These days, there's a question I hear most often: "I heard Parent PLUS loans are capped this year, so how do I cover the remaining tuition?"

To put it simply, they aren't completely capped, but there is a limit now. However, for families who were using PLUS loans to cover private college or out-of-state tuition, the impact can be significant.

The change comes from the One Big Beautiful Bill Act passed in July 2025. It applies to the first disbursements of Parent PLUS loans made after July 1, 2026.

The new limit is $20,000 per student per year, with a cumulative cap of $65,000. Previously, families could borrow essentially unlimited amounts up to the total cost of attendance minus other aid.

One point that can be confusing is that this limit is based on the student, not the parents.

This means that even if both parents apply separately, the total is capped at $20,000 per year. If you thought that borrowing separately would double the amount, you'll need to revise your plans.

Let's do some calculations. If you borrow the full $20,000 each year, you'll reach $60,000 in just three years, leaving only $5,000 for the senior year.

That's why financial aid offices are advising families to spread the borrowing evenly over four years. Dividing $65,000 by four gives you about $16,250 per year.

If you already have a child in college, there's a bit of relief. If they were enrolled in the same program as of June 30, 2026, and had previously received a federal Direct Loan under that program, the old rules will still apply.

However, this exception won't last forever. It only applies for a maximum of three years or until the degree is completed, whichever is shorter.

Let's also touch on interest rates. The fixed interest rate for Parent PLUS loans for the 2026-27 academic year is 9.07%, and a loan fee of 4.228% is deducted from the disbursement amount.

If you borrow $20,000, about $845 will be taken as a fee, leaving the remainder for the school. Honestly, I was a bit shocked when I first saw that number.

The repayment method has also changed. For Parent PLUS loans received after July 1, you cannot use income-driven repayment (IDR) and can only use the newly established standard repayment plan.

So, where do you find the additional funds for tuition? That's the real question. Let's go through the options one by one.

The first option is federal loans in the student's name. Dependent students can borrow $5,500 in their first year, $6,500 in their second year, and $7,500 in their third year and beyond.

This amount has remained the same since 2008, so it's not a huge solution. However, the undergraduate interest rate for the 2026-27 academic year is 6.52%, which is definitely cheaper than PLUS loans.

The second option is if the parents are denied for PLUS loans. In this case, the student can receive additional Unsubsidized loans, so be sure to ask the financial aid office about this.

The third option is institutional scholarships and state scholarships. South Dakota has the South Dakota Opportunity Scholarship, which can be awarded over four years if academic criteria are met.

Scholarship amounts and conditions can change each year, so it's wise to check the latest criteria on the school or state education department's website before applying.

The fourth option is the school's payment plan. This allows tuition to be divided into payments over several months, and many schools only charge a small registration fee without interest.

If you qualify for FAFSA, you may also be able to get campus jobs through Federal Work-Study. While it may not be a lot of money, it can help cover costs for books or living expenses.

The fifth option is private student loans. You can borrow without regard to federal limits, but interest rates can vary significantly based on credit scores.

Private loans offer very few protections like deferment or forgiveness that federal loans provide. So, I prefer to keep them as a last resort.

If your child is still in high school, consider a 529 plan as well. The more you save now, the less you'll need to borrow later.

There are two sides to this. The cap helps prevent parents from taking on unmanageable debt, and there's hope that schools will be more cautious about raising tuition.

On the flip side, there are concerns that low-income families or first-generation college students may have fewer options and could end up pushed into more expensive private loans. Both perspectives have merit.

If I were a parent, I would do the following: first, submit the FAFSA and maximize student loans and scholarships, then consider a payment plan, use PLUS loans evenly over four years, and keep private loans as a last option.

And once you receive acceptance letters, compare the net price, meaning the actual amount you'll need to pay. The total cost over four years is much more important than the name recognition.

Since this is the first year with new regulations, schools may provide slightly different guidance. If you're confused, don't hesitate to call the financial aid office directly to ask about your specific situation.