MEFA Responds to Federal Student Loan Restrictions with Expanded, Competitive State-Based Options

BOSTON--(BUSINESS WIRE)--New restrictions on federal student loans start July 1^st, increasing the need for supplemental financing options that college students may rely on to complete their degrees. The Massachusetts Educational Financing Authority (MEFA) has responded to the need by expanding its graduate loan program and offering an undergraduate loan rate lower than the Federal Parent PLUS Loan.

For the 2026-27 academic year, the MEFA Undergraduate Loan features a fixed interest rate range of 4.95% to 8.90% (4.95% - 8.90% APR*), determined by applicant credit history, with no annual loan limits, covering up to the full cost of education less aid. In contrast, the Federal Parent PLUS Loan offers a 9.07% interest rate, a $20,000 per year per student borrowing limit, and a $65,000 in aggregate limit per student for new borrowers starting July 1^st.

The MEFA Graduate Loan features a 7.15% to 9.95% fixed interest rate range (6.60%-9.93% APR*), determined by applicant credit history. Meanwhile, the Federal Graduate PLUS Loan program will be discontinued on July 1^st for all new borrowers.

MEFA’s undergraduate and newly enhanced graduate loan programs are now accepting applications. Both MEFA Loan programs feature no application or origination fees and repayment options designed to meet individual budgets.

“With new restrictions on federal loans, more students and their families are turning to state-based education loan providers, such as MEFA, for reliable, trustworthy, and transparent options for financing their educational goals,” said Thomas Graf, Executive Director of MEFA. “For more than four decades, MEFA has supported hundreds of thousands of families by providing competitive, predictable financing that empowers students to achieve their goals and step confidently into their careers.”

A state-based student loan provider created by the Massachusetts Legislature in 1982, MEFA offers loans to qualified borrowers up to the total cost of attendance, minus any financial aid. Following the federal government’s decision to end the Graduate PLUS Loan program, MEFA enhanced its graduate loan to support students pursuing advanced degrees in fields such as medicine, dentistry, nursing, law, veterinary medicine, and other professions, with multiple repayment options and grace periods tailored to specific programs.

State-Based vs. Private Student Loans

State-based education loan providers, such as MEFA, remain a trusted and steady source of financing as the total cost of higher education may exceed federal borrowing limits. MEFA advises students and families to shop around for the best loan rates and repayment terms to fit their budgets.

State-based loan providers differ from private lenders in their approach to pricing. Although private lenders may advertise a wide range of interest rates, few borrowers qualify for the lowest available rates, leaving many with interest rates at the higher end of the range.

In the 2024-2025 academic year, 69% of Sallie Mae borrowers were issued loans with an interest rate of 9% or above, according to a recent report from the American Action Forum (AAF). By comparison, 88% of borrowers from state-based/nonprofit lenders were issued loans with interest rates between 5% and 8.99%.

“This [tendency of state-based lenders to offer lower rates] is important as lower rates can reduce lifetime borrowing costs, improve repayment outcomes, and expand affordability for creditworthy students who exhaust federal aid,” according to AAF’s report.

Do the Homework Before Borrowing

When borrowing, undergraduate students and families should first consider Federal Direct Student Loans, followed by state-based and nonprofit lenders. Graduate students should consider Federal Direct Unsubsidized Student Loans alongside state-based and nonprofit lenders. All borrowers should evaluate interest rates, fees, and repayment terms to determine the best option for their individual situation.

MEFA’s loan programs offer reliable, predictable options for credit-eligible borrowers seeking to finance the full cost of education, and features include:

• No annual loan limits, covering up to the full cost of education less aid
• No aggregate borrowing limits
• Competitive, fixed interest rates
• No application or origination fees
• No prepayment penalties
• Multiple repayment options for undergraduate and graduate borrowers, including interest-only and deferred options
• A grace period length specific to program for certain graduate programs

To learn more about MEFA’s programs, visit mefa.org.

*The Annual Percentage Rate (APR) is designed to help consumers understand the relative cost of a loan and reflects MEFA’s current underwriting criteria, loan rates, and in-school and post-school period assumptions. MEFA’s lowest rates are only available to the most creditworthy applicants.

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 of MEFA’s work aligns with the ever-present goal to support the independence, growth, and success of Massachusetts students and families. Visit mefa.org to learn more.