Did you know there were major changes coming up this summer for how you pay for education?
Good morning everyone and welcome back to Finance Friday. I missed a huge opportunity to talk about 529 Plans on 05/29. This got me thinking that it may be time to go over some Education Planning on FF. The One Big Beautiful Bill was introduced in July last year. I admit, it’s a long piece of legislation, however, something that stuck out for me were the changes towards borrowing for education expenses. Some which will take place in a few weeks.
Here are 3 major changes to look for:
Loan Limits –
Starting July1st, federally funded loans for Graduate and Professional students (GRAD Plus Loans)will be eliminated. Parent Plus Loans, which allow parents to borrow to pay for undergraduate students, will be capped at $20,000 annually and $65,000 lifetime. Student Loan burden has been a hot topic in the economy for the last few years as we’ve seen more and more students graduate with mountains of debt before they even get started on their career. These moves are meant to curb that.
Pell Grant Expansion –
The 2026 – 2027 school year, Workforce Programs (Coding, HVAC etc.) will qualify for Pell Grants. There is a serious decline in numbers of people getting vocational education in our country. Pell Grants help students to cover the expense of the education. This change broadens which education these grants can be used for.
Reduced Relief Options –
After July 1st, 2027, unemployment and economic hardship deferments will end for new loans. Meanwhile, forbearance will be capped at 9 months. In an economy where inflation and entry level unemployment are up; this can potentially be a stressful scenario. This change can lead borrowers to default earlier. Putting them in a worse off situation with their credit. The silver lining here is that there’s a full year to plan next steps.
How do these new changes and rules affect you? Well, that’s a good question. These new rules and laws have benefits and disadvantages. The best advice is to speak with your planner/advisor to see if any of these 3 changes will affect your financial plan.
These new rules shift where money will be coming from to pay for education expenses. This could lead to larger reliability on savings, private loans and scholarships. This could also require earlier 529 planning than before.
Remember to submit your questions and thoughts on our discussion to hector@hrcfin.com. Don’t forget to follow HRC Financial on Facebook and LinkedIn for more Finance Friday Tips and Insights.
Thank you again and we’ll see you next week!