Paying for College in 2025? Here’s the Best Loan Option for Your Family

As college costs continue to rise, many families are weighing whether federal or private student loans are the best option for the 2025-2026 school year.

Federal Student Loans: Safer, Flexible, and Forgivable

For most students, federal student loans are the first and often best choice. Backed by the U.S. government, they come with:

• Fixed interest rates: For 2025-2026, undergrad rates are 6.39%, grad rates are 7.94%, and PLUS loans are at 8.94%.

• Income-driven repayment plans: Payments adjust to your earnings.

• Deferment and forbearance options: Payment pauses during hardship.

• Forgiveness programs: Such as Public Service Loan Forgiveness (PSLF).

These features can protect you if you face financial challenges after graduation or plan to enter public service fields.

Private Student Loans: Lower Rates (Sometimes), But Less Protection

Private lenders, including banks and online platforms, can offer rates starting around 3.5% for borrowers with strong credit or a cosigner.

Pros:

• May cover the full cost of attendance.

• Potentially lower rates if you or your cosigner have excellent credit.

Cons:

• Fewer repayment options and safety nets.

• No forgiveness programs.

• Fixed or variable rates can change over time.

Private loans can be helpful if you need to cover gaps after using federal aid but come with fewer protections.

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What’s the Best Strategy for Fall 2025?

Experts recommend:

• Use federal loans first for their fixed rates and built-in protections.

• Consider private loans only if you need to cover additional costs.

• Compare lenders carefully, looking at rates, fees, and repayment terms.

• Think about your future finances, including potential refinancing, but note refinancing federal loans means giving up federal protections.