Parent PLUS Loan Changes: What They Mean for You

Hey there. Welcome to the get out of debt guy show. I’m Steve Rhode the original Get Out of Debt Guy and as always
I’m joined by the new get out of debt guy
Damon Day say hello, Damon. Hello, Damon. That’s just proof of life
Today we’re talking to every parent who’s been watching their kids grow up
Working hard and getting ready to take that next step towards college
You’ve been making plans maybe even penciled in some numbers, but here’s the thing
Those plans about sending your kid to college just hit a curveball because
Congress just made major changes to the parent plus loan program for student loans and if you’re not paying attention
Those changes might wreck everything you thought you had lined up and the dates are not that far off
We’re talking about deadlines that are already on the calendar and won’t wait for you to catch up starting
So I first 2026 new parent plus loans as we know them
Boof disappear and if you already have when I want to access income driven repayment or public service loan forgiveness
You got until June 30th
2026 to consolidate and enroll before you lose those options forever
Damon, I don’t think this is a drill. This is a ticking time bomb. So in this episode
Let’s talk about
What’s changing and exactly when and what people need to do before the door slam shut
How to avoid common mistakes and why this affects not just parents
But anyone anyone who’s already in a parent plus loan
All right, let’s break it down and plain English. I have my plain English
seven pages
Of details in front of me because none of this stuff is ever easy
Well speaking of details. We actually don’t even yet know all the details yet
We just know the kind of the building blocks and we’ll just have to take it from there
Yeah, I mean the problem is that
This hand grenade has been thrown into parent plus loans
And we’re not really going to know until November 2025
What the rules actually are now we can look at what was just passed in the
Was it the big beautiful
Reconciliation bill because that’s where this got tucked in
Yeah, and I you know, hopefully we can read some tea leaves
But you and I have been doing this long enough and we’ve seen so many changes
That
You know if you’re making decisions about
Spending a hundred thousand dollars on college
You would at least like some certainty
Well, you don’t get it
Well, you kind of do
if you
Approach college without even thinking about getting in bed with the government
That’s right. I mean if you don’t take out federal student loans
You got things to deal with well you can still take out federal student loans
But do it with the intention and the understanding of what the normal repayment
Back at because people forget about this
Federal student loans can still be repaid as if it was a regular loan. Yeah, that’s any repayment
Yeah, well they even have you know 20 and 25 if you really need that but
You know, that’s the problem if as people have gotten to the point where they view federal loans
Not everybody a lot of them almost is like charity. Oh, well. I’m just gonna get federal loans
And then they’ll just get forgiven later
And the problem is
They don’t really do it ever they don’t ever do a proper cost benefit analysis on well little Jimmy really wants to go to Duke
Right, okay. Well, maybe little Jimmy needs to make sure he can get some scholarships to go to Duke unless you can afford it
You know because you don’t want to have Duke student loans after that
And so so you don’t have to get in bed with the government to go to college
But you do have to do a better cost benefit analysis especially these days
Whether you’re going to borrow money or not to figure out what does my child want to do
What are they what do they have the aptitude to do what are they likely to do what they likely to make and how much and how much is this gonna cost the family
You know to do it and is it a good investment?
Don’t sorry don’t go into it thinking what am I going to get forgiven if you’re already in that it’s not a good investment
Now my impression is that and I want to hear yours too my impression over the years has been
parents have
Falling into parent plus loans because
There was never really enough planning ahead of time
And then all of a sudden they realized oh crap
We don’t have enough money to send Johnny to school
And so they took out what they thought were easy to sign for parent plus loans
Never really considering what the consequences were
So Damon what is your impression about how people looked at parent plus loans
Well, I agree a hundred percent with you. This is kind of a panic last minute
Oh, we don’t have enough money to do this. Oh, let’s get these loans and remember and maybe I’m misremembering because you know
The mind can play funny tricks
But if I remember and I could be wrong, but I swear
Back in the day
People like Dave Ramsey and a lot of these finance gurus all called student loan debt good debt
If I remember that’s true. They did yeah, they did I know they don’t I know they don’t do it anymore
Well, no, I mean, there’s still a percentage of people that do because they use the excuse that
It increases your skill and your earning potential, but they forget about all the people that never finish
Yeah, and and the people that take underwater basket weaving yeah, and graduate with that you know what I think should happen
I think this should be record like you know when you file bankruptcy you’re required to take that stupid little course
It doesn’t teach you anything, but supposedly is going to you know make you be a better borrower in the future, right?
I think
Before you take out student loans. They should have like a similar requirement
Kind of like remember like the scared straight series like for alcohol and things like that
They should have a scared straight for all the you know poor incoming you know graduating high school seniors
They get them in a room with their parents and they make them watch like this just
Just grotesque video like a driving school and and the video is just
parents grandparents
Students and about the horror stories
Of student loans and what is done to their life and how they’re trying to retire or are retired
And are still dealing with federal loans and what that experience was and what they could do if they could go back and
Time what would they choose? I think that should be required
Watching for every person before they take out a student loan not to say don’t ever take out a student loan
But just to say hmm, maybe I should pause
And let’s think about this a little bit. Don’t just automatically. Oh gotta go to college. Gotta get a student loan
Well, I think that they should assign a max loan cap for each degree
You know like oh you want some you want to get a degree in dance?
Your cap’s 25 grand
Well, you know they used to quasi have that before the government got involved
Because a private lender even if they didn’t publish what the cap was
I guarantee them to you they had a cap when someone said I want to be a history major
You didn’t get no private bank that wasn’t gonna have that loan back by the government go you want to be a history major
I got 200,000 for you here. Yeah
Well here’s one of the changes that’s coming up
Is that for any loan dispersed
Honor after the first of July 2026
The lifetime cap for parent plus loans is forecast to be only 50,000 dollars
so if you failed to plan and
At now your lifetime cap for that student
Is going to be 50 grand and that might not be enough to send people to school anymore
Well, it will because supply and demand the more you restrict the access to money
The more tuition will come down
That’s another we’re not going to get into that on this call
But
But here’s the thing it might not seem even like a lot of money
But I have clients that borrowed 50,000 dollars 30 years ago
Mm-hmm, and oh a hell of a lot more than that now
Well, yeah, and right now the cost of college
For tuition and board and food for one year the average cost is 35 grand
ridiculous
All right, let’s talk about a repayment plant
So where anybody with parent plus loans right now there’s some big stuff
Happening right now some good some bad some
We don’t know
Yeah, if you have a parent plus loan you’re on the hook for right now
Before
June 30th, 2026
You must consolidate and elect an income dependent repayment program
To be grant grandfathered in
otherwise you’re not going to have
favorable terms to repay it other than
The basic terms right?
Well, yeah, and as everybody with the parent plus loans now everybody with a parent plus loan now knows
They don’t have favorable terms
Anyway, because
parent plus loans never were able to take advantage of the the new were you know lower cost programs lower payment programs
As they came out they were always kind of stuck on ICR yeah, and they
The partial good news here is
They they may no longer be stuck on ICR
But we don’t know for sure. We do know that your loans need to be sure to be consolidated into direct loans
And they need to be on an active income driven repayment which right now would have to be ICR this
He only planned the parent plus loans can be on
But the problem with the ICR especially if for clients that are or consumers that are you know retired
This is unfortunate that you know people were not paying off their mortgage before they’re retired
Now that another retiring and they still have mortgage payments and student loan payments for their kids
But you know, you have to be enrolled on the ICR now. I don’t know if
I didn’t tell the rules come out. I won’t know if maybe enrolled means okay
You’re enrolled that we can then get on a forbearance, but you’re still technically enrolled or if you have to be enrolled and actively making payments
As that June deadline rolls over. I don’t know yet. Well, here’s what we do know about
Consolidation is only the still the only doorway for a parent plus loan
To enter an income driven plan
Now today that’s ICR and then after 2026 it’ll be IDR
So to consolidate a parent plus loan Damon. What are the requirements?
There’s no real requirement. You just have to have more than one loan
You don’t have to have more than one loan
You can do it with one loan by itself and you just have to request consolidation
And consolidate it. I mean, it’s I’m
It’s really that simple to consolidate it. You just go online
And do it or you could do it manually, but most people don’t do it manually anymore. Yeah, paper forms
Paper forms. Yeah, you could you could you could like get the dot matrix out and have it start spitting dreams
How 2020?
Yeah, yeah, but no, if you have an old parent like a parent plus loan that’s never been consolidated
You just need to request a consolidation
If you’ve got multiple parent plus loans, you can consolidate them all into one
If you just have one parent plus loan, you can consolidate it into itself and just convert automatically into a direct loan when you consolidate it
All right, and then one of the bigger things is this whole public service loan forgiveness program
The benefits with parent plus loans go away
So right now now it’s interesting
You can take out a parent plus loan if you are a parent
An adoptive parent or a step parent
So if you have done a taken out of parent plus loan and you also work in one of the
Loan forgiveness categories under public service loan forgiveness
your parent plus loan
Maybe eliminated, however
In 2026 that all goes away
Now and do we know for sure Steve’s read more of the details than I have
I don’t think we know this yet, but correct me if I’m wrong
Do we know if
That’s all parent plus loans after that point or only parents after that point are so only parent plus loans
A taken out after that point. Yes, but for parent for people with current parent plus loans now that are on a PSLF track
And they’re okay your grandfathered in okay
Yeah, because I’m I’m alright when when this stuff started coming out a couple days ago
I started getting calls from clients and oh my god parent plus loans
You know the repayment plans going away. I’m not gonna be able to afford it
I’m on so security and it’s like wait, you know hold on hold on the payment plan options aren’t going away
Unless
In their very specific that you don’t have the loan consolidated and be on an ICR payment plan by June of next year
Well, I think okay. I think this summarized it all
Parent plus borrowers have one simple, but a movable checkpoint
If they don’t do something by June 30th
2026
Like consolidate and enroll an ICR
They will
Then permanently forfeit income driven repayment and PSLF
So that date is the most important
Yeah, and then and also to another potential issue because I have some clients where you know the strategy has literally been tried to
Put off repayment until the client is retired right because an I get it the the current ICR
Has a very large repayment component compared to the new IBR or the short-lived safe program
That that burst onto the scene and that blue bomb as soon as it settled in
But the payment is so high
There’s a lot of clients that we’re looking at going like hey we can extend this and get forbearance and through a series of
Consolidations and kind of push out the repayment until they are retired and
And then they’re you know the repayment based on a percentage of their income would obviously be a much smaller repayment
Especially if they’re going for you know forgiveness and there’s some things we have to talk about too
But the big point there is that strategy is going to be
hugely
Handicapped now because they are now saying that they’re going to cap
Loans with 12 months of lifetime forbearance, which is
significantly less
Yeah, and they had that news before we used to get three years and then anytime you would consolidate a loan
You would get another three years of voluntary and then have two additional years of what they call
You know a debt burden forbearance or basically if
Your your required payment was more than 20% of your income you could get another two years
So for a lot of my clients, especially with high debt loads
I was able to kind of get them five years of forbearance
Then do a consolidation get another five years and then if depending on how many loans they started out with
I was consolidating just two loans at a time
Until I have some clients where we were on a strategy where we’re like in our 12th or 15th year
Of consolidations and forbearances and they’re now about ready to retire it kind of worked
But now moving forward
That strategy is not going to work because the government is taking away the
disability to say we’re not going to give you
Loophole if you will to gain 15 years of no payments and then wait till you’re on social security
And then have your repayment be significantly less. So they’re essentially not not paying that
And another interesting
Part of this bill is the advice about
Make sure you download all your payment histories because
The old student loan servicing systems are
Planed to be eliminated by July of 2028
and
You know whenever data is migrated problems can occur
So if you want to keep a record for yourself
Downloaded print it save it whatever do it now
Well, and the other big shocker Rooney in this bill
And again, we don’t know the details until it all comes out but yeah right now
They’re talking about if I read it right see which I believe I did they were talking about capping
Even the even if your grandfathered in and your loan is eligible for you know
I see our forgiveness you know because a lot of people think of forgiveness. They think of PSLF right yeah
Well a lot of people that don’t qualify for that are going for
IBR and I see our forgiveness which is make payments for anywhere from you know 20 to 25 years right then
Based on your answer and then get forgiveness
But now they’re talking about capping that forgiveness. Yeah, is that correct or is that only with PSLF?
Now I think it’s only PSLF
So only PSLF is getting capped so okay, so if you’re on PSLF
See what did it what did say that was potentially going to be capped at 30,000?
I don’t know
I believe I believe it was 30,000
Okay, so so that that would need to be factored into if you someone says oh well
I’m gonna be you know a public service employee. I’m gonna right that’s not a game plan
Yeah, where I’m gonna go in and I’m gonna okay
I want to get my law degree and I’m gonna borrow all this money and then I’m gonna be a public defender
And then I’ll just make payments for 10 years and get my loans forgiven and then you rack up
250,000 dollars in loans and think you’re just okay. I want to be a public defender. Yeah, well then they pass this and all the sudden
They’re capping that at 30,000 dollars
Well who cares at that point? I mean if you take out 250 grand and make
Income-based payments, which is almost nothing if you’re a public defender
Then that loan is gonna grow and grow and grow
10 years later they forgive 30 grand which is less than the interest that you accumulated in those 10 years
So you still owe all the money if they if this ends up passing
So yeah, I think the big thing about PSLF is it’s another one of those details that we really need to wait until November
You know until the final rules are out
but I would suspect that
The current administration effort is going to be to restrict it as much as possible
Because
When the current administration was in office before
They tried to throw every roadblock in place to not allow people to forgive it
One and here’s the thing too
All the stuff that we’re talking about
Could be flipped by his head in a couple of years. Yeah. Oh, yeah, it will be and in this goes back to what Steve said the very beginning
Don’t
You cannot plan for college assuming you can get your loans forgiven
You have to plan for college
And this goes back to see what you talked about earlier which is
The overarching theme of all of these changes for the administration is
They want to shift from the mindset of oh don’t worry. It will get forgiven to
You better make some smarter choices because you’re gonna have to a lot of the onus of the repayment is going to be on
You if you take out the loan there’s still some safety net there
But not
Not as really nilly of a safety net as was before
Yeah, another problem is because there are going to be caps on the amount that you can take out
If you’re not doing some prior planning and thinking about where the other loans are coming from or scholarships or how’s Johnny gonna pay for college
I can see parents getting in a situation where
They can’t borrow enough money
To get the kid through school
And so now you’re in the worst spot you got the debt and no degree
Yeah
Yeah, well, you know, I mean there’s I think there’s going to be a major reset especially for kids that are
Gonna be graduate, you know, I’ve got kids this age right in fact my wife is
next door here
Enrolling my son my oldest son in college. He’s gonna go to a local local junior college
The the the the discussion of loans
Never even came up not because it’s mr
Money bags or anything, but yeah, it literally. It’s like how much is that? I was like oh, okay. Yeah, let’s pay for it
But so he’s gonna do that for two years and he doesn’t know what he wants to do yet
It would make absolutely no sense
To have him go to a college that’s 20 30 40 thousand dollars a year plus whatever other costs
When he doesn’t even really know we’ve we’ve talked about discussed and settled on a different degree for him
Three different times in the last two months
That’s how quickly his mind and so he’s not gonna know but the longer now go to college go to junior college
Something might click for him there. He might oh, I had this class or I had this class or I talked to this person
I had this conversation with this professor and and you know now now maybe he’s you know 21 or whatever
He’s like I really know what I want to do. I really want to do this and maybe he starts doing that and gets an internship or whatever
And it’s like okay, this is his career path. This is where he’s going
This is what he wants to do now. We have something we can get some numbers on right let’s analyze this
So what’s his best opportunity to succeed in this thing that he’s now figured out that he wants to do
Does he need to go to college not need to go what kind of degree does he need you know, I’ve I’ve got a finance degree
and I you know
I’ve never really had to use it because I’ve been working for myself since since college but
You know a lot of it is just like oh you got to degree great. That’s a requirement
But you ever feel a job application. I’m not saying school doesn’t met this doesn’t matter anymore
That’s for sure. I know but you fill that out and it’s not like they go well
You have to go to Yale Princeton or Harvard anything else and you don’t get you know
We’re not talking about a prestigious law firm. That’s you know got something up their butts or something like that
but for
98% of the students out there
They got a bachelor’s degree. They got a bachelor’s degree
It doesn’t really frickin matter what school they got the bachelor’s degree at
Because all it is is an entryway into putting your application in you
Win the job. It’s just a filter a box to tick now
Interestingly enough the the current trend has been more towards
Hiring people with skills and not necessarily degrees
But those yeah, but
15 20 years ago the advice was for people to get into
Computer science IT computer programming you’re going to be making a fortune
And those students did really really well. However
AI is changing so fast right now
That if yours kid is a senior in high school
And they went and got a computer science degree. Oh gosh most of them are going to be
Unemployable by the time they graduate just yesterday
I was talking to my son-in-law who has a software company
And he was telling me about how amazing AI is in writing computer code
And he showed me and in less than 25 minutes
He wrote tested and rolled out a new program to accomplish a very specific task
Using AI and it blew my mind
Yeah, well, it’s because you know 20 30 years ago
We had a need and a shortage of people that you know computers were emerging coming out
It was this new technology and we had more
Factory type workers and plumbers and electricians than we had people that understood this new technology
Well now that’s shifting again now everybody followed that advice and everybody got into computers and all this and everything
And nobody really does much with their hands anymore now
You’re now we need people like that. It’s just supply follow where the demand you got to you got to look
Where is the demand going to be what what skills you know what what what
What services are going to be in demand in the next 20 to 30 years and focus on that
Yeah, if you’re in anything that is
Analyst analytically based or even creatively based you’re going to be in trouble
Yeah, because a company can get it
Sometimes better yeah faster for sure faster and she faster and cheaper for sure better
That’s subjective if you’re the artist that’s losing your job you will never concede that it’s better
Yeah, no, absolutely not, but Ford
Just said that in the next 10 years they expect to reduce their white collar jobs by 50%
Yeah, and it might not need to be better. It might just need to be good enough
Right because it’s cheaper and faster
All right, Damon. I think we pretty much covered parent plus loan changes
And the two things I would like to leave people with are
Number one, there are changes coming
So you should think about it and if you have any
concerns or questions, you know, Damon’s always out there Damon day d a m o n d a y dot com
You can always talk things through and the second thing is
June 2026 is coming fast especially when you haven’t done any planning
About student loans, so don’t bury your head in the sand
Yeah, yeah, it is coming fast when you have a year if you have parent plus loans just pay attention
Because there will be options that we have to consider and look at but we don’t know the specifics just
Yeah, we’re gonna need a couple more months to see it
So don’t like rush and go what I got to do and just go get it done
You got to see how this is going to play out
When the actual specifics come down, but just have it on your radar that if you have parent plus loans
You may need to do something you may already have it done if those loans are already been consolidated
And you’re already on an income driven plan, which would be the ICR
Then you’re probably fine, but have a heads up. There’s major changes. We’ll need to look at that
Yeah cross your teeth and dot your eyes by like you know march
Of 2026 just to make sure you’re good like make everyone final check and march or something by that time the final rules will be out
I would say that this podcast is
You know the skies are looking really dark and I want you to get prepared
When the final rules come out in November, I’m sure it’s going to be the skies falling
But you still have seven months at that point red sky at night sailor’s delight. Yeah red sky morning sailor take morning
All right, David. I will see you