected by it as well: college planning. These changes can affect current and future borrowers as well as those already out of school. These changes will take effect in both 2026 and 2027. This week, let’s review some of the changes.
Starting on July 1, 2026, Grad PLUS loans will be eliminated. There will also be limits on Direct Loans. Similar to Direct Loans, the widely used Parent PLUS loans will also be capped at a limit of $20,000 per year or a total of $65,000. The Parent Plus IDR will go away on July 1, 2026, also. The intent here is to limit the amount of college loan debt that students can go into, with the intended effect of college costs being required to fall to meet the lower loan limits.
There is a new Repayment Assistance Plan, which is a function of your family’s income, family size, etc. The forgiveness, however, will be stretched to 30 years, up from the current 20-25 years. While this is a negative of the new plan, the financial hardship test has been eliminated, effective immediately, which should allow more borrowers to qualify for the program.
Extension of the Pell Grant. Pell Grants will now be available to shorter-term training programs such as computer training and HVAC. Those programs are now Pell Grant eligible.
Unemployment and economic hardship deferments will be eliminated in July of 2027. There will be a new second-chance loan rehabilitation after a borrower’s second default.
Lastly, there is great news for small business owners as well as family farms. These assets will no longer be counted against you for financial aid purposes. This can potentially increase financial aid for many future students. This provision also starts July 1, 2026.
My advice for current and future students is to assess how these changes can affect you going forward and plan accordingly. If you have Parent PLUS loans, look to consolidate them into Income-Based Repayment Plans before July 1, 2026. Start reviewing private loan options if you require higher borrowing limits than the Parent PLUS loans allow.
By proactively planning over the next 11-23 months, you can hopefully be prepared to manage the changes in these rules by the time they go into effect.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
