The best student loan isn’t a single lender. For most undergraduates it’s the federal loan the school already offered, and private lenders only matter for the gap that’s left. That gap got bigger this year. New rules that took effect July 1 eliminated Grad PLUS loans for new borrowers, capped Parent PLUS at $20,000 a year, and replaced most income-driven plans with a single new one called RAP.
This guide sorts the options by situation rather than by advertising budget. It covers today’s federal rates, how five well-known private lenders and credit unions compare, and what the new caps mean for graduate students and parents. You’ll find the numbers that decide whether a private loan actually saves money, and the issues that matter most to parents and grandparents: cosigning, Parent PLUS, and the reported plan to restart collections that can reach Social Security checks.
Nine Straight Answers Before You Borrow
The questions families ask most, answered in a sentence or two. The detail is further down.
For most undergraduates, a federal Direct Subsidized or Unsubsidized Loan. It carries a fixed 6.52%, needs no credit check or cosigner, and has protections no private lender matches.
6.52% for undergraduates, 8.07% for graduate unsubsidized loans and 9.07% for PLUS loans, fixed for the life of loans first disbursed July 1 through June 30.
It depends on the borrower. Advertised fixed ranges from Earnest, College Ave, Ascent, Sallie Mae and SoFi all start near 2% to 3% and top out near 16% to 18%. Your credit and cosigner decide where you land.
Mainly when you or a cosigner qualify for a rate meaningfully below 6.52%, and you’re sure you won’t need income-based repayment or Public Service Loan Forgiveness.
Not new borrowers. Grad PLUS ended July 1 for students without a prior loan in the same program. Federal unsubsidized loans now stop at $20,500 a year ($100,000 total) for graduate degrees and $50,000 a year ($200,000 total) for professional degrees.
New Parent PLUS loans are capped at $20,000 a year and $65,000 per student, cost 9.07% plus a 4.228% fee, and can’t be repaid under the new RAP income-based plan.
Not for federal undergraduate loans. Most undergraduates need one for private loans; a few lenders offer loans without one based on school, major or grades.
Yes, up to 15% of the benefit, as long as at least $750 a month is left. Involuntary collections have been paused since January, but reports this week say Education and Treasury are preparing to restart them, possibly after the November midterms.
Now. The form for the next school year is already open, the earliest launch ever, and some state and college aid is first-come, first-served.
Why Federal Loans Come First
Federal student loan rates are set by law each spring from the May 10-year Treasury auction, then fixed for life. Every borrower in the same category gets the same rate, whatever their credit. That alone makes them the best starting point for most students.
| Federal loan | Who gets it | Fixed rate | Fee | Key detail |
|---|---|---|---|---|
| Direct Subsidized | Undergraduates with financial need | 6.52% | ~1.06% | No interest while in school at least half-time |
| Direct Unsubsidized (undergrad) | Any undergraduate who files the FAFSA | 6.52% | ~1.06% | Interest builds during school |
| Direct Unsubsidized (graduate) | Graduate and professional students | 8.07% | ~1.06% | New annual and lifetime caps |
| Parent PLUS | Parents of dependent undergrads | 9.07% | 4.228% | Credit check for adverse history; new caps |
| Grad PLUS | Legacy borrowers only | 9.07% | 4.228% | Closed to new borrowers since July 1 |
The rate is only part of the case. Federal loans can be repaid on an income-based plan, qualify for Public Service Loan Forgiveness after 10 years of qualifying payments for borrowers who work in government or for eligible nonprofits, offer deferment and forbearance under set rules, and are discharged if the borrower dies or becomes totally and permanently disabled. Parent PLUS loans are also discharged if the student they paid for dies. Private lenders offer some of these on their own terms, but none are guaranteed by law.
Dependent undergraduates can borrow $5,500 in the first year, $6,500 in the second and $7,500 after that, up to $31,000 total, of which no more than $23,000 can be subsidized. Those limits didn’t change on July 1. For many families, that leaves a gap once tuition, housing and fees are added up, and the gap is where the hard choices start.
Before you borrow a dollar: money families leave on the table
The cheapest student loan is the one you don’t take. Three sources of free or nearly free money are routinely missed. The first is the FAFSA itself: it decides Pell Grant eligibility and feeds most state grants, and many states and colleges hand out aid until the money runs out. Filing in the first weeks after it opens can matter more than any rate comparison. The second is the financial aid appeal. If a parent lost a job, a family member has large medical bills, or income dropped after the tax year the FAFSA uses, the aid office can adjust the numbers. A short, documented letter is often enough to change the offer.
The third is the net price, not the sticker price. Every college publishes a net price calculator, and the gap between two schools’ real costs can be larger than the gap between any two lenders. Before borrowing to close a $15,000 gap at one school, check whether another school would have closed it with grants. We found that families who compare net prices first often end up borrowing only federal loans, and never need the private loan comparison at all.
Best Private Student Loans by Situation
Private lenders compete on rate, but their real differences show up in who they lend to and what happens when life goes sideways. We compared published rates, terms, cosigner rules and hardship options, and sorted them by the borrower each one fits best.
| Lender | Advertised fixed APR | Best fit | Why it stands out | Check before signing |
|---|---|---|---|---|
| Earnest | ~1.99%–16.24%* | Borrowers who want hardship flexibility | Known for borrower protections | Low end needs autopay and loyalty discounts |
| College Ave | ~2.05%–17.99% | Families who want to pick the repayment term | Wide choice of terms; multiple loan types | High top-end rate |
| Ascent | ~2.08%–17.50% | Students without a cosigner | Offers loans that don’t require one | No-cosigner loans cost more |
| Sallie Mae | ~2.19%–17.49% | Graduate and part-time students | Largest private student lender | Compare its rate offers against at least two others |
| SoFi | ~2.99%–15.99% | Strong-credit borrowers | Member benefits; lower top end | Higher starting rate |
| Credit unions | Varies | Members with local ties | Often competitive for parents | Membership rules, smaller limits |
*Ranges are advertised undergraduate fixed APRs seen in mid-October, generally including autopay discounts. Rates change often; your offer depends on credit, cosigner, school and term.
We found that the advertised low rates tell you almost nothing about what a typical family will pay. Every range above starts around 2%, because that’s the price for a borrower or cosigner with excellent credit and a short repayment term. The top of the range, 16% to 18%, is what thin or bruised credit gets. A student with no credit history and no cosigner will usually be quoted near the top, or turned down. That’s why the only useful comparison is your own quotes, side by side.
Most private lenders now offer prequalification with a soft credit check that doesn’t affect your score. Get three on the same day with the same term and loan amount, then compare the APR, not the interest rate, because APR folds in fees. Ask each lender four things in writing: how many on-time payments it takes to release a cosigner; what forbearance is available and for how long; whether the loan is discharged if the student dies or is disabled; and whether the rate is fixed or variable. Variable rates often start lower but can climb, and short-term rates have been rising.
How to read a private loan offer
Private offers bury the important parts. Start with the APR, which includes fees, rather than the interest rate. Then check the repayment option you picked. Most lenders let you choose between making full payments in school, paying a flat amount such as $25 a month, paying interest only, or deferring everything until after graduation. Deferring feels easiest, but unpaid interest is usually added to the balance when repayment begins, so a $30,000 loan can quietly become $34,000 or more before the first full payment.
Next, find the cosigner release terms: the number of consecutive on-time payments required, any income or credit test the student must pass, and whether one late payment resets the count. Then read the hardship section for the length of forbearance allowed over the life of the loan and whether interest keeps building during it. Finally, check what happens if the student dies or becomes permanently disabled. Several large lenders discharge the debt in those cases, but it’s a contract term, not a legal requirement, and it’s the single clause a cosigning parent or grandparent most needs to see.
Private refinance rates can look tempting after graduation, especially for borrowers with strong incomes. But once federal loans are refinanced with a private lender, they lose income-based repayment, Public Service Loan Forgiveness eligibility and federal discharge protections for good. There’s no way back. Refinance only loans you’re confident you can repay on a fixed schedule through a job loss or illness.
Federal or Private? Run Your Own Numbers
Enter how much you need in hand and a private quote. The tool grosses up the federal fee, compares monthly payments and shows total cost on a standard schedule.
Assumes a fixed private rate with no fees and level payments over the same term.
When we ran these numbers, two results stood out. First, a federal undergraduate loan beat every private loan priced at about 6% or more once fees were counted, and it still came with income-based repayment and death and disability discharge. Second, Parent PLUS was the expensive outlier among federal loans. The 4.228% fee means a parent borrows about $31,300 to put $30,000 toward tuition, and repays roughly $47,800. A parent with excellent credit can often beat that with a private parent loan. A parent whose plan depends on income-based relief can’t, and that’s the trade-off to weigh honestly.
The New Rules That Changed Student Borrowing
The 2025 budget law rewrote federal student lending, and most of it took effect July 1. If you’re borrowing for the first time, or adding a new loan to old ones, these rules apply to you.
| Area | Before July 1 | Now, for new borrowers | What it means |
|---|---|---|---|
| Grad PLUS | Up to cost of attendance | Eliminated | Private loans fill gaps above the caps |
| Graduate unsubsidized | $20,500/yr, $138,500 total | $20,500/yr, $100,000 total | Two-year master’s mostly covered; longer ones may not be |
| Professional unsubsidized | $20,500/yr plus PLUS | $50,000/yr, $200,000 total | Medical and law students face gaps at expensive schools |
| Parent PLUS | Up to cost of attendance | $20,000/yr, $65,000 per student | Families split funding or cut costs |
| Lifetime federal limit | None across all loans | $257,500 | Applies across undergraduate and graduate borrowing |
| Repayment plans | Several income-driven plans | Tiered Standard or RAP | Fewer choices; 30-year RAP forgiveness |
How the Repayment Assistance Plan works
RAP sets your payment at 1% to 10% of adjusted gross income, rising in $10,000 income steps, then subtracts $50 a month for each dependent on your tax return. The minimum is $10 a month, and any balance left after 30 years of qualifying payments is forgiven. Two features are genuinely new. If an on-time payment doesn’t cover the month’s interest, the unpaid interest is waived rather than added to the balance. And if your payment cuts the principal by less than $50, the government adds a matching amount so principal still falls by at least $50 that month.
The alternative for new borrowers is a Tiered Standard plan with fixed payments. The term depends on how much you owe: 10 years under $25,000, 15 years from $25,000 to $49,999, 20 years from $50,000 to $99,999, and 25 years at $100,000 or more. Public Service Loan Forgiveness still forgives remaining federal balances after 10 years of qualifying payments while working for an eligible employer.
We found the $10,000 steps to be the part of RAP most worth understanding before choosing it. At $55,000 of AGI the rate is 5%, about $229 a month. At $60,001 it’s 6%, about $300. A raise, a side job or a spouse’s income on a joint return can push you over a line. Borrowers with loans from before July 1 who take no new loans can still choose older plans such as Income-Based Repayment, which forgives after 20 or 25 years. Run both in the Loan Simulator on StudentAid.gov before switching, because the shorter forgiveness clock can be worth more than RAP’s interest waiver.
Which Situation Sounds Like Yours?
“Best student loan” means something different for an 18-year-old freshman, a parent at 55 and a grandparent on Social Security. Here’s how the answer changes.
Parent PLUS approval doesn’t depend on a credit score, only on the absence of adverse credit history such as a recent bankruptcy or serious delinquency. It’s discharged if you or the student dies. Its costs are 9.07% plus a 4.228% fee, and new Parent PLUS loans can’t use RAP. A private parent loan can be cheaper for strong credit but usually lacks federal protections.
A third option is to step back: the student’s own federal loans at 6.52% come first, and a family contribution plan or a lower-cost school can shrink what’s needed. If PLUS is denied, the student becomes eligible for additional federal unsubsidized loans, which is often a better deal than the PLUS loan would have been.
Cosigning a private loan makes you fully responsible for it. Missed payments land on your credit, and the debt can follow you into retirement. If you cosign, ask for a lender with a clear cosigner-release rule, get online access to the account, and check whether the loan is forgiven if the student dies; private policies vary.
Retirees with their own federal student debt, including Parent PLUS taken out years ago, face a specific risk. Defaulted federal loans can be collected from Social Security retirement or disability benefits, up to 15% as long as at least $750 a month remains. Supplemental Security Income can’t be taken. If you’re behind, contact your servicer before collections restart; income-based options and rehabilitation can stop the clock.
Without Grad PLUS, most master’s students can borrow $20,500 a year in federal loans. A two-year program at a reasonably priced school often fits; a three-year program or an expensive city may not. Check what your program costs against the new caps before accepting an offer, and ask the school about assistantships and tuition remission, which matter more than ever. Private graduate loans fill the gap, with rates tied to your credit and, increasingly, to your field.
The new $50,000 annual and $200,000 lifetime caps can fall well short of the full cost at many medical and law schools. Students already enrolled with a prior loan may keep older limits for a limited period; confirm your status with the financial aid office in writing. If you’re planning a public-service career, keep as much as possible federal, because PSLF only forgives federal loans.
Federal undergraduate loans don’t check credit, so max those first. For private loans, a few lenders offer loans without a cosigner based on factors like school, major, year in school and grades. Expect higher rates. If you can wait a year, building a little credit with a secured card, or adding a cosigner later, can lower the rate on future loans.
Federal loans require at least half-time enrollment at an eligible school. Community college is often the cheapest path to a degree, and many students can avoid borrowing entirely with Pell Grants and state aid. For trade and career programs, check the program’s completion and job-placement rates before borrowing anything. Fewer private lenders serve part-time students, so confirm eligibility early.
Most international students aren’t eligible for federal aid, and most private lenders require a cosigner who is a U.S. citizen or permanent resident. A small number of lenders specialize in international students without a U.S. cosigner, usually at higher rates and only at certain schools. Ask your school’s international office which lenders its students actually use.
Teachers, nurses at nonprofit hospitals, government workers and many others can have federal balances forgiven after 10 years of qualifying payments through PSLF. That makes federal loans worth far more than their rate suggests. Every dollar borrowed privately is a dollar PSLF can’t touch, so borrow private only for what federal limits won’t cover.
Independent undergraduates can borrow more in federal loans than dependent students: $9,500, $10,500 and then $12,500 a year, up to $57,500 total. Your income still counts on the FAFSA, but employer tuition assistance doesn’t have to be repaid, and you can receive up to $5,250 a year from an employer tax-free. Ask HR before borrowing.
Use education benefits before any loan. The GI Bill and military tuition assistance can cover most or all of tuition at many schools. For loans you already have, the Servicemembers Civil Relief Act caps interest at 6% on federal and private student loans taken out before active duty, for the period of service. You’ll need to send your lender a copy of your orders. Federal loans also offer military service deferment, and some service members qualify for interest-free periods while serving in areas of hostilities.
The riskiest student debt isn’t the largest. It’s the debt held by students who leave without a credential and without the income bump that comes with one. If a student is unsure about college, start at a lower-cost school, borrow only federal loans, and borrow one year at a time rather than accepting the full amount offered. Private loans and cosigned loans are especially hard to manage without the degree that was supposed to repay them, and they can’t use federal income-based plans.
Default, Collections and What’s Happening Now
The best loan can turn into the worst debt if it goes unpaid. Federal student loans don’t need a court order to collect, and that power may be used again soon.
The Education Department paused administrative wage garnishment and Treasury offsets in January. This week, several outlets reported that Education and Treasury are preparing to hire private collectors and restart involuntary collections on the roughly 10 million borrowers in default, possibly after the November midterms or in early next year. Nothing official sets a restart date yet. But when collections resume, the government can take up to 15% of disposable pay, seize federal tax refunds and offset Social Security benefits, after written notice.
| Problem | Likely cause | Do this first | Then |
|---|---|---|---|
| Behind on federal payments | Payment too high for income | Ask your servicer about RAP or IBR | Short forbearance only as a bridge |
| Already in default | 270+ days without payment | Call the Default Resolution Group | Rehabilitation or consolidation |
| Received a garnishment notice | Collections starting | Request a hearing within the notice window | Set up rehabilitation payments |
| Private loan denied | Credit or income | Ask for the reasons in writing | Add a cosigner or try a credit union |
| Cosigner release refused | Missed payments or income rules | Ask for the lender’s exact criteria | Refinance in the student’s name |
| Servicer errors or lost paperwork | Processing problem | Keep records and put requests in writing | FSA Ombudsman or CFPB complaint |
A federal loan generally goes into default after about 270 days without a required payment. Two routes back are worth knowing. Loan rehabilitation requires nine voluntary, on-time monthly payments within 10 consecutive months, at an amount based on income. It removes the default notation from your credit report, though not the late payments before it, and there are limits on how often it can be used. Consolidation into a new Direct Consolidation Loan is faster, but it leaves the default record in place. Either way, the first step is the same: call before the collection notice arrives.
Our Verdict
Federal Direct Subsidized, then Unsubsidized, loans at 6.52%. No credit check, income-based repayment, PSLF eligibility and death and disability discharge make them the best value even when a private lender advertises a lower starting rate.
A private loan from the lender that gives you the lowest APR on a real prequalification quote, with clear cosigner release and hardship options. Compare at least three on the same day. Parents with excellent credit should price a private parent loan against Parent PLUS’s 9.07% plus fee.
The total you’d borrow is more than the student’s expected first-year salary, a parent or grandparent would be repaying it from retirement income, or the plan depends on refinancing federal loans into private ones later.
Questions people still ask
Which student loan has the lowest interest rate?
For a borrower or cosigner with excellent credit, some private lenders advertise fixed APRs near 2%. For everyone else, the federal undergraduate rate of 6.52% is usually the lowest realistic option, and it’s the same for every borrower.
Should I choose a fixed or variable rate?
Fixed for most borrowers. Variable rates can start lower but rise with short-term rates, and you can’t predict them over a 10-year loan. Federal loans are always fixed.
Can I pay off a student loan early?
Yes. Federal and private student loans can be prepaid without penalty. Paying interest while in school keeps the balance from growing on unsubsidized and private loans.
Does applying hurt my credit?
Prequalification uses a soft check that doesn’t. A full application is a hard inquiry; doing all your rate shopping within a short window limits the effect.
How much should I borrow?
A common rule is to keep total student debt below the expected starting salary in your field. Lower is better, especially for programs with uncertain job outcomes.
What credit score do I need for a private student loan?
Many lenders look for scores in the mid-600s or higher, and the lowest advertised rates typically go to scores well above 700 with steady income. Most college students don’t have that yet, which is why a cosigner’s credit usually sets the rate. Federal undergraduate loans don’t check credit at all.
Does interest build while I’m in school?
On federal subsidized loans, no, as long as you’re enrolled at least half-time. On unsubsidized and private loans, yes, and unpaid interest is typically added to the balance when repayment starts. Paying even the interest during school prevents that.
Can I switch from a private loan to a federal one later?
No. Private loans can’t be moved into the federal program. You can refinance private loans with another private lender for a better rate, but federal protections are available only on loans made by the federal government.
Is a 529 plan better than a student loan?
Savings always beat borrowing, because there’s no interest to repay. Even modest 529 contributions in the years before college reduce what needs to be borrowed, and many states offer a tax deduction for them.
Are Parent PLUS loans forgiven if the parent dies?
Yes. Parent PLUS loans are discharged if the parent borrower dies, and also if the student on whose behalf they were borrowed dies.
How this page was checked. Federal rates come from the Department of Education’s announcement for loans first disbursed July 1 through June 30. Loan limits, repayment plans and RAP rules reflect the One Big Beautiful Bill Act as implemented by Federal Student Aid. Private lender ranges are advertised fixed APRs we saw in mid-October and change frequently. Collection rules and the current pause reflect Federal Student Aid guidance and reporting through October 22. Payment examples and charts are our own calculations. Lender names are listed for comparison only; your loan disclosures are the final word.
This page is independent and is not affiliated with any lender or with the Department of Education. It is general information, not legal, tax or financial advice.
Key sources: Federal Student Aid · U.S. Department of Education · Consumer Financial Protection Bureau · National Consumer Law Center