When Congress passed the One Big Beautiful Bill Act (OBBBA) in July 2025, most headlines focused on corporate tax reform and income tax brackets. But tucked inside this sweeping legislation are provisions that will reshape how American families pay for college, manage student loans, and use 529 plans.
If you’re a parent, a graduate student, or even planning for your child’s K-12 education, these changes matter. Here’s a breakdown of what’s coming — and how it could affect your financial planning.
Federal Student Loans: Borrowing Caps and the End of Grad PLUS
For decades, federal loan programs allowed families to borrow nearly unlimited amounts to cover tuition. That flexibility is ending.
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Parent PLUS Loans will now have a $20,000 annual cap and a $65,000 lifetime limit per child. Currently, parents can borrow up to the full cost of attendance. A three-year grace period gives existing borrowers some breathing room.
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Grad PLUS Loans, which let graduate students borrow up to the full cost of their program, are being eliminated. They’ll be replaced with stricter Direct Loan limits: $20,500 per year ($100,000 total) for graduate students, and $50,000 per year ($200,000 total) for professional programs like law and medicine.
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A new lifetime borrowing cap of $257,500 applies to student borrowers (excluding Parent PLUS).
For families counting on federal loans to close funding gaps, this is a major shift.
Repayment Plans: Out with the Old, In with the New
If you’ve been navigating acronyms like SAVE, PAYE, or ICR, those days are numbered. By July 2028, those repayment plans will be phased out.
In their place, two new options arrive in 2026:
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The Standard Repayment Plan: Fixed monthly payments over 10–25 years, depending on how much you owe.
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The Repayment Assistance Plan (RAP): A new income-driven repayment program. Monthly payments range from $10 (if your AGI is under $10,000) up to 10% of income for borrowers earning over $100,000. Payments decrease for dependents, and any balance left after 30 years is forgiven.
RAP also qualifies for Public Service Loan Forgiveness, a valuable detail for lawyers, doctors, and others in public-sector roles.
For many borrowers, RAP could be a lifeline — but it’s also a longer road, with forgiveness stretched from 20–25 years today out to 30 years
Harsher Rules on Pausing Payments
The new law makes it harder to hit pause on student loans. Starting in 2027, deferments for unemployment or economic hardship are eliminated, and forbearances are limited to one nine-month pause every two years. Borrowers will need to be more strategic — and proactive — when financial challenges hit.
Good News: 529 Plans and Workforce Training Expand
It’s not all cutbacks. Families saving through 529 plans and students exploring nontraditional education paths will see new opportunities.
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Workforce Pell Grants will support short-term, job-focused programs like certificate courses at community colleges starting in 2026.
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529 plans get a significant boost: beginning in 2026, funds can be used for workforce credentialing programs, not just college. The K-12 spending cap doubles from $10,000 to $20,000 annually, and allowable expenses now include tutoring, online courses, dual enrollment, test fees, and even therapies for students with disabilities.
For families, this means 529 plans are more flexible than ever — and more valuable as part of a long-term education strategy.
Wealthy Universities Face a Bigger Endowment Tax
Colleges with massive endowments aren’t escaping untouched. Beginning in 2026, private schools with large per-student endowments will pay higher excise taxes on investment income. The top tier — schools with more than $2 million in endowment per student — will face an 8% tax.
While this change targets elite institutions, it could ripple down to students if universities cut back on financial aid to offset the tax.
Other Provisions Worth Noting
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Pell Grant eligibility rules are shifting, which could reduce the number of students qualifying.
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FAFSA calculations will no longer count small businesses, farms, or fishing businesses in net worth starting in 2026 — a big relief for entrepreneurial families.
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Employer student loan repayment benefits — up to $5,250 tax-free per year — are now permanent and indexed to inflation.
What Families Should Do Now
The 2025 tax bill is a game-changer for education planning. Parents and students face stricter borrowing rules, new repayment structures, and fewer ways to pause payments. At the same time, 529 plans are expanding and new grants support workforce training.
The bottom line: if you’re saving for a child’s education or managing loans of your own, now is the time to revisit your strategy.
At Samalin Wealth, we specialize in helping families navigate complex financial shifts like this. From maximizing 529 benefits to rethinking student loan strategies, our goal is to keep your education plan strong — no matter how the rules change.
