Student loans: how much you can borrow and what it costs

The rules for borrowing for college changed on July 1, 2026, and a lot of the advice you’ll find online was written before that.

Until that date, parents could borrow federal PLUS loans up to the full cost of college. Now the limit is $20,000 a year and $65,000 per student, graduate PLUS loans are closed to new borrowers, and every new federal student loan is repaid under one of two plans. What hasn’t changed is where most of the cost of student loans comes from: the order you borrow in, and how fast you pay it back.

This guide is for students and parents working out how to pay for college. By the end you’ll know which student loans to take first, what they cost at today’s federal rates, how much each of you can borrow under the new limits, and how to avoid the default repayment setting that can add thousands to the bill.

The aid offer lists loans next to grants. Only the grants are free.

What is a student loan?

A student loan is money borrowed to pay for college costs that you repay with interest, usually starting after you leave school. There are two kinds, and they work very differently.

• Federal student loans come from the U.S. Department of Education. The rate is fixed and set by law, the same for everyone, and most don’t need a credit check. You apply through the FAFSA, the Free Application for Federal Student Aid.
• Private student loans come from banks, credit unions and online lenders. Each lender sets its own rate based on your credit or a cosigner’s, and the loan comes with fewer protections if you struggle to repay.

For almost every student, federal loans come first. Start with the FAFSA, even if you think you won’t qualify for aid, because it’s the only way to get federal loans at all.

Federal vs. private student loans, side by side

Federal student loans win on protections and access. Private student loans can win on rate for borrowers with strong credit or a strong cosigner.

Federal rates and fees are from Federal Student Aid for loans first disbursed July 1, 2026 through June 30, 2027. The same fees apply to loans first disbursed October 1, 2026 through September 30, 2027.

The rule of thumb: use every federal dollar you’re eligible for before you look at private loans. Then compare a private loan against a Parent PLUS loan on total cost, not just the rate.

Student loan interest rates and fees right now

Federal student loan interest rates for loans first disbursed between July 1, 2026 and June 30, 2027 are 6.52% for undergraduates, 8.07% for graduate and professional students, and 9.07% for PLUS loans. The rate is fixed for the life of each loan.

The rate comes from a formula. Each May, the Treasury auctions 10-year notes, and federal student loan rates for the next school year are that auction’s high yield plus a fixed margin: 2.05 points for undergraduates, 3.60 for graduate loans and 4.60 for PLUS loans. The May 12, 2026 auction came in at 4.468%. The law caps the rates at 8.25%, 9.50% and 10.50%.

“Subsidized” means the government pays the interest while you’re in school at least half-time, during the six-month grace period after you leave, and during deferment. On unsubsidized loans, interest starts building the day the money goes out. The fee also comes off the top: borrow $5,500 and about $58 is kept as the fee, but you repay the full $5,500.

Private student loan rates aren’t set by law. Each lender prices your loan based on credit history, income and the cosigner, and you’ll only see your real rate after applying. Borrowers with excellent credit can sometimes beat the federal rate; borrowers with thin credit and no cosigner often can’t get a private loan at all.

Before you accept any loan, write down three numbers: the rate, the fee and the monthly payment on the plan you expect to use. That’s your real price.

How much you can borrow under the new limits

Undergraduate limits didn’t change on July 1, 2026, but graduate and parent borrowing did. There’s also a new lifetime cap of $257,500 on federal student loans, not counting Parent PLUS loans.

Undergraduates

*Independent-student limits also apply to dependent students whose parents can’t get a Parent PLUS loan. Since July 1, 2026, students enrolled less than full-time get a reduced amount based on their enrollment, and you must be enrolled at least half-time to borrow.

Graduate and professional students

Graduate students can borrow up to $20,500 a year and $100,000 in total in Direct Unsubsidized Loans. Students in professional programs such as law and medicine can borrow up to $50,000 a year and $200,000 in total. Grad PLUS loans, which used to cover the rest of the cost of attendance, are closed to new borrowers.

Parents

Parents can borrow up to $20,000 a year and $65,000 in total per dependent student in Parent PLUS loans. That cap covers all parents combined, so two parents can’t each borrow $20,000 for the same student in the same year.

If you already borrowed before July 1, 2026

Students and parents who had a federal loan disbursed for their current program before July 1, 2026 can keep borrowing under the old limits for up to three more academic years or until the program ends, whichever comes first. Check with your school’s financial aid office before you assume you qualify, because the program and enrollment rules are strict.

If the new limits leave a gap, your options are cheaper schools, more grant and scholarship money, work, or a private student loan. Figure out the gap per year before you pick one.

How to get a student loan, step by step

You get a federal student loan by filing the FAFSA and accepting the loans in your school’s aid offer. The whole process is free, and it goes in this order:

1. Create your StudentAid.gov accounts. The student and each parent who has to provide information need their own account. Set these up a few days before you file.
2. File the FAFSA. The 2027-28 FAFSA, for the school year that starts in fall 2027, is open now at StudentAid.gov. The federal deadline isn’t until June 30, 2028, but state and college deadlines come much earlier, and some state grants run out. File in the first few weeks.
3. Read the aid offer line by line. Sort everything into two columns: money you don’t repay (grants, scholarships) and money you do (loans, work-study earnings). Colleges sometimes list a Parent PLUS loan as if it were aid. It’s a loan in your parent’s name.
4. Accept free money first. Then accept subsidized loans, then unsubsidized loans. You can accept less than the amount offered.
5. Sign the Master Promissory Note and finish entrance counseling. First-time borrowers do both online. It takes about 30 minutes.
6. Fill any remaining gap last. If you still need money, compare a Parent PLUS loan with a private student loan on total cost.
7. Repeat every year. You file the FAFSA and accept loans one school year at a time, so borrow only what that year needs.

Put the FAFSA on your calendar for late September each year, when the next form usually opens. Filing early is the single easiest way to get more free money before anyone borrows a dollar.

The order to borrow in

The cheapest way to pay for college is to use the cheapest money first and stop as soon as the bill is covered. From cheapest to most expensive:

1. Grants, scholarships and work-study. Free, or earned.
2. Direct Subsidized Loans. No interest while you’re in school at least half-time.
3. Direct Unsubsidized Loans. Same rate, but interest builds from day one.
4. A Parent PLUS loan or a private student loan. PLUS loans cost 9.07% plus a 4.228% fee, but they don’t depend on a credit score. A private loan can cost less for a family with strong credit and gives up federal protections. Compare both.

Stay off credit cards for tuition. They cost more than any loan on this list and don’t wait until you graduate to start charging interest.

In most families, the student should take every federal loan available to them before a parent borrows anything. Student loans cost less, carry more protections, and sit with the person whose earnings the degree is supposed to raise. A common rule of thumb is to keep total student debt below what you expect to earn in your first year after graduating. Look up typical starting pay for your major and check your total against it.

A $27,000 degree: what the default repayment plan costs

The default federal repayment plan often costs you more than the rate does. Say you’re a dependent student who borrows the federal maximum for four years: $5,500, $6,500, $7,500 and $7,500. That’s $27,000. If you don’t choose a plan when repayment starts, you’re placed on the Tiered Standard plan, which sets your term by your balance. A balance between $25,000 and $50,000 gets 15 years.

On the student’s $27,000, the default plan’s payment is about $71 a month lower, and it costs about $5,600 more in interest. On a parent’s $65,000, the default payment is about $238 lower, and it costs about $42,000 more.

Federal student loans have no prepayment penalty. So you can stay on the default plan for its safety net and still pay the 10-year amount every month. If money gets tight, drop back to the required payment without asking anyone.

Before your first payment is due, look up your balance at StudentAid.gov, run the 10-year payment in our loan calculator, and set up autopay for that amount if it fits your budget.

Illustrative example. Assumes one fixed rate for the whole balance and ignores the upfront fee and interest that builds up on unsubsidized loans while you’re in school. Loans taken in different years can carry different rates. This is not a quote or an offer.

Repaying federal student loans: RAP vs. the Tiered Standard plan

Anyone who takes out a new federal student loan on or after July 1, 2026 repays it under one of two plans: the Repayment Assistance Plan (RAP), which bases payments on income, or the Tiered Standard plan, which sets a fixed payment by balance.

Under RAP, the percentage goes up one point for every $10,000 of income: 1% for adjusted gross income between $10,000 and $20,000, up to 10% above $100,000. A single borrower with an adjusted gross income of $45,000 pays 4%, which is $1,800 a year or $150 a month. With one dependent, it’s $100 a month.

RAP usually wins if your income starts low, you work in public service, or your balance is large compared with your pay. Tiered Standard, or paying ahead of it, usually wins if your income is solid and you want the loan gone at the lowest total cost. Under current law, balances forgiven under income-driven plans count as taxable income again starting in 2026, while Public Service Loan Forgiveness stays tax-free.

If you borrowed before July 1, 2026

Loans you took out before July 1, 2026 can stay on an older plan for now. The SAVE plan has ended: borrowers who were on it got notices starting July 1, 2026 and have to choose a new plan. PAYE and ICR are being phased out, with July 1, 2028 as the deadline to move, while Income-Based Repayment stays open for older loans. You can also opt into RAP. But taking out a new federal loan or consolidating after July 1, 2026 limits you to RAP and Tiered Standard, so check the plan rules at StudentAid.gov before you borrow again or consolidate.

Log in to StudentAid.gov and use the Loan Simulator to compare your actual payment under each plan. It takes about 15 minutes and uses your real loans.

Parent PLUS loans: what changed for parents

A Parent PLUS loan is a federal loan that a parent takes out for a dependent undergraduate, and the parent is the one who owes it. For loans made on or after July 1, 2026, three things changed.

• A cap. $20,000 a year and $65,000 in total per student. Before, parents could borrow up to the full cost of attendance.
• One repayment plan. New Parent PLUS loans can only be repaid on the Tiered Standard plan. There’s no income-based option and no path to Public Service Loan Forgiveness.
• Same price. The rate is 9.07% with a 4.228% upfront fee, tied with Grad PLUS as the most expensive federal loan. Borrow $20,000 and about $846 goes to the fee.

The credit check hasn’t changed. Parent PLUS looks for adverse credit history, such as a recent default, foreclosure or bankruptcy, rather than a minimum score. A parent who’s turned down has two options: borrow anyway with an endorser, which is like a cosigner, or skip the PLUS loan, in which case the student can borrow up to the higher independent-student limits.

Parents, look at your own retirement timeline before you sign. A $65,000 PLUS balance on the default 20-year plan runs about $588 a month. If that payment would still be running when you plan to stop working, borrow less or ask your student to carry more of the cost in their own federal loans.

Private student loans: when they make sense

A private student loan makes sense when you’ve used all your federal student loans and still have a gap, especially graduate students under the new $20,500 annual limit and families who hit the Parent PLUS cap.

Private loans can also make sense instead of a Parent PLUS loan for a family with excellent credit, because a private lender may offer a lower rate with no upfront fee. The trade-off: no RAP, no Public Service Loan Forgiveness, and payment relief only if the lender chooses to offer it.

What to ask a private lender

• What’s the APR, including every fee, not just the interest rate?
• Is the rate fixed or variable? If variable, what’s the maximum it can reach?
• Do I have to make payments while I’m in school, or can I defer them?
• Can the cosigner be released, and after how many on-time payments?
• What happens if I lose my job? How long can I pause payments, and does interest keep building?
• Is the loan discharged if the student dies or becomes permanently disabled, and does that also cover the cosigner?

Apply with two or three lenders within the same two weeks. Credit scoring models generally treat several student loan applications in a short window as one inquiry, so shopping around costs you almost nothing.

Student loan forgiveness: what’s still real

There’s no broad student loan cancellation in effect. Forgiveness still exists through specific programs, and each has strict rules.

• Public Service Loan Forgiveness (PSLF). Your remaining federal Direct Loan balance is forgiven after 120 qualifying monthly payments while you work full-time for a government agency or a qualifying nonprofit. RAP payments count; Tiered Standard payments don’t. PSLF forgiveness isn’t taxed.
• Income-driven forgiveness. Whatever’s left after 30 years of payments on RAP, or 20 to 25 years on Income-Based Repayment for older loans, is forgiven. Under current law that amount counts as taxable income.
• Teacher Loan Forgiveness. Up to $17,500 after five consecutive years teaching full-time at a qualifying low-income school, depending on the subject.
• Discharges. Federal loans can be discharged for total and permanent disability, death, some school closures, and when a school misled you (borrower defense).

If you plan a career in public service, choose RAP when repayment starts and submit the PSLF employer form every year so your count stays accurate.

Refinancing and consolidating student loans

Refinancing replaces your student loans with a new private loan, ideally at a lower rate. Consolidating combines federal loans into one Direct Consolidation Loan with the same average rate. They sound alike, but they do different things.

• Refinancing can lower your rate if your credit and income have improved. Refinance federal loans and they become private: you lose RAP, PSLF, federal forbearance and discharge protections for good. It’s worth a look for private loans at a high rate, and for high earners with stable jobs and graduate loans at 8% or more.
• Consolidation doesn’t lower your rate. The new rate is the weighted average of your loans, rounded up to the nearest eighth of a percent. It can simplify billing or make older federal loans eligible for certain plans. Consolidating after July 1, 2026 puts the new loan on the RAP and Tiered Standard rules.

Before you refinance federal loans, ask one question: would I be in trouble if my income dropped by half for a year? If yes, keep the federal safety net.

What happens if you can’t pay

A federal student loan goes into default after 270 days without a payment, and the consequences are serious. The government can take part of your wages without going to court, keep your tax refund, and report the default to the credit bureaus. You also lose access to more federal aid until you fix it.

The Education Department paused these involuntary collections in January 2026 while the new repayment plans launched. It said they will resume but hadn’t announced a restart date as of September 2026. Don’t plan around the pause.

If you’re struggling, act before you miss payments:

1. Switch to RAP. On a low income the payment can be as little as $10 a month, and it counts as on time. (New Parent PLUS loans can’t use RAP; parents should call their servicer about deferment or forbearance.)
2. Ask your servicer about deferment or forbearance. Useful for a short, specific setback, though interest usually keeps building.
3. If you’re already in default, ask about loan rehabilitation, which takes nine on-time monthly payments within 10 months, or consolidation to get back into good standing.

Your servicer is the company that sends your bill. Its name and phone number are on your StudentAid.gov dashboard. Call it the same week you see trouble coming.

Student loan scams and red flags

Every federal student loan program, including RAP, PSLF, consolidation and rehabilitation, is free through StudentAid.gov or your servicer. Anyone charging you for them is selling something you can get for nothing.

Walk away from any company that:

• charges an upfront or monthly fee to “enroll you in forgiveness” or lower your payment
• asks for your StudentAid.gov username and password
• promises forgiveness or cancellation that “expires soon” or uses a politician’s name to sell it
• tells you to stop talking to your servicer or send payments to them instead
• offers a private “student loan” with guaranteed approval if you pay a fee first

How student loans affect your credit score

Student loans are reported to the credit bureaus, so they can build your credit or damage it. On-time payments build a payment history, which is the biggest single factor in most credit scores.

• Late payments on federal loans are usually reported once you’re 90 days behind. One report can lower your score for years.
• Default adds a serious negative mark on top of the late payments.
• Private loan applications trigger a hard inquiry. Several applications in a short window generally count as one.
• Cosigning puts the whole loan on the cosigner’s credit report too, and every late payment hits both of you.

Set up autopay the day your first bill arrives. Our guide to improving your credit covers what else moves your score.

Can you use a personal loan for college?

Usually not for tuition, and usually not a good idea. Many personal loan lenders don’t allow the money to be used for college costs, and personal loans don’t wait until you graduate: payments start within about a month. For most students with little credit history, the rate is also higher than on a federal student loan.

A personal loan can make sense for costs a student loan doesn’t cover, or after graduation, for example, to consolidate credit card balances into one fixed payment or cover a move for a new job. See our guides to personal loans and debt consolidation.

Frequently asked questions

About Loans.net: Loans.net is a loan marketplace, not a lender. We don’t offer, arrange or earn money from student loans, and nothing on this page is a paid placement. For other loan types, a request you send goes to lenders in our network, and a lender that can offer you a loan contacts you directly with its own terms; we may be compensated by those lenders. Federal student loan rules change: confirm current rates, limits and plans at StudentAid.gov before you borrow. This page is general education, not financial, tax or legal advice.

Sources

• Federal Student Aid, “Federal Interest Rates and Fees” and loan limit pages (studentaid.gov, accessed September 2026)
• One Big Beautiful Bill Act, Public Law 119-21 (July 4, 2025)
• The Institute for College Access & Success, “Amounts and Terms for Loans Issued in 2026-27” (2026)
• NASFAA, summary of federal student aid changes under the One Big Beautiful Bill Act (2026)
• Federal Student Aid, Repayment Assistance Plan information (studentaid.gov, 2026)
• NASFAA, “Welcome to 2026: Some Student Loan Forgiveness Is Now Taxable” (January 2026)
• U.S. Department of Education, press releases on delaying involuntary collections (January 2026) and ending the SAVE plan (March 2026)
• Federal Student Aid, FY27 sequester announcement on loan fees (May 13, 2026)
• Federal Trade Commission, student loan debt relief scam guidance (consumer.ftc.gov)

Related guides

• Personal loans: how they work and what they cost
• Debt consolidation: combining several debts into one payment
• Improve your credit: steps that move your score
• Your credit score: what it is and what changes it
• Loan calculator: estimate your payment and total interest
• Secured vs. unsecured loans: what a lender can take if you don’t pay

Last updated: September 2026. Federal rates, fees, limits and repayment plans were checked against the cited sources in September 2026 and apply to loans first disbursed July 1, 2026 through June 30, 2027. Worked examples are illustrative.