Introduction to New Federal Student Loan Changes
The new federal student loan laws set to take effect on July 1, 2028, represent one of the most significant overhauls in recent decades. These changes could have a significant impact on Americans with a federal student loan, especially those with Parent PLUS loans. For these borrowers, it’s essential to understand the changes and take necessary action before July 1 to avoid losing access to certain benefits.
Implications for Parent PLUS Loans
One of the most pressing issues of the new laws revolves around Parent PLUS loans. Borrowers holding these loans, who don’t consolidate into a Direct Consolidation Loan before the set deadline, risk losing access to income-driven repayment plans and Public Service Loan Forgiveness (PSLF). It’s highly advisable for borrowers to visit studentaid.gov as soon as possible to understand their options and make necessary adjustments.
The Need for Parent PLUS Loans Consolidation
If you are a Parent PLUS loan borrower, one crucial action to take now is to consider consolidating your loans into a Direct Consolidation Loan before July 1. Failure to do so would mean losing permanent access to income-driven repayment plans and forgiveness programs such as PSLF. Thus, it’s highly recommended to check your options at studentaid.gov and initiate the consolidation process if it benefits your situation.
How to Consolidate Parent PLUS Loans
To consolidate your Parent PLUS loans, visit studentaid.gov and complete the online application for loan consolidation. Remember to include all your Parent PLUS loans in the consolidation. If your loans are in default, you’ll need to manually enter them into the online form. Alternatively, you can also apply using a paper or PDF application.
Repayment Options for New Borrowers
New borrowers should note that only two repayment plans will be available from July 1: the Standard Repayment Plan and the Repayment Assistance Plan (RAP). The standard plan requires fixed monthly payments over 10 to 30 years, and the RAP is an income-driven plan with payments ranging from 1% to 10% of adjusted gross income.
Changes to Borrowing Limits for Parent PLUS loans
Another crucial change affecting Parent PLUS loans is the introduction of borrowing caps. From July 1, Parent PLUS loans will be capped at $20,000 a year per student, with a $65,000 lifetime limit per dependent. However, if a borrower already holds one of these loans, they may continue borrowing under the old limits for up to three school years or until graduation, whichever comes first.
What Borrowers Should Do Now
In light of these changes, it’s imperative for borrowers to review their options on studentaid.gov now. This is particularly crucial for Parent PLUS borrowers who, to retain access to income-driven repayment and PSLF, might need to consolidate into a Direct Consolidation Loan before the July 1 deadline.
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