Education isn’t cheap, but graduate students have options to help cover costs and make ends meet. Some of the loans offered to graduate students are similar to undergraduate loans, but others are specific to certain grad programs.
The federal government offers several loans specifically for graduate students. You should consider starting with these sources before exploring your private loan options. Government-sponsored student loans often have advantages, like lower interest rates and more flexible repayment plans.
Keep in mind that graduate students haven't been able to enjoy the benefits of a subsidized loan since July 1, 2012. Unlike undergraduate loans, interest will begin to accrue as soon as you get the money, so you'll want to be especially careful about how much you borrow.
Federal Student Loans
Like undergraduate students, graduate students applying for federal aid benefit from starting the process as soon as possible. Visit your school’s financial aid office to apply for any of these loans. You'll also need to gather personal information and submit your Free Application for Federal Student Aid (FAFSA) early in the year, ideally in January, to improve your chances of getting grants and other types of financial aid.
Interest rates for loans owned by the Department of Education were reduced to 0% to provide temporary relief during the COVID-19 pandemic. The 0% interest rate applies to loans through August 31, 2022.
Payments on federal student loans were also paused through January 31, 2022, in response to the pandemic. You didn't have to worry about making your payments during this time. The White House announced that this forbearance period has been extended through August 31, 2022.
Direct Unsubsidized Loans
Direct Unsubsidized Loans (also called “Stafford Loans") are available to both undergraduate and graduate students. They allow you to borrow up to $20,500 per year for graduate school. Grad students who received their first loan payments between July 2021 and July 2022 paid a fixed interest rate of 5.28%. The origination fee for the first loan payments made between October 2020 and October 2022 was 1.057%. This is likely less expensive than a private loan, but you should always shop around, especially if you have a good credit score. Students with good credit may be able to find a great deal from a private lender, but you'll likely qualify for a Direct Unsubsidized Loan no matter your credit score.
Direct PLUS Loans
Direct PLUS Loans are also known as “Grad PLUS Loans." They're available if you still need money after you’ve exhausted your Direct Unsubsidized Loans, which offer lower interest rates.
You can only borrow as much as needed for your “cost of attendance,” minus any other financial aid you’ve received. You also need a credit history that's free from bankruptcy, tax liens, repossessions, and similar events. You probably won't qualify for a Graduate PLUS Loan if you need a cosigner to qualify for a loan,
Students who received their first payments through this type of loan between July 2021 and July 2022 paid a fixed interest rate of 6.28%. There's also an origination fee. The origination fee for students who received their first disbursement between October 2020 and October 2022 is 4.228%.
You may remember Perkins Loans from your days as an undergraduate student. This loan type was popular because of the low interest rates it offered to undergraduate and graduate students who demonstrated "financial need." Unfortunately, the Perkins Loan program was ended by federal law in September 2017. The final disbursements through the program were distributed through June 30, 2018. These loans are no longer offered to any type of student.
Private Loans for Graduate Students
You'll have to look to private lenders after you’ve borrowed everything you can through government programs if you need more to pay for the cost of your advanced degree.
This is probably a good time for a common-sense reminder: Just because you can borrow more, that doesn’t mean that you should. Remember that you’ll have to repay these loans, and irresponsible borrowing can haunt you for many years. Student loans are a great way to invest in your future, but there are countless horror stories about people who got in over their heads.
Where to Find Private Loans
Private student loans are available from a variety of lenders. Banks, credit unions, and online lenders offer private student loan products. Unlike the government, private lenders are more likely to have stricter qualifications for borrowers. You’ll need good credit and sufficient income to repay the loan. Most graduate students are fairly young, and they have a hard time qualifying on their own, but having a cosigner can help.
Students coming from abroad to pursue post-graduate degrees are ineligible for federal student loans. Private student loans may be the best option to help cover their costs.
Private Loans May Be More Customized
How much can you borrow from a private lender when you’re a graduate student? It depends on the lender and your field of study. You can generally borrow more if you’re studying for a profession that tends to have higher earnings. Future doctors, lawyers, and chief financial officers (CFOs) get to borrow more than future librarians, for example.
Private lenders even offer products that are specific to your field of study, and this is one way in which they might be more attractive than federal student loans. You may need to complete internship hours, pass licensing exams, or earn industry certifications after you graduate. Some private graduate student loans include provisions that help cover your living expenses while you complete these requirements.
How to Apply for Private Loans
Guidelines for how to specifically apply for a private loan can vary. There are just too many types of loans and too many lenders to allow for any single "average" process.
Start by searching generally for private loans, and then narrow your search by focusing on the type of degree you’re pursuing. Be prepared to provide financial information to the lender when you're ready to apply, including bank statements, pay stubs, and school documents.
Online lenders have emerged as a way of making loans more affordable and accessible. That applies to student loans as well as personal loans, which can be used for any purpose.
Be sure to compare online loans to those from traditional sources. Shopping around is even more important for private loans. You can assume that your loan's rate is relatively competitive with government loans, but you may find some great private loan plans, along with some predatory ones. Read the fine print to catch any extra hidden fees.
Keep an open mind about the type of loan you use. You may find that a personal loan with good terms is ultimately a better option for your situation than a "student" loan.
You may end up with multiple loans once you've finished your studies. It may be possible to consolidate them into a single loan in this case. Whether or not it makes sense will depend on how many loans you have and what kind of lenders you used.
Multiple federal loans can be consolidated into a Direct Consolidation Loan. Private lenders may also be willing to consolidate both your federal and private loans into one loan. Make sure to take note of factors like the amount of each loan and the interest rates before consolidating. You could end up with worse terms if you aren't careful, so ensure that you won't end up paying significantly more under a consolidated loan plan.