If you are one of the parents, the grandfather, or even the student, you may soon affect student loans on your financial plans. On the podcast “Women and Money”, a financial expert Suz Orman Recently, how the new federal draft law – one beautiful draft law – will restore federal loans from 2026.
Here is what Orman says you need to know him and how it can affect families like you.
One of the biggest changes that Orman talks includes Parent Plus Loan Program. It indicates that under old rules, parents can borrow to the full cost of children attending the college. But starting next July 1, the maximum borrowing will be crowned at $ 20,000 annually and a total of $ 65,000 per student.
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This means that if you are planning to help pay the price of an expensive private college, it costs $ 65,000 per year or more, you will need to rethink your strategy.
There is more than that: Parent Plus loans after that date will not be qualified for income -dependent payment plans. Orman said: “I hate this.”
Instead, the payment will follow a standard plan with fixed payments of more than 10 to 25 years, regardless of income.
Orman advises parents to be careful before taking out these loans. She said: “The standard payment plan is much more, so it is better to think twice before you get a loan.” Without income -dependent options, monthly payments may be much higher.
Orman was also cut off from the effects of the new law for students who borrow university loans. Previously, the backed loans did not accumulate attention while the students were at school. Now, all university federal loans will be absolute from July 1.
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What does this mean? The benefit will accumulate during school, and if not added to the loan balance. This will increase the total amount due and lead to increased payments once the payment begins.
“You may want to pay the interest on this loan annually starting from the first year, because otherwise, Orman will recommend.
The bill also changes payment plans for all federal students ’loans taken after July 1. There will be two options:
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Standard payment plan with fixed payments more than 10 to 25 years.
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A new income -based payment plan called the payment assistance plan, or RAP, which links payments by 1 % to 10 % of the estimated income.
“But there will be no zero payment options,” Orman explained, explaining that although some current income payment plans allow borrowers to make zero payments based on the financial need, this option will not be available next year.
In addition, the loan remission will not occur under RAP until 30 years after payments, five years longer than previous plans. In addition, economic hardships will not be available from July 1, 2027, although limited endurance may be possible for short periods.
“Why do they want to be able to allow you to do so?” He asked Orman. “Since student loans, which are still in most cases, are not free of bankruptcy, they can come after you. They can decorate your wages. They can even follow the social security examination later in life, which is double and compound, so it’s best to be careful.”
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The borrowing of graduate studies will also be limited. The academic loan program, in addition to unaccounted loans, ends with an annual limits of $ 20,500 for doctoral students and $ 50,000 to obtain professional certificates, in addition to lifelong hats.
These most strict limits may mean that graduate students should plan more carefully or search for alternative financing sources.
Orman’s advice? Families need to start planning now. Parents should avoid risk of retirement savings by borrowing too much for the college. Children must borrow federal loans first, because student loan interest rates are generally lower than parental loans in addition to loans.
More than ever, families must explore schools and scholarships at reasonable prices and merit. The new rules add the complexity to the college financing, which makes it important to borrowers carefully evaluate their options.
If you are considering the college costs in your family, sit with your financial advisor and start conversations early with your children. The beautiful, single, large bill is to change the game, and reporting is your best defense.
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Student loans are about to change the big time: SUZE Orman explains the effect of the “big beautiful bill” for borrowers originally on Benzinga.com
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