BOSTON--(BUSINESS WIRE)--Jul 18, 2025--
For many families, a college loan bridges the gap after financial aid between the family’s ability to pay and the full cost of college. With so many options available, it’s easy to get distracted by a low-advertised interest rate, small incentive, or a catchy tagline. That’s why MEFA advises families to look at the whole picture carefully to understand the true cost of borrowing.
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“It’s critical to weigh not only the interest rates, but all components of any loan, to understand how much the loan will cost you in the long run,” said Thomas Graf, Executive Director of MEFA, Massachusetts’ hometown lender. Created in 1982 at the request of Massachusetts colleges and universities, MEFA serves a public mission to help families with higher education access and affordability by offering expert guidance, tools, and resources to help families plan and pay for college.
How can families make the best borrowing decisions for their future?
Start by doing your homework—and don’t get distracted by a low-advertised interest rate. While it’s tempting, there’s much more to consider when deciding on a college loan. Many lenders offer a range of fixed and variable interest rates, as well as different repayment options, and some may even have fees associated with the loan. A thoughtful comparison could make a significant difference in the total cost of borrowing.
Before considering private loans, families should complete the FAFSA ® to secure the maximum amount available in financial aid, including Federal Direct Student Loans. Federal Direct Student Loans offer favorable terms to the student, such as a fixed interest rate, flexible repayment options, and the ability to consolidate.
Once a student has secured the maximum available financial aid, MEFA's experts offer the following tips for families looking at private loan options for the 2025-26 school year:
1. Understand How Interest Rates Work and What Affects Them
Private education loan lenders offer both fixed and variable interest rates, however the lowest rates are typically reserved for borrowers with excellent credit histories. The type of repayment plan and loan term you choose also impacts the rate. For example, opting for a repayment plan that defers payments until after graduation typically leads to a higher cost of education.
A loan's interest rate has a direct impact on its overall cost, so it's important to understand how choices now will affect repayment. MEFA’s Undergraduate Loan Payment Calculator shows how different repayment options impact the total cost of a MEFA Loan.
2. Carefully Compare Private Loan Offers
All private lenders are required to provide an Application and Solicitation Disclosure that outlines the cost of the loan, including fees. Take time to review this document for each lender to understand the full cost of any loan you’re considering. MEFA’s Comparing College Loan Options webinar offers the basics to help borrowers read and understand these disclosures.
Currently, MEFA’s Undergraduate Application and Solicitation Disclosure shows fixed interest rates between 3.29% and 8.89% APR* —with no application fees, no origination fees, and no late charges. Compare these costs to the Federal PLUS Loan, which carries a fixed interest rate of 8.94% plus a 4.228% fee. And MEFA’s top rate is much lower than the top rates of other private lender loan options. Additionally, MEFA’s undergraduate loans require both the student and a parent or other creditworthy co-borrower to be on the loan. This shared responsibility helps instill smart borrowing habits.
The disclosure includes scenarios for each of MEFA’s repayment options, including immediate repayment, interest-only repayment while enrolled, and deferred repayment.
MEFA undergraduate, graduate, and refinancing loans are available to qualifying borrowers nationwide.
3. Know the Ins and Outs of the PLUS Loan
The Parent PLUS Loan is a federal loan option available exclusively to parents to help pay for education expenses not covered by other financial aid. Offered by the U.S. Department of Education with a 2025-26 interest rate of 8.94%, plus a 4.228% origination fee, the PLUS Loan requires the submission of the FAFSA and can be a costly borrowing option. For some families, this combination of high costs and lack of shared responsibility may make the Parent PLUS Loan a less attractive option.
4. Get Expert Guidance Every Step of the Way
MEFA’s team of college planning experts is available to help families navigate the process of finding and applying for a college loan. Whether providing help with comparing loan options, understanding terms and conditions, or exploring repayment strategies, MEFA is equipped to listen and offer expert guidance. Reach out to MEFA at (800) 449-6332 or via email at collegeplanning@mefa.org.
For additional resources, visit mefa.org, for free live and recorded webinars, helpful videos, and expert articles covering a full range of topics, including Tips for Private Student Loans.
About MEFA
MEFA is a state authority, not reliant on state or federal appropriations, established under Massachusetts General Laws, Chapter 15C. MEFA’s mission, since its founding in 1982, has been to help Massachusetts students and families access and afford higher education and reach financial goals through education programs, tax-advantaged savings plans, competitive loans, and expert guidance. All MEFA’s work aligns with the ever-present goal to support the independence, growth, and success of Massachusetts students and families. Visitmefa.orgto learn more.
How the MEFA Loan stacks up against other private college lenders as of July 14, 2025.
NEW YORK (AP) — Reviving a campaign pledge, President Donald Trump wants a one-year, 10% cap on credit card interest rates, a move that could save Americans tens of billions of dollars but drew immediate opposition from an industry that has been in his corner.
Trump was not clear in his social media post Friday night whether a cap might take effect through executive action or legislation, though one Republican senator said he had spoken with the president and would work on a bill with his “full support.” Trump said he hoped it would be in place Jan. 20, one year after he took office.
Strong opposition is certain from Wall Street in addition to the credit card companies, which donated heavily to his 2024 campaign and have supported Trump's second-term agenda. Banks are making the argument that such a plan would most hurt poor people, at a time of economic concern, by curtailing or eliminating credit lines, driving them to high-cost alternatives like payday loans or pawnshops.
“We will no longer let the American Public be ripped off by Credit Card Companies that are charging Interest Rates of 20 to 30%,” Trump wrote on his Truth Social platform.
Researchers who studied Trump’s campaign pledge after it was first announced found that Americans would save roughly $100 billion in interest a year if credit card rates were capped at 10%. The same researchers found that while the credit card industry would take a major hit, it would still be profitable, although credit card rewards and other perks might be scaled back.
About 195 million people in the United States had credit cards in 2024 and were assessed $160 billion in interest charges, the Consumer Financial Protection Bureau says. Americans are now carrying more credit card debt than ever, to the tune of about $1.23 trillion, according to figures from the New York Federal Reserve for the third quarter last year.
Further, Americans are paying, on average, between 19.65% and 21.5% in interest on credit cards according to the Federal Reserve and other industry tracking sources. That has come down in the past year as the central bank lowered benchmark rates, but is near the highs since federal regulators started tracking credit card rates in the mid-1990s. That’s significantly higher than a decade ago, when the average credit card interest rate was roughly 12%.
The Republican administration has proved particularly friendly until now to the credit card industry.
Capital One got little resistance from the White House when it finalized its purchase and merger with Discover Financial in early 2025, a deal that created the nation’s largest credit card company. The Consumer Financial Protection Bureau, which is largely tasked with going after credit card companies for alleged wrongdoing, has been largely nonfunctional since Trump took office.
In a joint statement, the banking industry was opposed to Trump's proposal.
“If enacted, this cap would only drive consumers toward less regulated, more costly alternatives," the American Bankers Association and allied groups said.
Bank lobbyists have long argued that lowering interest rates on their credit card products would require the banks to lend less to high-risk borrowers. When Congress enacted a cap on the fee that stores pay large banks when customers use a debit card, banks responded by removing all rewards and perks from those cards. Debit card rewards only recently have trickled back into consumers' hands. For example, United Airlines now has a debit card that gives miles with purchases.
The U.S. already places interest rate caps on some financial products and for some demographics. The Military Lending Act makes it illegal to charge active-duty service members more than 36% for any financial product. The national regulator for credit unions has capped interest rates on credit union credit cards at 18%.
Credit card companies earn three streams of revenue from their products: fees charged to merchants, fees charged to customers and the interest charged on balances. The argument from some researchers and left-leaning policymakers is that the banks earn enough revenue from merchants to keep them profitable if interest rates were capped.
"A 10% credit card interest cap would save Americans $100 billion a year without causing massive account closures, as banks claim. That’s because the few large banks that dominate the credit card market are making absolutely massive profits on customers at all income levels," said Brian Shearer, director of competition and regulatory policy at the Vanderbilt Policy Accelerator, who wrote the research on the industry's impact of Trump's proposal last year.
There are some historic examples that interest rate caps do cut off the less creditworthy to financial products because banks are not able to price risk correctly. Arkansas has a strictly enforced interest rate cap of 17% and evidence points to the poor and less creditworthy being cut out of consumer credit markets in the state. Shearer's research showed that an interest rate cap of 10% would likely result in banks lending less to those with credit scores below 600.
The White House did not respond to questions about how the president seeks to cap the rate or whether he has spoken with credit card companies about the idea.
Sen. Roger Marshall, R-Kan., who said he talked with Trump on Friday night, said the effort is meant to “lower costs for American families and to reign in greedy credit card companies who have been ripping off hardworking Americans for too long."
Legislation in both the House and the Senate would do what Trump is seeking.
Sens. Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., released a plan in February that would immediately cap interest rates at 10% for five years, hoping to use Trump’s campaign promise to build momentum for their measure.
Hours before Trump's post, Sanders said that the president, rather than working to cap interest rates, had taken steps to deregulate big banks that allowed them to charge much higher credit card fees.
Reps. Alexandria Ocasio-Cortez, D-N.Y., and Anna Paulina Luna, R-Fla., have proposed similar legislation. Ocasio-Cortez is a frequent political target of Trump, while Luna is a close ally of the president.
Seung Min Kim reported from West Palm Beach, Fla.
President Donald Trump arrives on Air Force One at Palm Beach International Airport, Friday, Jan. 9, 2025, in West Palm Beach, Fla. (AP Photo/Julia Demaree Nikhinson)
FILE - Visa and Mastercard credit cards are shown in Buffalo Grove, Ill., Feb. 8, 2024. (AP Photo/Nam Y. Huh, File)
