Many states have moved to expand their own student loan programs in response to new limits on federal borrowing from President Donald Trump's "big beautiful bill."
"While state loans can be an important option for some borrowers, students should understand the trade-offs and risks before assuming they're equivalent to federal loans," said Tiara Moultrie, a fellow at The Century Foundation.
The interest rates on state student loans can exceed 10%, and the debt is excluded from federal protections and relief options, consumer advocates said.
States including Connecticut, Massachusetts, Minnesota, Pennsylvania, and Rhode Island have recently moved to expand their loan offerings in anticipation of the added restrictions on federal borrowing.
The new federal limits could push more borrowers to private lenders like SoFi and Navient.
State-backed loan rates can vary widely depending on the state and may also depend on the degree program and borrower qualifications such as income and credit score.
Loan programs usually have residency rules, and state loan programs are excluded from federal relief options.
