The Rhode Island Student Loan Authority has pointed out a rate differential it says could save families thousands when they take out loans for higher education.

Federal education loan rates for the 2017/18 academic year were set May 10 based on the 10-Year U.S. Treasury Note auction, pegging the Federal PLUS Loan rate for the 2017/18 academic year at 7.0 percent. Comparatively, parents and students can borrow through RISLA’s state-based education loan program at rates as low at 4.74 percent. In a press release, RISLA calls this rate differential a “remarkable opportunity for students and parents in RI to save up to thousands of dollars in interest and fee charges.”

“Many parents think of the Federal PLUS Loan as their first option for borrowing because they don’t know what else is out there,” said Charles Kelley, Executive Director of RISLA. “There are many state-based loan programs, such as the RISLA Student Loan, that offer lower interest rates and fees while still providing borrowers with protections and benefits.”

For example, a parent borrowing $20,000 to help pay for their child’s education could save nearly $4,000 by choosing RISLA’s immediate repayment student loan, at a rate of 4.74 percent with no upfront fees as opposed to the Federal PLUS loan, which has a 7.0 percent interest rate and a 4.276 percent origination fee.

Those savings are substantial, Kelley said, because families on average borrow $30,000 to 35,000 over a 4-year period. Savings through RISLA under that amount of borrowing would be just under $6,000.

“We encourage them to borrow only what they really need,” he added.

PLUS is generally the first loan people go to because it’s a federally provided loan, which people should look to first anyway, Kelley said. But if they qualify for RISLA’s, it can save them additional money. Kelley said PLUS is easier to qualify for in the case of lower credit scores, but that RISLA’s program is beneficial for those with better credit scores.

Among the benefits provided by RISLA are an income-based repayment program, $2,000 in loan forgiveness for qualifying interns, and forgiveness in the unfortunate event the student dies or becomes permanently disabled.

“Sometimes borrowers end up in unforeseen situations. In the tragic event of death, disability, or unemployment, RISLA provides protection to borrowers,” said Kelley. “We don’t want to overburden students and their parents with monthly payments they can’t afford when adversity strikes.”

RISLA “encourages families to pursue free sources of college aid, such as grants and scholarships, and the Federal Direct Subsidized and Unsubsidized Loans for students before pursuing other options.” The Federal Direct Subsidized and Unsubsidized Loans have extensive benefits for students and low fixed interest rates and fees. However, these loan programs have annual loan limits, which are often well below a family’s borrowing needs. When families need to finance college beyond these limits, families should compare their options, making sure to find the best deal available to them.