Parents who have taken out federal loans for their children’s college education are facing major policy changes that could cost them money.
The One Big Beautiful Bill that President Donald Trump signed into law last summer places restrictions on Parent Plus loans, limiting the amount families can borrow and eliminating some options for repaying the debt starting July 1. But one key repayment option could still be available if parents act soon.
As it stands, parents have far fewer choices for repaying federal loans than their children. The only way for Parent Plus borrowers to make payments tied to their earnings is to consolidate their loans and enroll in income-contingent repayment, the most expensive of the four income-driven repayment plans. Income-contingent repayment caps monthly payments at 20 percent of discretionary income — earnings above 100 percent of the federal poverty line — and forgives the remaining balance after 25 years.
The plan, however, will be phased out in 2028, and parents who are not already enrolled have until June 30 of this year to consolidate for access to income-contingent repayment before it sunsets. Because it can take up to 90 days for student loan servicers to process applications, the Education Department is encouraging borrowers to apply by April 1 to ensure the consolidation loan is disbursed in time. After successful disbursement, parents must then enroll in income-contingent repayment and make at least one payment under the plan before it winds down.
“This is really important for lower payments, access to forgiveness programs,” said Jessica Meyers, the student loan ombudsman at the D.C. Department of Insurance, Securities and Banking.
Consolidating Parent Plus loans is the only way to make them eligible for Public Service Loan Forgiveness, which cancels the education debt of government and nonprofit employees after 10 years of service and 120 monthly loan payments.
But there are trade-offs to consolidation. Any uncapitalized interest on the loan is added to the balance, increasing the total amount owed. Consolidating could also result in a higher interest rate.
Parent Plus borrowers also have to take other steps to preserve their access to an affordable repayment plan after July 1. Because income-contingent repayment is winding down in two years, Parent Plus borrowers must switch to another plan before then. The Republican tax-and-spending bill gives them a more affordable option by opening access to the original income-based repayment plan, known as IBR. That plan requires lower monthly payments and, in some cases, fewer years in repayment than income-contingent repayment. But Parent Plus borrowers need to first enroll in income-contingent repayment before switching to income-based repayment.
The entire process is tedious, and missteps could derail parent borrowers, said Michele Zampini, associate vice president for federal policy and advocacy at the Institute for College Access & Success, which advocates for affordability in college education.
“Because there are so many stacked deadlines and enrollment requirements to meet, once you miss one, you kind of miss your opportunity going forward,” Zampini said. “It could be really difficult for people to check all of the boxes in the right time frame.”
All the same, Zampini advises Parent Plus borrowers to take advantage of consolidation to maintain access to an affordable repayment option.
Parents who are repaying Parent Plus loans and still have children in college have some specific considerations. Parent Plus loans taken out on or after July 1 will be eligible only for a new tiered repayment plan that does not qualify for Public Service Loan Forgiveness. Even if you have existing Parent Plus loans that have been consolidated, taking out another one will result in all of your loans being moved into the tiered standard plan, said Jill Desjean, a senior policy analyst at the National Association of Student Financial Aid Administrators.
“If you are relying on income-driven repayment, and you are suddenly shifted into a fixed monthly payment, that could be a really big jump,” Desjean said. “You have to be very cautious about borrowing a new loan after July 1.”
The Education Department did not respond to requests for additional information.
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