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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The One Big Beautiful Bill Act is imposing significant changes to federal student loan repayment and borrowing that will likely be applicable to anyone with federal student loans – especially parents carrying Parent PLUS loans and those individuals who need to take out any additional loans after June 30, 2026.

If you’re a federal Parent PLUS loan borrower, the next few weeks could be critical:

1. You will want to ensure that your Parent Plus loans have been consolidated and you’re paying through the Income Contingent Repayment (ICR) plan.

2. 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’ll need to complete their consolidation before June 30. Considering that a consolidation can take two months or longer to complete, you will likely need to submit a consolidation application by the first week of April (and make sure to choose the ICR plan to repay the resulting consolidation loan).

3. You can use the “Loan Estimator” on 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 immediately and then file the consolidation application by the first week of April.

Parent PLUS loan borrowers: If your child is still in college and you need to take out additional Parent PLUS loans, you have some very difficult decisions to make. If you take out any additional loans, your existing Parent PLUS loans will not only become ineligible for ICR 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 OBBBA currently prevents any Parent PLUS loans taken out after June 30 from being forgiven through PSLF – not existing loans, future loans. That is why it is recommended that any future Parent PLUS loans be taken out by the spouse who hasn’t borrowed until now.

If you’re one of the millions of borrowers who have been stuck in the SAVE forbearance since last August, it’s probably time for you to move into the Income-Based Repayment (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. Please Note: If you applied for the IBR plan over the past year but were denied because you earn too much, it is time to submit a new application. The reason for this is that 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 IBR. If your goal is Public Service Loan Forgiveness, it makes sense to switch to IBR as soon as possible.

If you’re 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 IBR) ineligible for any plans other than the new Repayment Assistance Plan (RAP), which will debut next summer, or the Standard Plan, which would repay your loans in full and leave no balance to be forgiven after 10 years.

Finally, if your household budget makes it impossible to afford your new or existing monthly student loan 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.