Three categories of federal student loan remain available in 2026, with a fourth (Grad PLUS) phased out for new borrowers:
Undergraduate only, need-based. The federal government pays the interest while the student is enrolled at least half-time. Borrowing limits are low ($3,500–$5,500 per year). At higher incomes these rarely come into play because the need-based qualification is not met; the few students who do qualify (lower parent income year, multiple kids in college, divorce) should take them in full.
Available to undergraduate and graduate students with no need test. Interest accrues from disbursement. Annual limits: $5,500–$12,500 for undergraduates depending on dependency and year; $20,500 per year for graduate students. OBBBA introduced a lifetime cap of $100,000 in unsubsidized loans for undergraduate and graduate combined, with a separate $200,000 cap for professional programs (medicine, law, dentistry, pharmacy). The interest rate is set annually by Congress; it has run between 5% and 7% in recent years.
Available to parents of dependent undergraduates. Credit check (rejection only for adverse credit events, not for low FICO). OBBBA capped Parent PLUS borrowing at $20,000 per year per child and $65,000 lifetime per child, ending the pre-OBBBA cost-of-attendance-minus-aid uncapped structure. The interest rate runs higher than the unsubsidized student rate (typically 1%–2% above), plus an origination fee that effectively raises the all-in cost another 4%. Parent PLUS is the parents’ obligation, not the student’s — it cannot be assigned to the student except through refinancing into private debt in the student’s name.
Eliminated for new borrowers as of July 1, 2026. Existing Grad PLUS borrowers continue under their original terms. Graduate students who exhaust the new $100,000 unsubsidized cap must look to private lenders for the residual.
Parent PLUS is the worst loan in the federal portfolio for high-income parents. The combined effect of higher interest, the origination fee, and the inability to transfer the debt to the student means Parent PLUS rarely beats home equity, an SBLOC (section “Asset Backed Loans (ABL)”), or even a 0% intra-family loan if you have liquidity. If you have appreciated taxable assets and a securities-backed line of credit at 4%–5%, borrowing on the SBLOC to pay tuition beats Parent PLUS at 8%+ all-in on every dimension except the death-discharge benefit, and a term-life rider for the parent is a cheaper way to buy that.