Efficient and Differentially Private Federated LLM Fine-Tuning on Heterogeneous Clients

Federated low-rank adaptation (FedLoRA) allows multiple clients to collaboratively fine-tune large language models (LLMs) on downstream tasks without exposing their private data. To mitigate privacy leakage during aggregation, differential privacy (DP) is widely used to clip and perturb local model updates with noise, yet it can compromise model accuracy due to the inherent privacy-utility trade-off. The performance degradation becomes worse under the FedLoRA setting with the amplified DP noise impact and client heterogeneity in both model structure and data distribution. In this work, we propose iP-FedLoRA, a privacy-preserving federated fine-tuning framework for heterogeneous clients that strikes a good privacy-utility balance. Specifically, to fully utilize clients' heterogeneous resources, we customize LoRA modules based on their available resources. iP-FedLoRA employs matrix-wise differentially private local fine-tuning with sensitivity-aware noise allocation and rank-compensated LoRA regularization, which effectively alleviates noise impact of low-rank modules and enhances training efficiency. By leveraging noise-resilient knowledge distillation, iP-FedLoRA facilitates heterogeneous LoRA aggregation that selectively prioritizes high-confidence knowledge to filter DP-induced noise, thereby achieving robust knowledge transfer. Through rigorous privacy analysis and extensive experiments, we show that iP-FedLoRA provides privacy guarantees, improves model accuracy by up to 3.8%, and expedites training by 1.37-2.23×.