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As borrowers come up against new federal limits on student debt, they may encounter financing options from an unexpected source: their state.
But don’t assume these government-backed loans are a close substitute for federal student loans. Consumer advocates say state student loans are more akin to private student loans, and should be approached with caution.
“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, a left-leaning think tank. “The government label can obscure the fact that state loans function much more like private credit products.”
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States have had their own student loan offerings for decades. Several — including…
