New federal legislation is reducing how much students and parents can borrow for college and graduate school. EP Wealth outlines how to evaluate costs, explore funding options, and build a long-term education plan.
New federal legislation — the One Big Beautiful Bill Act (OBBBA) — is making significant changes to how students and parents can borrow for college and graduate school. Federal student loan limits for 2026 and beyond are dropping, Graduate PLUS loans are being eliminated, and Parent PLUS loan limits are being capped for the first time. These student loan changes in 2026 mean that federal borrowing will cover less of the total cost of education for many families than it has in the past.
As a result, families planning for college may need to rely more on a combination of savings, private loans, scholarships, financial aid, and family support to cover the full cost of attendance. For families with children approaching college age, starting that planning process early — and thinking comprehensively about how to pay for college after federal loan limits take effect — can create more flexibility down the road.
This blog focuses on the longer-term planning picture.
Here are some key takeaways covered in this blog:
Here is a summary of how federal student loan limits are changing after July 1, 2026:
For families planning ahead, the key takeaway is that the federal borrowing available to help cover college and graduate school costs will be substantially lower than what was available in prior years.
Note: “Certain professional programs” referenced above include 11 degrees within medicine, law, dentistry, pharmacy, veterinary medicine, and certain clinical psychology and theology programs. Final definitions and rules are expected in 2026.
When federal loans cover a smaller share of total education costs, the remaining balance has to come from somewhere. For families thinking about how to pay for college after these reduced federal loan limits take effect, this means building a plan that draws on multiple sources — savings, financial aid, scholarships, private loans, and in some cases, direct family support.
This is especially relevant when you consider the full arc of a student's education. A family focused on funding an undergraduate degree may also want to account for the possibility of graduate or professional school. With Graduate PLUS loans no longer available and graduate borrowing capped at significantly lower levels, the cost of an advanced degree could be harder to cover through federal loans alone.
Borrowing decisions at one stage can affect options at the next. Each new parent or student loan may influence the interest rates and terms available on future private loans. Thinking holistically about borrowing across one or multiple students’ full educational paths — rather than year by year — can help families make more informed decisions.
One of the most practical steps families can take is to evaluate schools for affordability before applying based on estimated net cost rather than published tuition or cost of attendance (COA). The sticker price of a college or university can be misleading; what a family actually pays often looks quite different once need-based aid, merit awards, and scholarships are factored in.
This comparison can surface options that might not be obvious at first glance. Some private institutions, for example, may be similarly priced or less expensive than in-state public schools once all forms of financial aid are considered. Running the numbers across a range of schools — and comparing the estimated net cost of attendance at each — gives families a clearer basis for decision-making.
For families open to exploring additional ways to manage costs, two options are worth considering:
1. Community college for the first two years. Completing general education requirements at a community college before transferring to a four-year institution can meaningfully reduce total education costs. Many states have established transfer pathways that make this transition straightforward, assuming any specific requirements are met.
2. Regional tuition discount programs. Several regional programs offer reduced tuition for students who attend participating out-of-state institutions. Depending on where you live and what your student plans to study, these programs could open the door to schools that might otherwise carry a higher price tag:
Not every program will be relevant to every family, but for those in participating states, these options are worth researching early in the school selection process.
With federal borrowing covering less of the total cost, families may want to explore a broader set of funding tools. Here are several options that could play a role in a comprehensive education plan:
529 plans
These tax-advantaged savings accounts remain one of the most widely used tools for education funding. Contributions grow and distributions are made tax-free when used for qualified education expenses, while those qualified expenses now include programs leading to recognized credentials such as degrees, certificates, and licenses. Eligibility should be confirmed with the plan provider. Some states also offer tax savings on contributions.
An additional layer of flexibility: under current rules, unused 529 funds may be transferred to an eligible family member or a portion may be rolled into a Roth IRA for the account beneficiary, subject to certain conditions and limits. This can reduce the concern some families have about overfunding a 529 account.
Private loans
Given the reduced federal loan limits, private student loans may play a larger role for some families. Private loans typically carry variable or fixed interest rates set by the lender, and they generally come with fewer borrower protections than federal loans — including more limited options for deferment, forbearance, or income-driven repayment. A parent is typically required to co-sign for their student, and interest rates tend to increase with each successive loan taken. It’s important to compare terms carefully, consider your long-term financial goals, and borrow conservatively.
Scholarships and financial aid
Institutional scholarships, community-based awards, and employer-sponsored education benefits can all contribute to closing the funding gap. Families who research and apply broadly, starting well before enrollment, tend to have more options available to them.
Family gifting and support
For immediate and extended families with the means to provide direct financial support, structured gifting strategies may be worth considering as part of a broader education funding approach. Depending on the family's situation, this could involve outright gifts, contributions to a 529 plan, or other vehicles.
Because gifting intersects with tax and estate planning considerations, working with a financial advisor can help families structure support in a way that aligns with their overall financial goals.
Each of the strategies above can be useful on its own, but they tend to work best when they're part of a coordinated plan that accounts for the full scope of a family's education funding needs.
That means thinking beyond a single child's undergraduate degree. If there are multiple children in the household, or if graduate or professional school is a possibility, factoring those costs into the plan early can help avoid surprises later. The new federal loan limits make this kind of forward-looking approach especially relevant, since the borrowing available for graduate programs is now significantly more limited.
A few practical starting points:
As families prepare for the financial aid process, a few details are worth keeping in mind.
Certain assets — including primary home, retirement accounts, family farms, small businesses, and commercial fishing businesses — may be excluded from FAFSA reporting. For families who hold these types of assets, this could affect how their financial profile is assessed for aid purposes.
More broadly, it's helpful to familiarize yourself with how the FAFSA process works years before your student applies. The way income and assets are evaluated can influence the types and amounts of aid a student receives. Approximately 300 institutions, including many private colleges, use a more comprehensive approach called the College Scholarship Service (CSS) profile to determine need-based aid. Understanding how your financial profile may be assessed by each college can be a valuable part of the overall education funding strategy.
Education is one of the largest financial commitments a family can make, and the recent changes to federal student loan limits add a new layer of complexity to the planning process. At EP Wealth, a financial advisor can help you think through how education funding fits into your overall financial picture.
That might include evaluating how college and graduate school costs interact with your retirement savings timeline, exploring how gifting or 529 plan contributions align with your tax and estate planning goals, or simply mapping out what different funding scenarios could look like over the years ahead.
Every family's situation is different, and the right approach depends on your specific circumstances, goals, and resources.
If you'd like to discuss how these changes may affect your family's planning, connecting with an EP Wealth advisor is a good place to start. We can help you build a plan that accounts for education costs alongside the other financial priorities that are important to you.
For the most current information on federal student loan programs, visit studentaid.gov.
If you're evaluating your options and want to learn more, schedule an introductory meeting with an EP Wealth advisor to start the conversation.
Note that the Cost of Attendance (COA) is published on the college’s website and includes tuition, room and board, books and supplies, travel and misc, and other fees.
The Estimated Net Cost of Attendance is the COA less projected need-based grants/financial aid, merit scholarships and private scholarships.
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