Important: Major federal student loan changes are taking effect on July 1, 2026. The One Big Beautiful Bill Act overhauls how students borrow and repay federal loans. Key changes include the elimination of Graduate PLUS Loans for new borrowers, caps on Parent PLUS borrowing, and a reduction from multiple income-driven repayment plans to just two options. If you’re borrowing for the 2026-2027 school year or beyond, these changes affect you directly. Learn more below.
I need a student loan. What are my options?
You have two options when you’re looking for a loan to pay for school: federal loans or private loans.
Federal student loans are funded by the government, which sets fixed interest rates each year and offers flexible repayment plans.
Private student loans are funded by providers like banks, credit unions and online lenders, which charge a range of interest rates based on your creditworthiness.
Typically, both private and federal lenders recommend that students apply for federal loans first, since they often have lower interest rates than private loans and more forgiving repayment options. However, there is a limit to how much federal funding you can qualify for and how you can use it.
Federal loans for summer classes
The same federal student loans available for courses during the regular academic year can also be used for summer classes. These include:
Direct Subsidized Loans
Direct Unsubsidized Loans
Parent PLUS Loans
Grad PLUS Loans (note: this program is being eliminated for new borrowers starting July 1, 2026)
Private student loans for summer classes
If you’ve reached your federal loan limit or otherwise aren’t eligible, you might want to consider private student loans. Typically, you can borrow up to 100% of your school’s costs, covering whatever federal loans and other financial aid can’t.
Like with federal loans, you can get started by reaching out to your school’s financial aid office. Some might have deadlines for when you can apply for summer funding and other restrictions. Once you’ve confirmed the process with your school, you can start comparing lenders with the table below.
What else can a student loan pay for?
You don’t have to attend a traditional university to take advantage of a student loan, which can also pay for:
A degree abroad. Many universities abroad participate in agreements with the federal government that give US citizens access to federal loans.
A second undergraduate degree. You have both federal and private student loans to consider, though you may have fewer options due to lifetime loan limits.
Part-time education. You can qualify for many federal and private student loans if you’re enrolled at least half time. But you aren’t eligible for federal and some private student loans if you drop below half-time enrollment.
A skills-based program. Some private lenders specialize in loans for skills-based programs like coding bootcamps and trade schools that don’t qualify for federal aid. However, these may come with higher interest rates and less-flexible repayment plans.
Community college. If your community college is a Title IV school, you may qualify for federal student loans. Otherwise, you can look into private lenders.
How federal and private student loans compare
Federal student loans
Private student loans
Interest rates
Fixed rates of 6.39% (undergraduate), 7.94% (graduate/professional) and 8.94% (PLUS loans) for the 2025-2026 school year. New rates are set each July.
Variable rates starting around 3% and fixed rates up to about 18%, depending on your credit profile and whether you have a cosigner.
Origination fees
1.057% for Direct Subsidized and Unsubsidized Loans. 4.228% for PLUS Loans. These fees are deducted from your loan before disbursement.
Most private lenders don’t charge origination or application fees, though it varies by lender.
Restrictions
Only for education-related expenses while you’re a student.
For education and post-graduate expenses, such as studying for a bar exam or starting a medical residency.
Repayment options
Deferred until six months after school. Options include fixed repayments, graduated repayments and income-driven plans. Starting July 2026, new borrowers will have only two options: Standard Repayment and the Repayment Assistance Plan (RAP).
Typically deferred or interest-only repayments until six months after school, then full fixed repayments over five to 20 years.
Forgiveness
Eligible for Public Service Loan Forgiveness (PSLF) and income-driven repayment forgiveness. Note: Forgiveness through income-driven plans may be taxable starting in 2026.
Not eligible for federal forgiveness programs.
Federal student loans generally attract lower interest rates than private student loans, but there’s a limit to how much you can borrow and what you can use it for.
Federal loans also tend to be a first choice because they come with benefits like loan forgiveness programs, flexible repayment schedules and deferment options. However, many of these benefits are changing significantly for loans disbursed after July 1, 2026.
Students typically turn to private student loans after they’ve maxed out their federal loans or need help paying for a career-related postgraduate cost like studying for the bar exam or relocating for a medical residency.
Parent loans
In addition to taking out a loan in the student’s name, there’s also the option to take out a loan in the parent’s name. You might want to consider a Parent PLUS loan if you’ve exhausted other federal financing options. If you need private financing, it could be an easier choice since parents with good credit and high income don’t typically need to bring on a cosigner.
Starting July 1, 2026: Parent PLUS Loans will be capped at $20,000 per student per year, with a lifetime limit of $65,000. This is a significant change from the current system, which allows parents to borrow up to the full cost of attendance.
A breakdown of every student loan option
Student loan
What it is
How it works
Where to get it
Undergraduate student loans
Federal and private student loans to pay for an undergraduate degree program.
Federal loans: Fill out the FAFSA and apply for student loans along with other federal funding through your school’s financial aid office.
Private loans: Apply with a cosigner to get up to 100% of your school’s cost of attendance after federal loans and other financial aid.
Federal loans: Your school’s financial aid office.
Private loans: Most private student loan providers.
Graduate student loans
Federal and private student loans to cover the cost of attending a master’s or professional degree program.
Federal loans: Fill out the FAFSA and apply through your school’s financial aid office. Subsidized federal loans aren’t available to graduate students. Note: Grad PLUS Loans are being eliminated for new borrowers starting July 1, 2026.
Private loans: Apply with a cosigner to get up to 100% of your school’s cost of attendance after federal loans and other financial aid.
Federal loans: Your school’s financial aid office.
Private loans: Private student loan providers that offer graduate funding.
Bar exam loans
A loan meant to help recent or soon-to-be law school graduates cover the cost of studying for and taking the bar exam.
Typically borrow between $1,000 and $15,000 from a private lender and start repaying it between six and nine months after receiving your funds.
Private student loan providers that offer bar exam loans.
Medical residency loans
A loan meant to help recent medical school graduates cover the cost of applying to and relocating for a medical residency, plus required exams.
Typically borrow between $1,000 and $15,000 and defer repayments until between six and 36 months after leaving school.
Private student loan providers that offer medical residency loans.
Student loan refinancing
General refinancing: A new loan that you can use to pay off your current student loans at more competitive rates and terms.
Parent loan refinancing: A new loan to transfer a Parent PLUS loan into your child’s name or get more competitive rates and terms.
Medical resident refinancing: A student loan with reduced payments during your residency and rates based on your estimated future income.
Take out a new loan with new rates, terms and repayment options to pay off your current private or federal student loans.
Private student loan providers that offer refinancing.
Parent loans
Parent PLUS loans: A federal loan in a student’s parent’s name. Currently covers up to 100% of the cost of attendance, but will be capped at $20,000/year starting July 2026.
Private parent loans: A loan from a private provider in the student’s parent’s name to cover up to 100% of the cost of attendance.
Parent PLUS loans: Parents fill out the FAFSA and borrow up to the student’s cost of attendance (subject to new caps starting July 2026).
Private parent loans: Parents fill out an application with a private lender to borrow up to 100% of the student’s cost of attendance.
Parents can later refinance the loan into the student’s name.
Parent PLUS loans: The school’s financial aid office.
Private parent loans: A private student loan provider that offers parent loans.
Major federal student loan changes starting July 1, 2026
The One Big Beautiful Bill Act (OBBBA) overhauls the federal student loan system for new borrowers. If you’re taking out federal loans for the 2026-2027 school year or later, here’s what’s changing:
Grad PLUS Loans eliminated. New graduate and professional students will no longer have access to Grad PLUS Loans. Students who already have a Grad PLUS disbursement before July 1, 2026 can continue borrowing under a legacy provision.
Parent PLUS Loans capped. Parents will be limited to $20,000 per student per year and $65,000 in total, down from the current system that allows borrowing up to the full cost of attendance.
Only two repayment plans. New borrowers will choose between the Standard Repayment Plan (fixed payments over 10-25 years) and the Repayment Assistance Plan (RAP), an income-driven option with payments set at 1-10% of your adjusted gross income.
Deferment and forbearance limited. For loans issued after July 1, 2027, economic hardship and unemployment deferments will no longer be available. Forbearance will be capped at nine months during any two-year period.
Part-time borrowing prorated. New borrowers enrolled less than full time will only be able to borrow an amount proportional to their enrollment status.
Forgiveness may be taxable. The tax exemption on student loan forgiveness expired at the end of 2025. Borrowers who receive forgiveness through income-driven repayment plans in 2026 or later may owe federal income taxes on the forgiven amount. PSLF forgiveness remains tax-free.
If you currently have federal student loans, most of these changes don’t apply to you immediately. However, some existing repayment plans are being phased out, with a transition deadline of July 1, 2028. Contact your loan servicer to review your options.
How do I apply for a student loan?
Fill out the Free Application for Federal Student Aid (FAFSA) to apply for a federal student loan, which also allows you to apply for other types of federal aid like work-study and grants. You can complete this online at StudentAid.gov.
Private student loan providers typically offer online applications that you can complete along with your cosigner in a few minutes. If you’re applying with a cosigner, they can typically either apply with you or receive a link to access their part of the application once you’ve completed yours.
Common fees that come with student loans
It depends on whether you take out a federal or private student loan. Federal loans come with origination fees of 1.057% for Direct Subsidized and Unsubsidized Loans and 4.228% for PLUS Loans. These fees are deducted from your disbursement, so you receive slightly less than you borrow but are responsible for repaying the full amount.
Private lenders don’t usually charge origination or application fees, though it varies. You might also be on the hook for late fees depending on the type of loan you take out.
Can I defer undergraduate student loans while in grad school?
In most cases, yes. You can defer your federal student loans by filling out an In-school Deferment Request form through your loan servicer. You can find your servicer by logging in at StudentAid.gov. Contact your servicer to learn what the deferment process is like if you have private student loans. If your private lender doesn’t offer in-school deferment, consider refinancing with a lender that does.
Keep in mind student debt can come with “hidden costs,” like making credit cards, auto loans and mortgages more expensive due to a higher debt-to-income ratio. Make sure you’ve exhausted your free financing options first before you decide to borrow.
How do I find a competitive student loan?
Federal student loans are the same for everyone, but private student loans aren’t as simple. Find a loan that works best for you by comparing lenders. First make sure you’re eligible, then compare features like APR, terms and repayment options.
If possible, consider prequalifying with a few lenders once you’ve narrowed it down. That way you’ll get a closer idea of what you’re eligible for than a general range of rates and terms. Prequalification typically uses a soft credit check, which won’t affect your credit score.
What’s a cosigner and do I need one?
A cosigner is another individual who signs your loan documents with you. Cosigners essentially act to reassure the lender that it’ll get its repayments on time.
Many private lenders recommend undergraduate borrowers apply with a cosigner. But you might want to consider a cosigner even if it isn’t required. That’s because most lenders have minimum credit requirements that most college students can’t meet, usually a minimum credit score of at least 600 and a debt-to-income ratio below 43%.
Can I get a private student loan with bad or no credit?
Generally you can, as long as you bring on a cosigner. Most undergraduate students don’t have an established credit history yet, so applying with a creditworthy cosigner is the most common path.
Some lenders specialize in student loans that consider factors beyond traditional credit scores, such as your academic performance, school, and projected future income. These lenders may not require a cosigner, though rates may be higher. Check with your school’s financial aid office for options available to students at your institution.
Can I get a private student loan without a cosigner?
It’s possible, if you meet your lender’s credit requirements. Generally, you’ll need good credit and steady income to go without a cosigner, which most undergraduate students don’t have. A growing number of lenders now use alternative underwriting models that consider your grades, degree program and future earning potential instead of (or in addition to) credit and current income.
Alternative ways to pay for school
Student loans aren’t the only way to pay for college. If you’re not certain you want a student loan, look into these financial aid alternatives.
Grants and scholarships
The federal government, state governments, schools and corporations offer grants and scholarships to students that you typically don’t have to repay.
Grants are often based on financial need, while scholarships are usually merit-based. Outside of need and merit, you can find both scholarships and grants for members of underrepresented groups, members of the US Armed Forces, veterans and specific career paths.
Because it’s rare for grants or scholarships to cover your full tuition, they’re most often used in combination with other financial aid. Key federal grants include Pell Grants (up to $7,395 for the 2025-2026 award year), the Federal Supplemental Educational Opportunity Grant (FSEOG) and the TEACH Grant for students pursuing teaching careers.
Part-time job or side gigs
You likely can’t cover the cost of tuition with most part-time jobs. But you might be able to cover part of your housing, textbooks and pocket money. A job in your field can also give you a head start on your career.
Federal Work-Study is another option if you qualify through the FAFSA. It provides part-time employment that’s often related to your field of study. Don’t have time for a regular commitment? Take on side gigs when you have the time.
Personal loans
You can use a personal loan to pay for college, though you might not want to foot the entire bill with one. Personal loans are typically better for covering extra costs like flying back home for the summer, relocating for an internship and similar expenses that come with being in school.
You can typically borrow between $2,000 and $100,000 with rates that compare to private student loans. However, you often need good credit to qualify, cosigners aren’t always allowed, and repayments typically start immediately.
529 plans
A 529 education savings plan offers tax-advantaged savings for qualified education expenses. If your family has been saving in a 529, these funds can cover tuition, fees, books, room and board, and even up to $10,000 in student loan repayments. Earnings grow tax-free when used for qualified expenses.
Retirement accounts
Parents or students can withdraw from their IRA without the 10% early withdrawal penalty to pay for qualified higher education expenses (QHEE), which includes tuition, fees and other costs related to attending college. However, the withdrawn amount is still subject to income tax. Withdrawing too much can significantly reduce your retirement savings. Consult a tax expert before withdrawing from your retirement account early.
Refinancing student loans
Student loan refinancing means taking out a new loan to replace your current one. Refinancing can help you save money by reducing your interest rate, changing your repayment timeline or reworking the terms of your debt.
Generally, you need good credit and a steady income to qualify for a refinancing loan with low rates. But if you refinance a federal loan with a private lender, you lose federal benefits including income-driven repayment plans, loan forgiveness eligibility and deferment options. In most cases, only federal loans offer these protections, and you give them up permanently when you refinance with a private lender.
If you didn’t finish your program, you can refinance a student loan without a degree, but with limited options. Compare your needs against your eligibility before signing any contract.
The difference between student loan refinancing and consolidation
Student loan refinancing is when you take out a new private loan to pay off one or more student loans, potentially at a different rate. Student loan consolidation typically refers to a federal Direct Consolidation Loan, which combines all of your federal student loans into one with an interest rate that’s a weighted average of your previous rates, rounded up to the nearest one-eighth of a percent. Consolidating federal loans allows you to change your servicer and may open you up to additional repayment options.
When you refinance your federal loans with a private lender, you permanently give up several benefits including loan forgiveness for teachers and public servants (PSLF), deferment programs, forbearance options and income-driven repayment plans. While refinancing is possible, it’s not always the best idea.
Federal loans also generally come with some of the lowest interest rates out there, fixed by the federal government. That said, current federal rates for 2025-2026 (6.39% to 8.94%) are higher than the best private refinance rates available to borrowers with excellent credit. If you have strong credit and don’t need federal protections, refinancing could save you money.
Talk to your loan servicer to explore your options before turning to refinancing for federal loans.
Refinancing Parent PLUS Loans
Parent PLUS Loans don’t come with as many benefits as other federal student loans, so refinancing might help you save. You can also refinance a Parent PLUS Loan into your child’s name to help build their credit and release you from their student debt, improving your personal debt-to-income ratio.
How does refinancing a student loan affect my credit score?
Refinancing a student loan can improve your credit in the long run by adjusting your monthly repayments to something you’re more likely to afford. However, it may temporarily lower your score because most lenders conduct a hard credit inquiry during the application process.
A cosigner can’t refinance your student loan without your permission. If you’re the cosigner, you can request a cosigner release if you’re unhappy with the way the loan’s terms are affecting your personal finances.
What happens after I take out a student loan?
Unlike other types of debt, student loans come with several repayment options. Immediately after you take out your student loans, you might start making full repayments, interest-only repayments or none at all if you have a Direct Subsidized federal loan.
When your funds are disbursed
What happens after you take out your student loan depends on the type of student loan you have.
Federal student loans
Your school receives your student loan money, using it to pay for your tuition and fees. It then gives you the option of taking leftover funds for other education-related expenses or returning them to the government. Here’s what you can expect, depending on your loan type:
With a subsidized loan, you don’t have to make any payments while in school. The government covers your interest.
With an unsubsidized loan, interest starts accumulating immediately. You can make interest-only repayments while in school or let it accrue.
With PLUS Loans, you start immediate full repayments on your interest and principal (though you can request deferment while in school).
Once you graduate, leave school or drop below half-time enrollment, you’ll complete exit counseling to learn what’s involved in repaying your student loans.
Private student loans
Your school pays your tuition from your private student loan funds before forwarding any leftover money to you. Depending on your loan terms, you might need to repay your student loans immediately, make interest-only repayments or defer your loan until after you graduate.
After you graduate or drop under half-time studies
Federal student loans
Unless you have a PLUS Loan, you have a six-month grace period before your loan repayments are officially due. Your interest starts to accumulate if it hasn’t already. At this point, your loan servicer reaches out to set up your account and go over repayment plan options.
You also have the option of consolidating your federal student loans by applying for a Direct Consolidation Loan through StudentAid.gov. Consolidating combines all of your federal student loans into one under a new interest rate that’s a weighted average of your previous rates. You begin repaying your consolidated loan 60 days after it’s disbursed.
Private student loans
You might find yourself in one of these four scenarios, depending on the loan terms you chose when you signed up. Either you:
Won’t have to start making repayments until six months after you leave school
Start making full repayments right away
Start making interest-only repayments right away
Start making small flat payments right away
Six months after leaving school and beyond
Federal student loans
If you haven’t already begun repaying your loan, you start making repayments to your loan servicer based on your repayment plan. Setting up autopay could knock 0.25% off your interest rate.
Private student loans
You either start making repayments after a grace period or continue making repayments. Ask about discounts for autopay. Some lenders discount your rate by 0.25% to 0.50% if you sign up.
What’s a loan servicer?
Loan servicers are companies that manage your loan repayments on behalf of the lender. The federal government assigns loan servicers for all of its loans, and some private lenders use servicers as well.
You don’t get to choose your federal loan servicer, and they won’t always reach out proactively. If you’re not sure who your loan servicer is, log in to StudentAid.gov to find your servicer and loan details.
Student loan repayment plans
When you start making repayments, you might have a choice between several different repayment plans. These can include monthly repayments that stay the same throughout the life of your loan, or repayments that better fit an earning curve as you start your career.
Federal loans currently come with more flexible options, including several based on your income. However, for loans disbursed after July 1, 2026, new borrowers will only have two options: the Standard Repayment Plan and the Repayment Assistance Plan (RAP).
Private student loans typically come with fixed repayments over five to 20 years regardless of how much you earn.
Note on the SAVE plan: The SAVE (Saving on a Valuable Education) income-driven repayment plan, introduced in 2023, has been blocked by court rulings and the Department of Education is no longer enrolling new borrowers. If your loans were placed on pause due to the SAVE litigation, contact your servicer to explore alternative repayment plans. The Federal Student Aid Loan Simulator tool can help you compare costs across different plans.
Other repayment options
Life happens. You might find that you’re unable to make repayments on your loan, even if you’re on an income-based plan. Or maybe you want to let your cosigner off the hook to lower their overall debt load.
Some of the options you might come across include:
Forbearance. If you lose your income, are part of a military deployment or simply want to return to school, you might be able to pause your student loan repayments. How long and often you can go into forbearance depends on your loan and lender, but expect interest to continue adding up. For loans issued after July 2027, forbearance will be limited to nine months during any two-year period.
Deferment. Like forbearance, you can apply to pause your repayments for a legitimate reason. The key difference is that interest doesn’t accumulate on subsidized loans while you’re in deferment (it does on unsubsidized loans). Note: Economic hardship and unemployment deferments are being eliminated for new loans issued after July 2027.
Cosigner release. You can release your cosigner from most student loans after consistent on-time repayments for a specific time, usually a few years. After your cosigner is released, you’ll be fully responsible for your debt.
Forgiveness. Depending on your loan type or career, you might be eligible to have some or all of your loans canceled. Public Service Loan Forgiveness (PSLF) remains available for borrowers who make 120 qualifying payments while working for a qualifying employer. Income-driven repayment forgiveness is also available but may result in a tax bill starting in 2026.
Understanding interest capitalization
Both federal and private student loans can include interest capitalization, which adds accrued interest to your loan balance. The most common times for interest capitalization are at the start of repayment and when exiting deferment or forbearance. When unpaid interest capitalizes, you end up paying interest on a larger principal balance, increasing the total cost of your loan. Some private lenders also capitalize interest annually or quarterly.
Frequently asked questions
How do I transfer my student loans between schools? Federal student loans don’t transfer between schools, and most private student loans don’t either. Instead, you’ll need to take out a new student loan for the school you’re transferring to. Contact your new school’s financial aid office to begin the process, and file a new FAFSA if needed.
Is going to college worth taking out thousands of dollars in student loans?
It depends on your career and financial goals. On average, workers with a bachelor’s degree earn significantly more over their lifetime than those with only a high school diploma. However, the return on investment varies widely by major, school and career path. Consider your expected salary after graduation relative to the total amount you’d need to borrow.
What happened to the SAVE repayment plan?
The SAVE plan, introduced in 2023, was blocked by federal court rulings. The Department of Education is no longer enrolling new borrowers in SAVE and is transitioning existing SAVE borrowers into alternative repayment plans. If your payments were paused due to SAVE litigation, contact your loan servicer to set up an alternative plan.
How do I find my loan servicer?
Log in to StudentAid.gov with your FSA ID to see your federal loan details, including your servicer’s name and contact information. For private loans, check your original loan documents or contact your lender directly.
Anna Serio was a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY.
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