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Which Student Loans Are Available for Graduate Students?
Federal Student Loans
The Stafford Loan
The greatest amount that you may borrow for the 2020 year is $20,500. If you’re attending medical school, you qualify for up to $40,500 per year. The total loan limit for a Stafford loan is $138,500 for grad students and $224,000 for medical students. These numbers include any debt that you may still have from undergraduate.(Source: STUDENTAID.gov)
The interest rates for an unsubsidized loan may depend on the year in which you take out the loan. But the Stafford loan has a lower interest rate than the Grad PLUS loan. Interest begins from the moment the funds are first released (or disbursed) to your school. Much like a credit card, your total debt may increase based on the rates of the loan.
If you can’t qualify for the money you need for grad school through a Stafford loan, you may consider the Grad PLUS loan.
Grad PLUS Loan
Loan Origination Fee
You typically pay for a loan origination fee on both the Stafford and PLUS loans. This charge generally covers the work the lender needs to do to grant the loan. For example, lenders have to underwrite your history. They’re likely looking at how you’ve paid back past debts. They also have to arrange for payment. They might need to work out a contract with your school or negotiate delivery terms. The lender may also need to process paperwork and ensure that there are no loose ends.
The origination fee is a percentage of the loan. This percentage varies depending on the year in which you take it out. As with the interest rates, the Stafford loan origination fee is lower than that of the Grad PLUS loans. (In some cases, a lot lower.)
It’s important to factor in all costs before you take out a federal loan. A high loan origination fee is the same as bumping up your interest rates by a certain percentage. Applying an amortization formula may help you understand the true life of the loan and loan repayment schedule.
The Disbursement of Loans
Deferment and Grace Periods
How to Apply for a Loan
Private Student Loans
There is typically no deadline to apply for student loans for grad school. This is handy because you may try other things before you settle on private loans. Or if you underestimated how much you would need during a semester. You may apply for a private graduate school loans to cover the rest of your incidental expenses. Applying for a student loan is a lot like applying for other types of loans. The lender may look at your income, credit history, total debt, and whether you have a cosigner. (A cosigner is someone who agrees to pay the debt even if you are unable to.) The better your credit score, the better rates you’ll typically receive.
How Much Can You Borrow?
Like the Grad PLUS loans, private loans for grad school usually are based on the Cost of Attendance. So let’s say that year in grad school amounts to $55,000. If you’ve received $20,000 in a Stafford loan, then you could take out a total of $35,000 in private loans. To work out living expenses, private lenders may base the costs on the area where the school is. A more in-demand area, such as San Francisco, might rate more than $2,000 a month for off-campus housing. The total loan limit that you’re allowed to borrow is generally based on the lender. But it should be noted that private lenders are more likely to award more than the government.
Repayment Facts
The repayment terms may be up to the lender. They may ask you to begin making payments while you’re still in school. But this is difficult when you’re trying to concentrate on learning. So while it might save you some money, it might not be practical if you’re too busy. Or lenders may want you to repay only the interest while you’re still in school. This way, you may focus on the principal of the loan by the time you’re ready to start your career.
Some lenders might grant you a deferment or grace period. Their terms are usually the same as the federal government (e.g., 6 months, etc.). The amount of time that you have to pay back the loan may be nearly anything that the lender wants it to be. In some cases, you’ll likely have more than two decades. Lenders usually give you at least 5 years.
Which One Is Better: Private or Federal?
In general, it’s usually better to choose the federal options whenever you can. You may focus on your schooling when you’re a student, and you’ll also have more flexible payment options. The federal government might offer you an income-driven plan too. This means that you’ll typically pay back your loans in proportion to the job that you receive out of school. You may also qualify for student loan forgiveness.
Private loans for grad school may be an option if you need to borrow more. But remember that the more you borrow, the more interest you’ll pay over time. Private loans are sometimes based on variable interest rates too. This means that you might see your interest rate rise over time.
One benefit of a private loan though is that you might get a better interest rate. Federal loans are a product of fixed criteria. They don’t really look at you as a person but as a student. A private lender may take into account your good credit. Federal loans also typically don’t have a statute of limitations. This means that your debt may not be forgiven if you default. (This is separate from student loan forgiveness based on income.) Private loans for grad school may also tend to offer more flexible refinancing options.
6 Factors You Should Look for in A Grad School Loan
We can’t stress enough how different lenders can be — even when they’re offering the same loan. Even lenders offering federal loans may each have their own rules and expectations. See what you should look for before you start applying:
1. Low rates
The rates of your loan may have everything to do with how much money you pay over time. If you’re considering a private loans for graduate school, you should compare the numbers to a federal loan. In general, you may want to avoid variable rates whenever you can. These rates sometimes look lower. But there’s a good chance that they may increase over time and force you to pay more.
2. Low Fees
The fees for the federal loans may be the same no matter where you apply. But that doesn’t mean that some lenders won’t tack on extra. Remember that the loan origination fees may add more to the total cost of the loan. Lenders may try to hide processing fees, especially if they’re offering low rates. You should always get these fees upfront and factor them into the total amount you’ll pay over time.
3. Repayment Options
The government may generally give you the best repayment options available. If you’re not making as much money as you thought you would, federal lenders may work with you. The federal government may even forgive your debts in some cases. Lenders have introduced a variety of options to compete with federal loans. You may see some degree of flexibility with them. But they generally can’t come close to the same amount of choice.
4. Transparency
Every lender may go about their business a little differently. This regardless of whether you’re applying for a private or federal loan. The lender’s communication style may have a lot to do with how much information you have. Their processes determine how the school is paid and your account is credited. The more you know, the easier it is to plan ahead. It also speaks to the lender’s priorities.
5. Total Loan Amount
Graduate student loans may end up costing you a lot more than you ever considered. You don’t want to be surprised by the time you start on your repayment plans. Just because the monthly payment looks low, doesn’t mean that it’s affordable. Student loan options may vary across lenders, but you should be calculating the total to avoid massive student loan debt. If you have questions, you may check with the financial aid office.
6. Monthly Payments
You can’t predict how much money you’re going to make over time, but different degree programs may at least give you an average. Whether you’re going to law school or getting your Ph.D, the type of graduate degree you receive may give you an idea of whether you’ll be able to make the loan payments.
Grad school loans are a means to higher education and an advanced degree, and they may be extremely useful for students of all backgrounds. Options like income-based repayment and payment deferrals may be help students even if their careers don’t always go as planned. The key is to look for lenders who may work with you. In most cases, the best loan application process and loan program may be the federal kind. To get more answers about rate loans or additional funding, talk to your school’s financial aid office.