Hi friend,
I need to talk to you about something that quietly changed on July 1, because if there is any chance college is on the horizon for a child or grandchild in your life, this affects you directly, and most families have no idea it happened.
The rules for how parents can borrow to pay for a child's education just changed dramatically. And while I want to walk you through the details, I also want to have a bigger, more honest conversation underneath the details. The kind of conversation that, in my experience, almost no one is having with families at exactly the moment they need it most.
So let's get into it.
What Actually Changed
The federal loan program that parents have long used to help pay for college, called PLUS loans, has been drastically cut back.
Here is the new reality. Parents can now borrow only 20,000 dollars a year through this program, and there is a lifetime cap of 65,000 dollars in parent borrowing per student. That is a significant reduction from what was available before, when the limits were far more generous.
Now, I want to say something that might surprise you coming from a financial coach.
I am not upset about this.
I am genuinely in favor of parents borrowing less for college. I have watched too many families take on enormous student loan debt that they are still carrying into their retirement years, and it breaks my heart every time. So if this change nudges families toward schools that do not require borrowing 20,000 dollars a year, I see that as a good thing, not a bad one.
But here is where my concern kicks in.
The Trap Hiding Inside the Good News
The government did not make college more affordable. Let me be very clear about that. It simply decided to limit how much it will lend. And when the federal door narrows, families do not suddenly need less money. They just go looking for it somewhere else.
That somewhere else is the private student loan market. Banks. Fintech companies. Private lenders who will happily step in to fill the gap above the new federal limits.
And this is exactly where I need you to slow down and pay attention, because private loans are a very different animal from federal ones, and the differences can cost your family dearly.
What You Must Know About Private College Loans
If you find yourself, or a grandchild's family, considering a private loan to cover the gap, please go in with your eyes wide open. Here is what you need to understand.
You have to qualify. This is not automatic money. Just like borrowing for a car or a home, private lenders will examine your income, your existing debt, and your credit score before they lend you a dime. Your financial life gets put under a microscope.
The interest rate can be variable, not fixed. This is one of the most dangerous features and the one people overlook most. A variable rate means that if interest rates rise, the cost of your loan rises right along with them. You could sign up for a payment you can afford and find yourself, a few years later, with a payment you cannot.
The rate range is enormous. If you have a truly excellent credit profile, the starting rate can look quite attractive. But depending on your finances, that rate can climb to nearly 18 percent. Let that number sit with you. Eighteen percent on tens of thousands of dollars is the kind of debt that reshapes a family's entire future.
Private loans, in other words, are not a gentle backup plan. They are a serious financial commitment that can quietly grow more expensive over time.
The Question Nobody Is Asking You
Here is the part that I feel most strongly about, and it is the reason I felt I had to write to you today.
When a family sits down to figure out how to pay for college, everyone is focused on one question: how do we get the money? The financial aid office, the lenders, and the school itself, they are all oriented around helping you find a way to say yes.
But there is a question no one in that room is asking you.
Will borrowing for this child's education mess up your own financial security?
That is my job. That is why I am here. And I need you to actually think about it, because no one else will make you.
If borrowing for college means you save less for your own retirement, that is a problem. And if it means you are still repaying education loans after you have stopped working, when your income has dropped and your options have narrowed, that is a serious problem. In my class on smart family finances, that gets a failing grade every single time.
I know how this feels. You love your child. You want to give them every opportunity. Saying "I cannot borrow that much for you" can feel like failing them. But hear me on this: protecting your own retirement is not selfish. It is one of the most loving financial decisions you can make. Because the alternative, a child who someday has to financially support a parent who gave away their own security, is a far heavier burden to place on the people you love.
The Smarter Path
So what do you actually do? Let me give you the game plan I would give any family sitting across from me.
Do the research to find a school that fits your family financially. This is the single most powerful move you can make, and almost no one puts in the effort. The school that will not bury your family in debt exists. But finding it takes real work, comparing costs, understanding aid packages, and being willing to choose the smart financial fit over the flashiest name. That research is worth more than any loan strategy.
If you must borrow, let the student borrow, not you. This is a rule I want you to hold firmly. When borrowing is truly necessary, the loan should be in the student's name through the federal student loan program, not on your shoulders.
Here is why that works. Federal student loans for the child are capped at 5,550 dollars the first year, 6,500 dollars the second year, and 7,500 dollars for each year after, with a lifetime limit of 31,000 dollars, assuming your child is still claimed as a dependent on your taxes. Independent students can borrow somewhat more.
That 31,000 dollar cap is not a limitation. It is a guardrail, and a good one. It is a manageable amount that a young graduate should be able to pay off within about ten years of finishing school. That is how a family reaps the real benefits of a college education without anyone drowning in debt to get there.
Your To-Do This Week
If college is anywhere on your family's horizon, here is your one assignment.
Have the honest money conversation before you fall in love with a school. Sit down, look at what your family can genuinely afford without touching your retirement savings, and decide on that number first. Then let that number guide the school search, not the other way around.
It is a hard conversation. But it is so much easier to have now, calmly, than it is to have later, buried under payments you never should have taken on.
One Last Thing
I want to leave you with the heart of this.
A college education is a beautiful gift. But the goal was never just to get your child in the door. The goal is a whole family that thrives afterward, the child launched well and the parents secure enough to enjoy the years they worked so hard for.
Do not trade your retirement for a diploma. You can give your child a wonderful education and protect your own future. It just takes planning, honesty, and the willingness to ask the question no one else will ask you.
That question is my job. And now it is yours too.
Talk soon,
Najma Zanelli
Explore Offerings
Founder, NAZ Global Consultancy
Follow me on IG: @najma_zanelli
Email: [email protected]
