As new federal student loan borrowing limits take effect, some U.S. states—including Connecticut, Minnesota, and Rhode Island—have expanded their respective student loan programs.Under President Donald Trump’s “Great American Act,” effective July 1, the new annual limit for federal graduate student loans is $20,500, and professional degree students can borrow up to $50,000 per year, whereas previously graduate students could borrow as much as they needed.

However, consumer advocates warn that state student loans are more similar to private student loans and should be approached with caution. Interest rates on these loans vary by state and can exceed 10% (for example, up to 10.5% in Pennsylvania), which is higher than the current 8.07% interest rate on federal unsubsidized loans.State loans are typically financed through bond sales, require a return for bondholders, and may require borrowers to have a high credit score or a cosigner. Additionally, state student loans do not qualify for federal relief options and protections, such as income-driven repayment plans or public service loan forgiveness, and often have residency requirements. Advocates recommend treating state loans as a last resort.