What Parents Should Know When Comparing Student Loans
BIG Ideas:
- Understanding the differences between federal and private loans can help you and your child make more informed borrowing decisions.
- Comparing student loans carefully can reduce long-term costs and improve repayment flexibility.
- Parents and students should exhaust federal loan options before turning to private loans.
Sending your child to college is one of the most exciting and bittersweet milestones of parenthood. It’s proof of all the time, energy, and love you’ve poured into their success. And now, it’s time to let go and let them take that big step into the independent life you’ve prepared them for.
It’s a lot for any parent to take in.
And then, there’s another reality: the cost.
Today, the average annual price of college is about $38,000 per year per student, according to the Education Data Initiative, and that number can soar even higher for students attending private or out-of-state schools.1
Over four years, that money will add up quickly and could leave a significant financial burden not just for your child, but for you, especially if you have multiple children and other life expenses.
Most students and families can’t swing it alone, which is why many turn to student loans.
Of course, every family is different. So, whether you’re planning to contribute to your child’s education or not, they’ll likely need your guidance. One of the best ways to prepare is to understand and compare student loan options.
Understanding Student Loans
When you’re comparing student loans, it’s important to understand the two types: federal and private student loans. Federal student loans are offered by the U.S. Department of Education, while private loans are offered by banks, credit unions, non-profits (like Brazos), and other non-government lenders.
To qualify for a federal loan, you’ll need to start by completing the Free Application for Federal Student Aid (FAFSA).
Federal Student Loans for Students. There are two types of Federal Student Loans for students: Subsidized and Unsubsidized Loans.
Subsidized Loans: These are student loans based on financial need. If your student qualifies for one, interest is paid by the government while they’re in school and during the 6-month grace period after graduation. That offers a valuable benefit for your student: They’ll pay much less in total interest.
Unsubsidized Loans: If your student doesn’t qualify for a subsidized loan, they can get an unsubsidized federal student loan. But unlike the subsidized loan, interest will accrue while they’re in school, even if they defer payments until after graduation.
This student loan comparison can help you better understand the differences:
| Subsidized Student Loan | Unsubsidized Student Loan | |
| Who qualifies | Undergraduate students who demonstrate financial need. | Undergraduate, graduate, and professional students – no financial need is required. |
| Who pays interest | The federal government pays interest while the student is in school and during the 6-month grace period. | Interest accrues while the student is in school. |
| How much can you borrow | Lower limits that are based on financial need | Higher limits not based on financial need. |
Both Subsidized and Unsubsidized Loans offer a range of benefits when compared to private student loans, including:
- Easier qualification: No credit check required.
- Repayment flexibility: The student can choose from different repayment plans to fit their income and financial situation, including Income-Driven Repayment Plans that can help make payments more affordable during lower-earning periods.
- Deferment and forbearance: If the student experiences financial hardship or enrolls in school, payments can be temporarily paused or reduced.
- Public Service Loan Forgiveness: The student’s remaining loan balance may be forgiven after 10 years of qualifying payments while working in eligible public service jobs.
Federal Loans for Parents – Parent PLUS Loans
If you plan to help pay for your child’s college education and want to compare student loan options, a Parent PLUS loan could work for you. Available to parents of dependent undergraduate students, these federal loans do require a credit check to ensure you don’t have adverse credit history.
Though they can help families meet the cost of attendance after financial aid, scholarships, and savings, there are some things you should know before you borrow:
- The rates for Parent PLUS loans are often higher than other types of student loans.
- There is a one-time origination fee that’s a percentage of the amount you borrow. So, the more you borrow, the higher the fee.
- They are unsubsidized loans.
- The passage of the One Big Beautiful Bill Act (OBBBA) has created new borrowing limits for Parent PLUS loans.
- For loans disbursed on or after July 1, 2026, you can borrow up to $20,000 per year and up to $65,000 total for a dependent student.
- Existing Parent PLUS borrowers, however, who borrowed before July 1, 2026, can continue with the current limits (up to the cost of attendance) for up to three more academic years or until the student’s program ends, whichever comes first.
Private Student Loan Options – For Both Students and Parents
As you compare student loans, you’ll also want to look at private loans. Again, private loans are student loans offered by private lenders, such as banks, credit unions, and non-profits, like Brazos. Like PLUS loans, they are designed to fill the gap between federal aid, savings, and the cost of attendance.
When you compare student loans, you’ll need to understand these important things about private loans, which are available to students and parents:
- Interest rates and approval are based on credit and income. So, your student may require a co-signer. If you co-sign, you are fully responsible for the loan if the student can’t repay it. Learn more about the responsibilities of a co-signer.
- Rates, fees, and repayment terms vary by private lender, so shop around as part of your student loans comparison.
- Private loans do not offer federal protections, such as income-driven repayment, public service loan forgiveness and deferment and forbearance.
Comparing Student Loans – Federal vs. Private
To help with your student loan comparison, we’ve put together this chart.
| Federal student loans Offered by the federal government | Private student loans Offered by banks, credit unions, non-profits, and other non-government lenders. | |
| Qualification | A credit check is not required for most loans except Parent PLUS loans (only to determine adverse credit). | A good credit score and steady income are typically required. Students may need a co-signer. |
| Interest rate | Fixed rates set by the government. | Variable or fixed. Actual rates vary by lender and credit score. |
| Repayment | You can choose from multiple repayment plans, such as income-driven repayment. | Repayment options vary by lender. |
| Subsidized interest payments while the student is in school | Students who demonstrate financial need can qualify to have interest paid while in school. | Not subsidized. Interest accrues while the student is in school and may be deferred, but is not paid by the lender. |
| Public Service Loan Forgiveness | Some students who meet the requirements could be eligible to have loans forgiven. | Not available. |
| Deferment and forbearance | If the student experiences financial difficulty, they may be able to postpone or lower payments temporarily. | Options may be available depending on the lender. |
Making the Right Loan Decisions For You and Your Child
The loan that’s right for you depends on your unique financial situation. Because federal loans typically offer lower rates and payment protections, your student will want to exhaust federal loans first before applying for a private loan.
Understanding your options and comparing student loans carefully can help you make more informed decisions for your child’s financial future and your own.
Brazos Can Help You Meet the Costs of College
For more than 40 years, Brazos Higher Education has helped students and parents finance the cost of college. As a Texas nonprofit, we offer competitive rates on private student loans that can help you fill the gap where federal aid and your savings leave off. Contact us today.
1Hanson, Melanie. “Average Cost of College & Tuition” EducationData.org, 2026-02-14, https://educationdata.org/average-cost-of-college
