Before You Borrow — Run These Numbers First
Before you borrow anything, run the numbers. Most students sign loan paperwork without really understanding what they're agreeing to — total interest paid, monthly payment after graduation, how long they'll be paying it back. This calculator shows you all of it upfront. A $35,000 loan at 6.53% over 10 years means $386/month and you'll pay back $46,300 total — $11,300 more than you borrowed. That number doesn't show up on the promissory note in bold, but it should. Know it before you sign.
Federal vs. Private Student Loans — Key Differences
The single most important thing to know about student loans: federal and private are completely different products. Here's what that actually means for you:
| Feature | Federal Loans | Private Loans |
|---|---|---|
| Interest rate | Fixed, set by Congress annually | Fixed or variable, set by lender |
| 2025–2026 rates (UG) | 6.53% (Direct Subsidized/Unsubsidized) | 4–16% depending on credit |
| Income-driven repayment | Available (SAVE, PAYE, IBR, ICR) | Not available |
| Public Service Loan Forgiveness | Eligible | Not eligible |
| Deferment / forbearance | Generous, including economic hardship | Limited, lender-dependent |
| Bankruptcy discharge | Very difficult but possible | Very difficult |
| Cosigner required | No (except Parent PLUS) | Usually, for students without credit history |
Federal Student Loan Types and Limits (2026)
| Loan Type | Who Qualifies | Annual Limit | Rate (2025–26) |
|---|---|---|---|
| Direct Subsidized | UG with financial need | $3,500–$5,500 | 6.53% |
| Direct Unsubsidized (UG) | All UG students | $5,500–$12,500 | 6.53% |
| Direct Unsubsidized (Grad) | Graduate students | $20,500 | 8.08% |
| Direct PLUS (Parent) | Parents of dependent UG | Cost of attendance minus aid | 9.08% |
| Direct PLUS (Grad) | Graduate students | Cost of attendance minus aid | 9.08% |
Income-Driven Repayment Plans
If your loan payment after graduation would be more than you can afford on your starting salary, income-driven repayment (IDR) exists specifically for that situation. These plans cap your monthly payment as a percentage of your discretionary income, and after 20–25 years of qualifying payments, any remaining balance is forgiven (forgiven amounts may be taxable as income under current law). Here's how the main plans work:
- SAVE Plan: The newest and most generous plan. Caps payments at 5% of discretionary income for undergrad loans, 10% for grad. Unpaid interest does not capitalize. Borrowers with original balances under $12,000 qualify for forgiveness after 10 years of payments.
- IBR (Income-Based Repayment): Caps at 10–15% of discretionary income (10% for new borrowers after July 2014). Forgiveness after 20–25 years.
- PAYE (Pay As You Earn): 10% of discretionary income, forgiveness after 20 years. Must have taken first loan after October 2007.
Public Service Loan Forgiveness (PSLF)
This is one of the most genuinely valuable programs most students have never heard of properly explained. Federal borrowers working full-time for a qualifying employer — government agencies, 501(c)(3) nonprofits, public schools, public hospitals — who make 120 qualifying payments on an IDR plan get their remaining balance forgiven, completely tax-free. Not taxed as income. Gone.
If you're going into teaching, nursing, social work, government, or nonprofit work and you have federal loans, PSLF is not a small thing. On a $60,000 loan balance forgiven after 10 years, that's $60,000 you don't pay back. Qualifying employers include all government jobs at every level, public schools and universities, public hospitals, and most nonprofits. Private companies, for-profit employers, and partisan political organizations don't qualify — but a lot more jobs do than people realize.
Strategies to Actually Reduce What You Pay
- Make interest-only payments during school. For unsubsidized loans, interest accrues while you're enrolled. Even $25–$50/month during school prevents interest capitalization — where interest gets added to your principal at graduation, and then you're paying interest on interest. On a $20,000 unsubsidized loan, this can save hundreds over your repayment term.
- Apply for income-driven repayment immediately if you can't afford standard payments. Default — missing 9+ monthly payments — destroys your credit, triggers wage garnishment, and creates years of problems. There's no good reason to default when $0/month IDR payments exist for people with very low income. Call your servicer before you miss a payment.
- Never refinance federal loans into private. You permanently lose IDR eligibility, forgiveness programs, and deferment protections. Refinancing private loans with a better rate once you have income and credit history makes sense — but keep your federal loans federal.
- Extra payments go to principal — but confirm this. Contact your loan servicer to ensure extra payments are applied to principal, not credited as future payments. Even $50/month extra on a $35,000 loan at 6.53% saves over $3,000 in interest and cuts 18 months off repayment.