Federal student loan update from Cambridge Credit Counseling

Our endorsed partner offers information about critical changes to the student loan process.

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It appears many of the changes to the federal student loan repayment and borrowing process from the One Big Beautiful Bill Act won’t go into effect until June 30, 2026.

However, anyone with federal student loans (especially parents carrying Parent PLUS loans and those who need to take out any additional loans after June 30) should consider the following steps now.

1. For Parent PLUS loan holders, the June 30 cutoff date works differently from prior federal student loan deadlines, for which you typically only had to have submitted a completed application by the date in question. This time, you will need to complete your consolidation before June 30. Considering that a consolidation can take 45 to 65 days or more to complete, you will need to submit a consolidation application as soon as possible to make sure your loans have been consolidated by the end of June – and make sure to choose the Income Contingent Repayment (ICR) plan to repay the resulting consolidation loan.

2. After consolidating, you will want to ensure that you make at least one payment through the ICR plan; you can then switch to the Income-Based Repayment (IBR) plan until you reach 120 payments and qualify for Public Service Loan Forgiveness. Note: After you apply for the consolidation, you will receive a message stating that your loans are ineligible for the IBR, PAYE, or SAVE plans. However, the letter should state that your consolidation loan will be eligible for the ICR plan (which is what you selected) and that you can switch to the IBR plan after you have made at least one payment. Unfortunately, technology is not keeping pace with the rule changes.

3. You can use the “Loan Estimator” available at studentaid.gov to give yourself an idea of what your monthly payment will be on the ICR plan. Many parents who file taxes jointly discover that the ICR payment is unaffordable.

4. To reduce that monthly payment, consider changing the way you file your taxes. If you file “Married/Filing Separately,” only the income of the borrowing parent will be considered. This should reduce the payment, which is based on your adjusted gross income and family size. If you use an accountant to file your taxes, consult with them as soon as possible to determine whether a change in tax filing status would impact your results. If you file taxes yourself, you could use last year’s tax numbers to calculate the difference (if any) that such a status change would have. If the change wouldn’t seriously impact your taxes but would result in a significantly lower monthly student loan payment, file this year’s taxes and the consolidation application immediately. If you have already filed this year’s taxes, you can change your filing status next year to reduce the amount of the remaining payments. After your loan balances are forgiven, you can change your status back to "Married/Filing Jointly."

Parent PLUS loan borrowers: If your child is still in college and you need to take out additional Parent PLUS loans, you have some difficult choices to make. If you take out any additional loans, your existing Parent PLUS loans will not only become ineligible for the ICR plan but they will also become ineligible for future income-driven repayment and would no longer be forgivable through Public Service Loan Forgiveness. For this reason, anyone in this position is advised to either have their spouse take out the additional federal loans (shielding the existing loans from damage) or consider taking out private loans for the remainder of their child’s education.

The OBBA currently prevents any Parent PLUS loans taken out after June 30 from being forgiven through Public Service Loan Forgiveness – not existing loans, future loans. That is why any future Parent PLUS loans should be taken out by the spouse who has not borrowed until now to allow your existing Parent PLUS loans to be forgiven.

If you are one of the millions of borrowers who have been stuck in the SAVE forbearance, you must move into a different repayment plan by September 30. In order to keep your Public Service Loan Forgiveness option available, consider the IBR plan. Use the loan estimator tool available at studentaid.gov to get a rough idea of what your monthly payment will be in the IBR plan to get back on the road to making 120 qualifying payments. Note: If you applied for the IBR plan over the past year or so but were denied because you earn too much money, it is time to submit a new application. The reason for this is because the U.S. Department of Education has removed the requirement that applicants must have a “partial financial hardship,” opening the door for everyone who wants to enroll in the IBR plan. If your goal is Public Service Loan Forgiveness, it makes sense to switch to the IBR plan as soon as possible.

If you are not finished with your education and need to take out additional loans, you could be in a difficult position. Any loan taken out after June 30 will make all your loans (including all undergrad loans already enrolled in the IBR plan) ineligible for any plans other than the new Repayment Assistance Plan (RAP), which will debut this summer, or a new tiered plan. RAP payments will be eligible for Public Service Loan Forgiveness but payments made through the tiered plans will not be eligible.

Finally, if your household budget makes it impossible to afford your new or existing monthly student loans payments, consider contacting Cambridge Credit Counseling to learn more about your options. Clients on Cambridge’s debt management plan repay their credit card balances in full, but at significantly lower interest rates (an average of just 8%) -- creating breathing room in the budget that could help you afford your student loan payments

Click here for more information about student loan counseling or contact a student loan counselor toll-free at 888-254-9827.