Improving Parameter-Efficient Federated Learning with Differentially Private Refactorization

Federated Learning (FL) with parameter-efficient fine-tuning, such as Low-Rank Adaptation (LoRA), enables scalable model training on distributed data. However, when combined with Differential Privacy (DP), LoRA often introduces errors during global aggregation and amplifies the negative effect of DP noise. Existing cross-silo FL approaches mitigate the aggregation error by freezing one LoRA module and applying output perturbation. However, in a restricted low-rank subspaces, this additive noise frequently overwhelms the signals of the weight matrices, leading to suboptimal accuracy. To address this vulnerability, we propose FedPower, a differentially private cross-silo FL framework that reshapes server-side aggregation. Instead of perturbing mismatched low-rank factors, FedPower explicitly reconstructs and clips full-rank client updates to bound the sensitivity. The server then projects the exact aggregated update back into a secure low-rank space using PowerDP, a novel differentially private low-rank factorization mechanism. Based on simultaneous subspace iteration, PowerDP injects calibrated DP noise prior to the final orthonormalization step, effectively mitigates the negative effect of DP noise by preserving matrix orthogonality. We provide rigorous theoretical analyses establishing sensitivity bounds for subspace projections, proving that FedPower achieves both sample-level and client-level DP. Extensive experiments on various language understanding tasks in cross-silo FL settings show that FedPower is robust against tight privacy budgets while adding negligible computational overheads. Additional empirical study on different DP noise injection schemes validates the effectiveness of PowerDP in improving the tradeoff in accuracy and privacy. Evaluation on three different membership inference attacks validates the robustness and privacy-preserving capability of the proposed framework.