About to Borrow for College? Here’s What You Need to Know First
TL;DR: Loan rates for the 2026–27 school year will be released in late May or early June. Now is the perfect time to understand how borrowing works, what your options are, and what the long-term costs might look like—so you’re ready to compare and decide the moment rates drop.
And a great place to start? Finding out where you actually stand.
Take the College Bill Reality Check
This free quiz helps you figure out whether your family has a strong paying-the-bill plan—or whether there are gaps worth closing before August arrives. It takes just a few minutes, and you’ll come away with a clear picture of your next steps.
The hoodie’s ordered. The Class of 2030 group chat is buzzing. College is getting real.
And now comes the question that catches so many families off guard:
How are we actually going to pay for this?
If loans are part of your plan, you’re not alone—and you’re not doing anything wrong. But before you start filling out applications or comparing lenders, it’s worth knowing:
Rates for the 2026–27 school year aren’t out yet. Federal loan rates are expected in late May or early June. Private and state-based lenders typically follow in early summer.
That means there’s nothing final to lock in today. But there’s a lot you can do to understand your options—and make smarter decisions when the time comes.
Most Families Borrow More Than They Expect
It often starts with, “We just need $40,000 for this year.”
But here’s the thing:
- You’ll probably need loans every year.
- College costs usually go up annually.
- That $40,000 might become $160,000 by the time your student graduates.
And when you factor in interest over a typical 25-year repayment? You’re looking at a total repayment of $300,000+.
Today, the average Parent PLUS borrower owes $34,630—and many take decades to repay. Some are still paying off loans as they approach retirement.
That’s not a scare tactic. It’s just what happens when the borrowing decision is made one year at a time, without a long-term picture in mind.
Loan Rates for Next Year? Not Out Yet.
If you’re feeling pressure to “just get it done,” take a step back.
- Federal Direct Student Loan and Parent PLUS loan rates for the 2026–27 school year will be hopefully be announced in late May/early June.
- Private and state-based lenders typically set their rates in early summer.
Right now, you simply don’t have enough information to choose the best option. What you can do is get clear on the types of loans available, what they mean, and what you’re really signing up for.
The Order Matters: How to Layer Your Borrowing
Most families jump straight to loans. But borrowing smart means using the right tools in the right order. Here’s our recommended sequence that we find works best:
- Private Grants & scholarships first — free money that never needs to be repaid. Apply every year, not just as a freshman.
- 529 savings — if you have funds set aside, timing your withdrawals carefully can save you thousands.
- Federal Direct Student Loans — no credit check, no co-signer, fixed rate (~6.53% for 2025–26), and federal repayment protections.
- College payment plans — monthly installments paid directly to the school. Usually fee-based but interest-free, and often overlooked.
- Private or state-based loans — credit-based options that can beat PLUS loan rates for families with strong credit. Shop multiple lenders.
- Parent PLUS Loans — a federal option, but one that comes with important new limits in 2026. Consider this after exhausting the options above.
The key insight most families miss: this is a four-year financial plan, not a one-year decision.
Your Main Loan Options, Explained
Most students can only borrow $5,500–$7,500 per year in federal direct student loans. That covers just a fraction of the cost at most schools. The rest? That’s usually on the parents.
Parent PLUS Loans (Federal)
Important 2026 Change: Under the One Big Beautiful Act, new Parent PLUS borrowers are now capped at $20,000 per year and $65,000 lifetime per student. The current rate is 8.94% with a 4.228% origination fee. If your gap exceeds these limits, private loans may actually cost you less.
These are federal loans offered to parents of dependent undergraduate students. Repayment begins right away, but income-driven plans and deferment options are available.
Why it matters: These loans are easy to get—you generally won’t be denied based on a low credit score unless you have an adverse credit history. But the new annual cap means families with larger gaps will need to plan around private options more than before.
And even if your student swears they’ll help cover it, you’re the one legally responsible.
State-Based Loans
These are education loans offered by state-based authorities. Now is a great time to see if your state offers any type of state loan program. There are some programs like (RISLA) Rhode Island Student Loan Authority, MEFA in Massachusetts, and Iowa Student Loan that even accept out-of-state applicants.
Rates and fees can be lower than PLUS or private loans, especially for families with strong credit. Some also offer borrower-friendly features like interest rate reductions for on-time payments.
Why it matters: With the new PLUS caps in place, state-based loans are worth checking before you assume private lenders are your only alternative.
Private Loans
Banks, credit unions, and online lenders all offer private student loans. These typically require a co-signer (usually a parent) and base rates on creditworthiness.
Fixed and variable rates are available. Some can look very appealing at first glance—especially if your credit is excellent.
Smart shopping tip: Start with lenders that use a soft credit pull—like College Ave or SoFi—so you can see rates without affecting your credit score. Save hard-pull lenders (like Sallie Mae) for last, after you’ve already collected soft-pull offers to compare. Shopping at least 3 lenders takes under 30 minutes and can save your family $2,000 or more over the life of the loan.
Why it matters: Private loans can fill the gap, but they come with fewer protections. There’s no income-based repayment. No forgiveness programs. No government deferment. If something goes wrong financially, you have fewer ways to manage repayment.
Real Example: What It Could Actually Cost
Let’s say you borrow $20,000 per year for four years through Parent PLUS Loans (the new annual max). That’s $80,000 in principal—before fees.
With an 8.94% rate, a 4.228% origination fee, and a 25-year repayment plan, your total repayment would well exceed $200,000.
And if your gap is larger than $20,000 per year, you’ll need to fill the rest with private or state loans—which means comparing total costs across multiple loan types, not just monthly payments.
The Bigger Picture:
Federal student loan policy has changed significantly over the past year—from new borrowing caps under the One Big Beautiful Act to ongoing shifts in repayment plan availability. Millions of borrowers are navigating a landscape that looks different than it did even 12 months ago.
This isn’t to scare you—it’s to show that loans are real financial obligations with real consequences. They can follow you (or your student) for a long time. The best defense is going in with your eyes open and a plan that spans all four years.
Questions to Ask Before You Borrow
- How much will we need to borrow over four years, not just one?
- What will our monthly payments be on a standard or extended plan?
- What’s the total cost of those loans with interest?
- Who will be responsible for repayment—you, your student, or both?
- Do we fully understand the difference between federal, state, and private loans?
- Does our gap exceed the new $20,000/year Parent PLUS cap—and if so, what’s our plan for the difference?
- Have we compared at least three lenders, including state-based options?
If you don’t know the answers yet, that’s okay. This is the right time to ask.
The Bottom Line
You don’t need to make loan decisions today.
But you do need to understand what borrowing means—financially and emotionally—before you commit.
And a great place to start? Finding out where you actually stand.
Take the College Bill Reality Check
This free quiz helps you figure out whether your family has a strong paying-the-bill plan—or whether there are gaps worth closing before August arrives. It takes just a few minutes, and you’ll come away with a clear picture of your next steps.
You’re Doing Great—Now Let’s Make a Plan
Needing loans doesn’t mean you’ve failed.
It means you’re showing up for your student and trying to make college possible. That’s something to be proud of.
But before you sign anything, take a breath.
Get clear on what borrowing means—not just for this year, but for the next decade or more. Ask the hard questions now, while you still have time to adjust your plan.
We’ll be hosting webinars this spring and summer to walk you through your loan options, repayment strategies, and real-life borrowing scenarios. If you want to stay in the loop:
We’ll share upcoming webinar dates, registration links, and other timely tips to help you borrow smarter.
Until then, we’re here—and we’ve got your back.
