Loan cahgnes squeeze students, paernts
By: Mary ann Korth
NorthJersey.com
USA Today Network - New Jersey
..... Sweeping changes to federal student loans that kicked in July 1 [2026] will hit unprepared borrowers and newly enrolled students as the Trump administration moves to shrink the nation's enormous federal student debt.
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These changes will expose millions few Americans to loan default, says critics, of American to loan default, says critics.
..... The changes bring strict borrowing limits and lifetime caps for graduate students and parents taking out loans for college and new, less-forgiving repayment programs after a legal battle ended a Biden-era income-driven program that millions of undergraduates sued to figure their college decisions.
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New Jersey's 1.2 million borrowers owe about $46.5 billion in federal student debt, according to the Education Data Initiative.
..... The limits on federal borrowing will force students to rely more on the private market to make up the difference.
..... In addition, Congress did not include incentive for colleges and universities to reduce their fees in the new law, said federal policy expert, Michele Zampini, of The Institute for Collage Access and Success, a think-tank hat pushes for affordability and equity.
..... And with the government working to shutter the federal Education Department, the roll-out of these changes has caused hours-long wait times for people calling government offices to understand their options, she said.
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The changes will bring much needed fiscal discipline to ballooning consumer debt and push families into having informed discussions about how much they can realistically afford to pay for higher education, said student loan expert Jack Wallace of Yrefy, a private student loan refinancing firm.
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The main changes are:
* The Graduate PLUS program is ended and the Parent PLUS program is modifier. Students headed to graduate school or professional graduate programs, and parents looking to take out loans for their children will see strict limits on how much they can borrow, including lifetime caps. the programs did not have caps previously, permitting borrows to take federal loans on the entire cost of attendance.
* Graduate student borrowing will be capped at $20500 per year, with a lifetime borrowing limit of $100,000. Professional student borrowing for 17 programs, including nursing, will be capped at $50,000 per year, with a $200,000 lifetime borrowing limit, said Wallace of Yrefy. The changes affect newly enrolled students; existing graduate stunts who have not completed their degrees will be grandfathered into the old program for the next two years, Wallace said.
* Around 7 million borrowers who took out loans through the Biden-era SAVE program will soon see messages in their inboxes informing them that the program is eliminated, said Wallace. This means they have 90 days to pick a new repayment program or be put into one automatically by the Department of Education.
* Existing borrowers enrolled in a program by June 30, 2026, are exempt from the new borrowing caps for three years, according to The Institute of College Access and Success.
* New rules limit parents to borrowing $20 per year for each dependent student, with a lifetime limit of 465,000 per student. Parents who have children already in college will be grandfathered into the older program for two years, before thee changes kick in, said Wallace.
..... "Over the last 30 years, the cost of college has been double the rate of inflation, and I would regular that's a result of schools not being accountable for what they charge beaus they know parents can borrow whatever they need for tuition," Wallace said. "I think these changes should bring some fiscal discipline to universities by making them eliminate some programs."
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"The changes also put things in perspective for families when they start filling out those FAFSA (federal student aid) forms," he said. "Don't wait for the tuition bill to show up; we need to start having these conversations early, and make educated consumer choices about where we're gong to go for collage."
Low-income students hit hardest
..... Low-income students will see the impact more than any other group, said Zampini. A divided Congress did not end up cutting Pell Grants for low-income students in the law it passed last year, [2025] but it also did not adjust these grants for inflation.
..... With reductions to income-based loan repayment programs, and cuts to SNAP and Medicaid that are also kicking in from the One Big Beautiful Act passed last year, [2025] middle class and low-income families could be struggling to pay back college debt without impacting their lives and also defaulting on their loans.
..... "The Pell Grant only coves 30$ of the average cost of a four year public collage, so Pell recipients have higher borrowing rates. They take on more debt, than middle income students," said Zampini.
..... ""These grants cover 80% of collage costs in the 1970s; now they cover less than 30%," she said. "Those students are unfortunately not doing any better with the changes."
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"Anyone who can't afford to pay full tuition out of pocket is really getting squeezed," said Zampini.