With credit unions in budgeting and strategic planning mode for 2026, there’s one asset class that demands a closer look: private student loans. The One Big Beautiful Bill (OBBB) is bringing huge changes to federal student loans, dramatically changing how students and families pay for college and expanding the private student lending space in the process.
A Growing Opportunity: Impacts From The OBBB
Starting next year, legislative changes will reshape the higher education financing landscape, increasing the financial need for millions and opening the door to expanding private student lending opportunities. The OBBB, in a quest to downsize the student lending role of the federal government, is set to take effect in July 2026 and will phase out or limit key federal loan programs that currently serve undergraduate and graduate students as well as parents. This creates a unique opening for credit unions to step in with competitive, mission-aligned options that put members first.
Grad PLUS Goes Away
Among the most significant changes to federal student loans under the OBBB is the phased elimination of the Grad PLUS program, long used by graduate and professional students (such as doctors, lawyers, and veterinarians) to bridge educational funding gaps after they exhausted other lower-cost sources. For example, during the 2023–24 academic year, roughly 440,000 graduate and professional students borrowed $14 billion through the federal Grad PLUS program — nearly the size of the current private student loan market.
The program will be eliminated for new borrowers beginning July 1, 2026, but still available to current Grad PLUS borrowers until they complete their educational program. While federal student loan limits for professional students will be increased as part of the OBBB, the move to end Grad PLUS will leave grad and professional students with fewer federal borrowing options. This will likely drive greater reliance on private loans or alternative financing, giving credit unions a new pathway to help young adults pursue graduate level education while securing important member relationships.
A Cap On Parent PLUS Loans
Federal Parent PLUS loans have long been a popular option for parents in need of additional funding to support their undergraduate student. Historically, mom or dad could use PLUS loans to borrow up to the full cost of the student’s cost of attendance, minus other financial aid, with no caps.
However, under the new legislation, starting July 1, 2026, new Parent PLUS loans will cap annual borrowing at $20,000 per student and a lifetime total of $65,000 per student. Considering the average cost of attending college in the United States now exceeds $38,000 per year, parents will face substantial shortfalls.
The Bottom Line? A Big Opportunity.
The OBBB represents one of the biggest shifts in student lending in decades. While it’s hard to pinpoint exactly how much additional volume private student lenders can expect, it’s clear that billions of dollars of demand will likely be added to the private student loan market. And as the elimination of Grad PLUS and Parent PLUS caps are fully phased in, this need is likely to grow exponentially in future years.
Existing and potential members are counting on trusted financial institutions to provide solutions as the student loan landscape shifts — and credit unions that act now will be positioned to meet those needs first. Launching or expanding your student lending program now means your credit union’s solution will be ready well ahead of late spring and early summer, when families and students begin securing financing for the upcoming academic year.
How To Get Started
Rolling out a student lending program doesn’t have to be difficult or costly; an experienced CUSO partner like CU Student Choice provides customizable plug-and-play solutions that provide origination, servicing, and compliance, with no need for the credit union to hire additional credit union staff or worry about expensive technology integrations. In fact, the Student Choice team can have a new program up and running in just 30 to 45 days.
With strong and stable historical performance, minimal setup barriers, and a clear tailwind from upcoming federal policy changes, private student lending should be part of your credit union’s 2026 loan strategy. Deliver financial peace of mind to students and families and start benefitting from new loan volume and valuable engagement with the next generation of members.
Contact us to learn more about how Student Choice can make it simple to offer student lending solutions that deliver meaningful value to both members and your bottom line.
If you’re attending the upcoming ACU Lending Council Conference, make sure to attend Jim Holt’s breakout session on Monday, Nov. 3 at 3:30 p.m. PT to learn more about the student lending impacts of the OBBB changes and the steps credit unions can take to best support their members and communities.
