Parent PLUS Borrowers: What the OBBBA Changes Mean (and What to Do Before July 1, 2026)

If you have Parent PLUS loans (or you’re considering them for a child starting school soon), the One Big Beautiful Bill Act (OBBBA) changes the rules in a way that can meaningfully impact your monthly payment options—and your long-term strategy.

This post covers what matters most, with the key dates you actually need on your calendar.

The two big dates to know

• December 31, 2025: the current federal tax-free treatment for most student loan forgiveness (outside PSLF) is scheduled to end. Forgiveness after this may be taxable again.

• July 1, 2026: the Parent PLUS program changes in two major ways: borrowing limits and repayment plan access.

There’s also a longer runway date in the background:

• June 30, 2028: deadline for many borrowers to transition out of certain repayment plans that are being phased out.
  

1) New borrowing caps start July 1, 2026

Historically, Parent PLUS let families borrow up to the school’s Cost of Attendance (minus other aid). Under OBBBA, that changes for “new” Parent PLUS borrowing:

• Starting July 1, 2026, Parent PLUS will be capped at $20,000 per year per dependent student (combined across all parents) and $65,000 total per student.

• Many schools are emphasizing that these caps are per student and apply across parents, not per parent.

What this means in real life: if your child’s total cost is $35k–$45k/year, Parent PLUS may no longer “fill the gap” the way it used to—so families will need a new plan for the difference (cash flow, scholarships, cheaper school choices, payment plans, etc.).

2) New Parent PLUS loans lose access to income-driven repayment (RAP)

OBBBA introduces a new income-driven plan called RAP (Repayment Assistance Plan) starting July 1, 2026—but new Parent PLUS loan borrowers aren’t eligible.

Under OBBBA, new Parent PLUS is treated as an “excepted loan,” and “excepted loans” made on/after July 1, 2026 are required to be repaid under the standard repayment plan.

Translation: if you were counting on “I’ll just put it on an income-driven plan later,” that assumption will no longer be available for new Parent PLUS borrowing after 7/1/26.

3) The “mixing loans” trap: borrowing after July 1, 2026 can complicate your plan

If you already have Parent PLUS and you borrow more after July 1, 2026, you could end up with two different buckets of loans that don’t play nicely together (because the new ones are Standard-only).

If you select RAP but have loans that aren’t eligible (like Parent PLUS), you may have to repay the ineligible loans separately—and it also flags complications when borrowing Parent PLUS both before and after the change.

In practice, future borrowing can restrict flexibility and create a messier repayment setup than most families expect.

4) The urgent strategy issue for current Parent PLUS borrowers: consolidation timing

For current Parent PLUS borrowers, the biggest question is usually:

“How do I keep an affordable payment if my income doesn’t support a Standard plan?”

Currently, Parent PLUS borrowers have one IDR doorway: Consolidate → Income-Contingent Repayment (ICR) → automatic transition to the Income Based Repayment (IBR) plan.

Under OBBBA, ICR is being phased out, and the Department has published guidance about deadlines to stay eligible for IBR (Income-Based Repayment) in the OBBBA environment.

There’s a lot of noise online about the exact mechanics and timing, but the consistent theme across borrower-facing summaries is:

• If you might need income-driven payments long-term, don’t wait until summer 2026 to look at consolidation and your plan options.

The Student Loan Savvy take: If Parent PLUS affordability is even a maybe for you, treat this like a planning project you start now—not a problem you punt to “later.”

5) Forgiveness and taxes: plan for a possible “tax bomb” after 2025

OBBBA is changing the repayment landscape, and at the same time the temporary federal tax exemption for most student loan forgiveness under the American Rescue act expired on January, 1, 2026, which means forgiveness in 2026+ may be taxable again (PSLF is the only exclusion).

Why this matters for Parent PLUS: Many Parent PLUS strategies rely on long-run forgiveness math. If forgiveness becomes taxable again, you want that reflected in the plan (and ideally, a parallel savings strategy).

A practical checklist for Parent PLUS borrowers (no fluff)

If you already have Parent PLUS loans

✅ Pull your loan details and identify whether you’re relying on Standard payments or need an income-driven strategy.

✅ If you may need an income-driven strategy, learn your consolidation + repayment-plan pathway now—before the July 2026 changes turn this into a last-minute scramble.

✅ If forgiveness is part of your plan, assume forgiveness in 2026 and beyond could be taxable and model accordingly.

If you’re planning to borrow Parent PLUS loans for a child starting Fall 2026 or later

• Rebuild the college funding plan around the $20k/year and $65k total caps.

• Plan as if these loans will be stuck on Standard repayment. Before you borrow, run the monthly payment on a 10-year term (or whatever term applies) and sanity-check it against your budget now, not “later.”

If you want help pressure-testing the numbers before you borrow, book a Student Loan Savvy strategy session and we’ll map the gap, the monthly payment, and your lowest-risk options. Already have Parent PLUS loans? Let’s make sure you’re on the right track before the rules shift.