US Student Loans (2026)
Federal vs private, income-driven repayment, PSLF, and when to refinance.
US student loan debt stands at $1.77 trillion across 43 million borrowers (Federal Reserve Q1 2026). The median balance is about $22,500; the mean is $37,600 (distribution is heavily right-skewed by graduate and professional borrowers). Since the SAVE plan was struck down in 2024 and a new income-driven repayment structure rolled out in 2025, the rules have shifted several times — meaning many borrowers aren't on the optimal plan. Below: federal loan basics, income-driven repayment options, when PSLF applies, and when private refinance makes sense.
Federal loan types (2025–26 school year)
| Type | Rate | Credit check? | Who qualifies |
|---|---|---|---|
| Subsidized Direct | 6.53% | No | Undergrad with financial need |
| Unsubsidized Direct | 6.53% | No | Undergrad any |
| Grad Unsubsidized Direct | 8.08% | No | Grad/professional |
| Grad PLUS | 9.08% | Yes | Grad/professional |
| Parent PLUS | 9.08% | Yes | Parents of dependent undergrads |
When to refinance (and when not to)
Refinance if: stable high income, don't need PSLF, you have mostly private loans already, rates are at least 1% lower. Don't refinance if: you work for a government or nonprofit, have unstable income, rely on income-driven repayment, or might return to school.
Top private refinance lenders
- SoFi — best overall, no fees, career support.
- Earnest — customizable terms, no fees.
- ELFI (Education Loan Finance) — often cheapest rates for high credit.
- Laurel Road — strong options for medical/dental professionals.
- Credible — comparison marketplace (not a lender itself).
Questions answered
Federal first, always. Federal loans have income-driven repayment plans, forgiveness programs (PSLF, teacher loan forgiveness, IDR forgiveness), deferment/forbearance rights, and no credit check (except PLUS loans). Private loans have none of these protections and are dischargeable in bankruptcy only with extreme difficulty.
Subsidized (undergrad only, need-based): government pays interest while you're in school and during deferment. Unsubsidized (undergrad and grad): interest accrues from disbursement. Both have the same fixed rate set annually.
For 2025–26 school year: Undergrad subsidized & unsubsidized 6.53%. Graduate unsubsidized 8.08%. Grad PLUS & Parent PLUS 9.08%. Rates are set each May for loans disbursed July 1 – June 30 of the following year.
The Saving on a Valuable Education (SAVE) plan was an income-driven repayment option with the most generous terms ever. It was largely struck down in court in 2024. A replacement income-driven plan structure was rolled out in 2025. Current IDR options: IBR, PAYE (for some), and the new successor plan. Check studentaid.gov for current status.
Yes, but weigh carefully. Refinancing federal loans into a private loan gets you a (possibly) lower rate but permanently gives up federal protections: income-driven repayment, PSLF, Teacher Forgiveness, death/disability discharge. Only refinance federal if you have stable high income and are certain you won't need those protections.
120 qualifying monthly payments (10 years) while working full-time for a government or 501(c)(3) nonprofit employer forgives your remaining federal student loan balance tax-free. Reforms since 2022 have dramatically simplified PSLF — as of 2025, over $78 billion has been forgiven for ~1 million borrowers.
Undergrad dependent: $5,500 freshman year, up to $7,500 by junior year; $31,000 aggregate max. Undergrad independent: $9,500–$12,500 per year; $57,500 aggregate. Grad: $20,500/year unsubsidized; $138,500 aggregate. Parent PLUS and Grad PLUS fill any gap with credit check.
Yes, no prepayment penalty on federal or private student loans. Extra payments go to accrued interest first, then principal. Specify 'apply to principal only' in the payment note to accelerate payoff — otherwise servicers apply extra to pre-pay future installments.
You can deduct up to $2,500 of student loan interest paid per year on your federal tax return (even if you don't itemize). Phase-out starts at $80k single / $160k married filing jointly. 1098-E statements from your servicer report interest paid.
IDR caps your federal student loan payment at 10%–20% of discretionary income, with the remaining balance forgiven after 20–25 years of payments (or 10 years under PSLF). Multiple plans exist (IBR, PAYE, SAVE successor). The forgiven amount is taxable as income unless PSLF applies — but the American Rescue Plan Act makes IDR forgiveness tax-free through 2025 (extension uncertain).