Student Loans for Graduate School
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Graduate Student Loans
Have you decided to go to graduate school, but aren’t quite sure how you’re going to pay for it? If you’re lucky, you might already have some help with that, whether you’ve earned scholarships, qualify for professional benefits through an employer, have sufficient savings, or something else. But what if you don’t have those kinds of resources? What if what you do have access to doesn’t cover all of it? That’s where graduate student loans might come in for those who qualify.
Getting Started: What to Know About Student Loans for Graduate School vs. Undergrad
Graduate student loans may be one option for financing graduate school if you qualify. With a student loan, qualified applicants may borrow money to fund tuition and education-related expenses, which is later paid back over time, with interest, after the borrower graduates. Student loans may also be available for eligible undergraduates seeking their bachelor’s degrees—something you might have experienced. But when considering student loans for graduate students, the rules are a little different. But that doesn’t mean you can’t apply and perhaps qualify for the loans and assistance you need! Here’s a basic run down of the key differences between the undergraduate and graduate loans process, for you to keep in mind.
Interest rates for graduate student loans might be higher:
While interest rates on both federal and private student loans tend to fluctuate from year to year, one thing to keep in mind is that federal student loan rates might be higher for graduate degrees than they are for undergrad.i
Your FAFSA might be different:
FAFSA stands for Free Application for Federal Student Aid. Undergraduate and graduate students may both submit this form to be considered for eligibility for federal and state student financial aid, depending on factors like your expected family contribution toward your expenses, and your overall level of need.ii Unlike most undergrads, if you’re submitting your FAFSA as a graduate student, you’ll most likely be considered an independent student.iii That means that you probably won’t have to include your parents’ information on the form, possibly qualifying you for more need-based aid. Which brings us to the next point…
Need-based aid might be a little harder to get:
While need-based financial aid is out there for qualified grad students, it might be tougher to qualify for. For example, Pell Grants are only awarded at the undergraduate level, with limited exceptions (e.g. some students in a post-baccalaureate teacher certification program might still be eligible).iv Additionally, graduate students aren’t eligible for Direct Subsidized Stafford Loans.v However, some graduate schools might offer need-based aid to qualified students, so check with your school’s office of financial aid.
DID YOU KNOW?
You might be able to defer your undergrad loans:
While you’re enrolled in graduate school, you might also be able to defer your student loans from your undergraduate degree.vi This might be a good thing or a bad thing, depending on your particular loans and financial situation. If you have unsubsidized or private student loans and defer them, remember that your interest will continue to accrue, adding to the overall amount you have to pay back. If you have any subsidized student loans, however, those may not continue to accrue interest, should you qualify.
You might be able to borrow more:
This might be good or bad. Graduate school may be pretty expensive, especially if you’re not eligible for any merit or need-based aid. Particularly for federal loans, there may be a limit imposed on how much you can borrow for student loans, but that ceiling is typically higher for graduate students.vii In the case of private graduate student loans, these details may vary by lender. While this might help cover more of your expenses while you’re in school, it might also allow you to rack up a little more debt if you’re not careful.
Types of Graduate Student Loans That May Be Available
Federal Direct Unsubsidized Stafford Loans
While Direct Subsidized Stafford Loans might be limited to qualified undergraduate students, as a grad student, you may still apply for a Direct Unsubsidized Stafford Loan. The primary difference between a Subsidized Stafford Loan and an unsubsidized one is that, if the loan is subsidized, the government might cover accruing interest while the borrower is actively enrolled in a program at least half-time, as well as during grace periods and deferment. With a Direct Unsubsidized Stafford Loan, as the qualified borrower, you might be responsible for any interest that accrues during those periods.viii
While you may be responsible for interest on Direct Unsubsidized Stafford Loans, you might also be able to take advantage of some of the benefits afforded to federal loan borrowers. For example, federal loans might include deferment options, fixed interest rates, various repayment plan options, and even the option to consolidate into a direct consolidation loan. Federal loans may also be eligible for some loan forgiveness if you work in certain eligible fields. ix
The exact amount you might qualify to borrow is determined in part by the cost of attendance at your school of choice, as well as considering both annual and aggregate loan limits. You can apply for a Direct Unsubsidized Stafford Loan by completing your FAFSA.x
Federal Direct PLUS Loans
Graduate Direct PLUS Loans may be another option for covering the costs of attending graduate school using a federal loan if you qualify. Like the unsubsidized Stafford loan, you may apply by completing your FAFSA. However, the method of determining how much you may be eligible to borrow is a little different.
Direct PLUS Loans can apply to any of your education-related expenses not already covered by your Direct Unsubsidized Stafford Loan and other financial aid, should you qualify.xi In short, you might be able to use it to fill in the gaps. If you choose to apply for a direct PLUS loan, some of the elements that might be considered in your application are:
- Your credit
- The amount of financial aid your are already receiving
- The total cost of attendance at your school of choicexii
Direct PLUS Loans, like Direct Unsubsidized Stafford Loans, are subject to fixed interest rates, which continue to accrue while the loans are in deferment.xiii They also might be eligible for additional benefits that might come with federal student loans, including deferment and repayment options, and potential tax deductions, if you meet the necessary qualifications.
Federal Perkins Loans
Perkins Loans are a little bit different from Direct Unsubsidized Stafford Loans and Direct PLUS Loans. Perkins Loans are a low interest student loan awarded based on eligibility requirements and financial need. Financial need is often determined using your FAFSA, considering the level of difference between your expected family contribution (or EFC) and the cost of attendance at a given school.xiv If you meet the eligibility requirements for a Perkins loan, the amount you may receive might be subject to both availability of funds and your particular level of need. This amount is also subject to maximum annual and lifetime amounts for borrowers. For graduate students, the lifetime figure also includes funds borrowed as an undergrad. Unlike Direct Unsubsidized Stafford Loans and Direct PLUS Loans, Perkins Loans do not include loan fees.xv
Perkins Loans are government funded, but the actual lender is the school you are attending. The total amount of funds available for Perkins Loans at your school are limited each year, so if you wish to be considered for eligibility, make sure to complete your FAFSA early.xvi
Those who apply, qualify for, and accept Perkins Loans might be able to take advantage of similar benefits to other federal loans, such as potential tax deductions (if you qualify, depending on income and other factors), deferment, and consolidation into a Direct Consolidation Loan. Repayment options might be a little different with Perkins Loans, however, so if you choose to pursue this option, make sure to follow up with your school’s financial aid office for more information.
Private or Non-Federal Student Loans
Federal student loan package doesn’t quite cover the cost of attendance? You might consider private student loans to cover the difference, which may be available if you qualify. Private student loans include any student loans not made or guaranteed by the government. Unlike Direct Subsidized Stafford Loans, Direct PLUS Loans, and Perkins Loans, private student loans may be subject to rates, limits, terms and conditions set by the individual lender. These loans might also be subject to a variable rather than fixed interest rate. Repayment, deferment, and forbearance options may be limited, and may vary by lender or loan. Private student loans may not be consolidated into a Direct Consolidation Loan; however, private consolidation options may be available.xvii
Private student loans generally take your credit into account when evaluating loan eligibility and amount.xviii As such, if you have very good credit, you may feel this is a good option for you. If that is the case, make sure you do your research, familiarize yourself with the amount, interest, and terms, as well as the options available to you for repayment and postponement.