Student loans in plain numbers
There is an order to borrow in, and the rules reward following it: free money first, then the safest loans, then everything else only if you need it. Here is the sequence and the numbers behind it.
The order to borrow in
- Gift aid - grants and scholarships you never repay. (See reading your aid offers.)
- Federal student loans in the student's name - the safest borrowing, with built-in protections and a sane limit.
- Parent PLUS loans - a real option, but easy to overuse. Read the warning below.
- Private loans - last resort only, when everything above is exhausted.
Subsidized vs unsubsidized
Both are federal loans the student borrows. The difference is who pays the interest while they're in school:
- Subsidized: need-based. The government covers the interest while they are enrolled at least half-time, which most schools count as six credit hours. This is the best loan money there is - take it first.
- Unsubsidized: not need-based, so most families can get it. Interest starts adding up from the day it is disbursed (paid to the school), even while they are still in class.
Why the federal limit exists
A dependent undergraduate can borrow roughly $5,500 the first year, stepping up each year to about $31,000 total across a bachelor's degree. The ceiling is deliberate: it keeps a student's own borrowing to a number a typical starting salary can carry.
Parent PLUS: the one to think hardest about
A Parent PLUS loan lets a parent borrow, after a basic credit check, to cover a gap the student's own federal loans do not. The interest rate is higher than the student loans, as is the origination fee the government takes off the top before the money reaches the school, and the debt is yours, not theirs.
As of 1 July 2026, PLUS borrowing is capped at $20,000 a year and $65,000 in total per student. The cap follows the student, so two parents borrowing separately still share one $20,000. Families who already had a PLUS loan disbursed for that student before that date can continue under the earlier rules for up to three more academic years, while the student stays in the same program.
Work out the gap before you commit: cost of attendance, minus gift aid, minus the student's own federal loans. If what is left is more than $20,000 a year, PLUS will not cover it. Spring is when a family still has time to act on that. The borrowing gap calculator does the arithmetic and checks it against both caps.
Private loans, and what you give up
Private loans come from banks and lenders, usually need a creditworthy cosigner (that's you), and - this is the part that matters - carry none of the federal protections. No income-driven repayment if a paycheck is thin, no federal forgiveness programs, less flexibility to pause payments in a hardship. Only go here after federal options are used up, and read every term.
Repayment, briefly
Federal student loans generally give a six-month grace period after graduation before payments start. Interest on unsubsidized and PLUS loans accrues the whole time, so any payment your student can make while in school, even a small one, keeps the balance from snowballing.
As of 1 July 2026, new borrowers choose between a standard repayment plan and the Repayment Assistance Plan. Parent PLUS can use only the standard plan, and so can a consolidation loan that contains one. Plan on a fixed payment that does not adjust to your income.
- Exhaust gift aid and any appeal first
- Take subsidized federal loans before unsubsidized
- Check the federal loan limit for their year
- Work out the gap with the borrowing gap calculator
- Weigh the total you'd borrow against graduate earnings
- Read every term before signing a private loan
- Check the repayment plan and grace period before you sign
Checked against primary sources on 2026-08-05. Rules in this area change; verify anything you are about to act on.