Paying for college in 2025: federal vs. private loan options

How to choose the right loan for your needs  

Paying for college is a major investment — and in 2025, that investment keeps growing. Rising tuition and living expenses mean students and families need to be more strategic than ever about how they pay for school.

Grants and scholarships are a great starting point, but they don’t always cover everything. That’s where student loans come in.

Federal loans, offered by the U.S. Department of Education, tend to come with lower fixed interest rates, flexible repayment plans and protections like deferment or forgiveness programs. For many students, these are the first loans they should consider.

Private loans are issued by banks, credit unions or other financial institutions. Terms and benefits vary by lender. Many credit unions offer loans with competitive rates and flexible repayment options, like Credit Union Student Choice from Desert Financial, which includes a rate discount for using autopay.

Steps to fund your education

1. Start with scholarships and grants.
   These are your best financial aid tools because they don’t have to be repaid. Apply widely — from school programs to community organizations and government sources.
2. Use federal loans next.
   Federal loans should be your next stop after free aid. They typically come with lower interest rates, income-driven repayment plans and potential forgiveness opportunities.
3. File the FAFSA.
   Completing the Free Application for Federal Student Aid (FAFSA) opens the door to federal loans, grants and work-study opportunities. Submit it early to maximize your eligibility.
4. Consider PLUS or private loans if needed.
   If you still need additional funding, explore federal PLUS loans or private student loans. Compare rates, repayment terms and borrower protections before deciding.

Federal PLUS loans vs. private student loans

Choosing between federal PLUS and private loans? Here’s what to keep in mind:

PLUS loans:

• Designed for parents of undergrads or for grad students
• Fixed interest rates
• Require a credit check
• May offer deferment or forgiveness

Private loans:

• Available to students or parents
• Could require a co-signer
• Interest rates vary and may be lower with strong credit
• May offer fewer borrower protections

Choosing the right loan for you

When deciding on a loan, consider:

• Total cost of borrowing – Look beyond the monthly payment. What will the loan cost over time?
• Repayment flexibility – Can you adjust your payment plan if your income changes?
• Borrower protections – What happens if you lose a job or go back to school?

Compare multiple offers and don’t rush. Federal loans generally offer stronger safeguards, so exhaust those options first before turning to private loans.

Need help paying for college?

You're not alone. Whether you're an undergrad, grad student or a parent planning ahead, here’s how to move forward:

• Talk to a financial aid advisor – They’ll help you understand your full range of options.
• Review all aid sources – Use scholarships, grants and federal loans before borrowing privately.
• Explore Desert Financial’s Credit Union Student Choice program – Designed to help students and families fill the gaps in funding, with competitive rates and no hidden fees.