On July 4, Congress passed H.R.1—The One Big Beautiful Bill Act—which will significantly impact college financial aid. If you’re just starting to explore college planning and financial aid, it’s important to know that some of the rules and details you may have read will change. We’re here to help you understand the latest updates so you can plan ahead.
Most of these changes take effect July 1, 2026, meaning they will affect students entering college in the 2026–2027 school year and beyond. However, some provisions—such as updates to the FAFSA—will start even earlier. As with all new legislation, we expect further clarification from Federal Student Aid and loan servicers, and we’ll continue sharing updates as they roll out.
“Big Beautiful Bill” and Student Loans: The Biggest Change
The most significant shift is the creation of annual and lifetime caps on both Direct Student Loans and Parent PLUS Loans.
Here’s what that means in practice:
- Parent PLUS Loans will now be capped at $20,000 per year (with a $65,000 lifetime maximum). Previously, parents could borrow up to the full cost of attendance, minus other aid.
- Combined with the existing student loan limits ($27,000 total for undergraduates, or $31,000 if in school 5+ years), this creates a $92,000 cap on federal undergraduate borrowing.
- The “effective” Parent PLUS loan availability works out to about $16,250 per year when spread over four years.
For many families, especially those considering higher-cost private colleges, this could leave a gap. That gap may need to be filled with private loans or could lead to families reassessing college choices.
What Financial Aid Loan Changes Look Like in Real Life
It can be tricky to understand how the new loan caps might affect your family. Here’s a simple example based on a college with an $85,000 yearly cost of attendance:
| New Limits | Old Limits | |
|---|---|---|
| Cost of Attendance per year | $85,000 | $85,000 |
| Scholarship | -$15,000 | -$15,000 |
| Family Contribution | -$30,000 | -$30,000 |
| Direct Student Loan | -$5,500 | -$5,500 |
| Remaining Cost | $34,500 | $34,500 |
| Annual Parent PLUS Cap | -$20,000 | -$34,500 |
| Private Loan Need | $14,500 | $0 |
The takeaway:
- Under the old rules, parents could cover the remaining $34,500 entirely through Parent PLUS loans.
- Under the new rules, the Parent PLUS loan is capped at $20,000, leaving a $14,500 gap that would need to be filled through private loans or other resources.
This illustrates how higher-cost schools may present new financial challenges for families once these limits go into effect.
Relief for Small Business & Farm Families
There’s also a positive update: small business and family farm assets will once again be excluded from the FAFSA.
- To qualify, the business must be 50%+ family-owned and have 100 or fewer employees.
- Families must live on the farm for the exclusion to apply.
This change takes effect October 1 and should help many families qualify for more aid.
What Families Should Do Now
These changes mean financial planning is more important than ever. Here are our top recommendations:
- Apply Early: Submit college applications Early Action when possible, giving your family more time to review offers.
- Be Cautious with Early Decision: Run the school’s Net Price Calculator and review costs with their financial aid office.
- Model Your Budget: Estimate how much you’ll need to borrow and whether private loans may be required. Research terms, rates, and qualification criteria early.
Other Key Student Loan Policy Changes
- Lifetime Borrowing Limit: Students now face a $257,000 cap on all federal loans (undergraduate + graduate). Parent PLUS loans do not count toward this cap.
- School-Specific Caps: Colleges may set lower loan maximums for certain programs.
- Part-Time Students: Schools must prorate annual loan amounts based on enrollment status.
- Repayment Options: Simplified to two plans—standard or income-based (RAP).
- Deferments & Forbearance: Economic hardship and unemployment deferments will be eliminated. Forbearance will be limited to 9 months out of every 2 years (with a 3-year maximum) and is subject to loan servicer approval. Effective July 1, 2027.
Loan Resources
Here are some helpful places to start exploring your options:
- Federal Resources
- Private Loan Options
Final Thoughts
Big changes are coming, but with the right planning, your family can still find a smart, sustainable path to paying for college. Remember:
- Private loans involve credit checks and underwriting, and debt taken for one child may impact loan availability for siblings.
- Build a balanced college list. Always include moderate-cost, in-state safety schools on your student’s list to ensure financial flexibility.
- Don’t hesitate to reach out for help. If these changes could impact your child’s application strategy, you want to figure out a plan as soon as possible. To learn more about the Counseling Services at HelloCollege and how we can help you strategize a smart financial plan, reach out today for a FREE consultation.
