The recent passage of the Trump administration’s budget reconciliation bill has reshaped the federal student loan system in sweeping ways. With the elimination of the Graduate PLUS Loan, significant caps on federal borrowing, changes to Parent PLUS loan eligibility, and revised affordability protections for repayment programs, many students and families have been left with more questions than answers about how to move forward in funding their higher education aspirations.
As financial aid professionals, we are on the front lines of helping borrowers understand not only the new federal landscape but also their alternative gap funding options, including private student loans through private loan providers. While often met with skepticism, private loans have long served as a critical tool for students who do not qualify for federal student aid with helping them cover their remaining educational expenses. With federal aid options narrowing, it is important for financial aid professionals to revisit and retool themselves with understanding how to provide adequate counseling to ensure that guidance on the topic of private loans is comprehensive, clear, financially responsible, and student-centered.
Why Private Loans Now Demand More Attention
For years, financial aid professionals have emphasized a federal-first approach, given the built-in protections such as income-driven repayment, generous deferment options, and forgiveness programs. However, the new policy landscape demands a more nuanced approach.
For years, students ineligible to receive federal aid, including undocumented students, international students, and independent undergraduate students, have had to rely on this funding option to fill-in the gap in their remaining expenses. Taking guidance from the counseling best-practices that have been provided to these students in the past is therefore an important tactic in now serving newer populations of students who may need to rely on this option as they consider the totality of ways in which they might be able to most affordably cover their remaining educational expenses or at least narrow the gap.
At the same time, loan aversion remains high among many families, particularly in underserved communities. Thus, it is critical that we educate rather than advocate — ensuring our students and their families are informed about all funding options, with a full understanding of their benefits, limitations, and long-term implications.
Key Counseling Points When Comparing Private Loan Options
To empower students to make informed decisions, guide them through these key comparisons when evaluating private lenders:
- Interest Rates
- Compare fixed vs. variable rates and check the APR ranges — not just the starting rate.
- Ensure students understand how their credit (or a cosigner’s) affects pricing.
- In-School Payment Requirements
- Confirm whether the loan offers deferred payments, interest-only payments, or fixed minimum payments while in school.
- Cosigner Requirements and Release Policies
- Some lenders require a cosigner but offer release options after a set number of on-time payments — this can be a meaningful benefit for family dynamics and long-term planning.
- Borrower Perks
- Look for benefits like autopay discounts, loyalty programs (for existing bank customers), or good academic performance rewards.
- Credit Shopping and Rate Comparison
- Reinforce that shopping around is worth it. Students may worry about multiple credit pulls, but under FICO’s loan-shopping window, multiple inquiries within 14–45 days for the same type of loan typically count as one hard pull.
Educate them on how this works and encourage comparison to find the best terms.
- Reinforce that shopping around is worth it. Students may worry about multiple credit pulls, but under FICO’s loan-shopping window, multiple inquiries within 14–45 days for the same type of loan typically count as one hard pull.
Expanding the Conversation: Who Private Loans Can Serve
Private loans can be especially relevant for:
- Undocumented students and DACA recipients, who are ineligible for federal loans but may access private funding with a creditworthy cosigner.
- International students, provided they have a U.S.-based cosigner.
- Independent undergraduate students, who face lower federal loan limits.
- Graduate students, now facing the loss of the Graduate PLUS loan.
- Parents unable to qualify for Parent PLUS loans due to new credit criteria or debt-to-income limitations.
By equipping ourselves to speak fluently and fairly about private loans, we offer a fuller picture of all available financing options — especially in times of policy flux and uncertainty.
In a Nutshell – Private Student Loan Pros and Cons
| Pros | Cons |
| May offer lower interest rates for creditworthy borrowers or those with strong cosigners | No income-driven repayment plans or Public Service Loan Forgiveness |
| Higher borrowing limits, up to the full cost of attendance | Interest rates based on credit – students with limited or poor credit may pay more |
| Available to students ineligible for federal loans | No subsidized interest – interest accrues immediately |
| Fast application process with online approval | Limited forbearance or deferment options compared to federal loans |
| May offer tax-deductible interest | Typically not dischargeable in bankruptcy |
| Some lenders offer perks (e.g., good grade discounts, autopay interest rate reductions, cosigner release) | Risk of overborrowing, especially when borrowing up to the cost of attendance |
A Note on Risk and Responsibility
While private loans can fill critical gaps, they are not a panacea. We must help students avoid the pitfalls of overborrowing, and advise them to borrow only what they need, plan for repayment early, and stay alert to changes in loan terms and market conditions.
As such, private loans should never be positioned as “better” or “worse” — but as one of many tools, each with trade-offs that need to be understood in full in order to assist families and students cover their remaining educational costs in a responsible and affordable way.
Final Thoughts
As financial aid professionals, we play a critical role in helping students and families navigate changing federal aid policy and understand emerging pathways for educational financing. With the right information and support, our students can make confident, informed decisions — even in the face of uncertainty.
Want to learn more about how HEAG can support your team through high-volume cycles or high-stress calls? Contact us at info@heag.us or visit heag.us to explore staffing solutions tailored to your needs.
