Big student loan changes hit July 1, but most borrowers say they're not ready

Major federal student loan changes will take effect on July 1, 2024, but a survey by Credible shows most borrowers are unprepared. According to the survey, 61% of Americans with student loans do not feel ready for the upcoming reforms, while 61% of respondents aged 18-61 were unaware of the changes. Richard Richtmyer, senior editor of student loans at Credible, warns that borrowers may face unexpected limitations, such as reduced borrowing options or higher costs, potentially forcing them to delay education or turn to private loans. One key change involves Parent Plus loans, which will now have a $20,000 annual cap and a $65,000 lifetime cap per dependent. Grad Plus loans will be eliminated entirely, leaving graduate students with stricter federal aid limits. Existing borrowers under Grad Plus loans can still use them, but new borrowers will face restrictions, possibly creating funding gaps for higher education. The government is also phasing out most income-driven repayment plans and replacing them with a single plan called the Repayment Assistance Plan (RAP). While this simplifies repayment for new borrowers, existing borrowers will transition over time, leaving many with fewer repayment options. Andrea Dona, a first-generation college student at San Diego State University, advises borrowers to explore scholarships and financial aid to bridge potential funding shortfalls. She emphasizes that many scholarships go unclaimed due to lack of awareness, offering an alternative to relying on federal loans. The Trump administration justifies the changes as a measure to curb excessive borrowing and encourage institutions to evaluate costs. By limiting loans to the full cost of attendance, the administration aims to reduce high levels of student debt that many borrowers struggle to repay. Experts urge borrowers to act now rather than waiting, as the changes could significantly impact future education planning and financial stability.