What loans are available for graduate students? One major investment many people make is in pursuing a graduate education, and many students rely on loans to finance their advanced degrees.
Now, while graduate school can lead to better career prospects and higher salaries, it also comes with higher tuition costs, living expenses, and other financial burdens.
Fortunately, graduate students have several loan options, ranging from federal to private loans.
Each type of loan has its own set of benefits that puts them at a higher advantage, interest rates, and repayment options.
Before one commits to a loan, it’s essential to compare the different options and understand how they align with your financial situation and long-term career goals.
Loans Available For Graduate Students
Federal Student Loans For Graduate Students
When it comes to taking out a loan by graduate students, the federal student loans are often the first choice.
This is because they typically offer lower interest rates and more flexible repayment options than private loans.
What’s more, these loans are funded by the U.S. Department of Education and come with various borrower protections. They include:
Direct Unsubsidized Loans
- This loan is available to all graduate students, regardless of financial need.
- Annual borrowing limits apply, typically up to $20,500 per year.
- Accrues interest while you are in school, but payments can be deferred until after graduation.
- This loan also has mixed interest rates, which are usually lower than private loans.
Direct PLUS Loans
- Also known as Grad PLUS Loans, these loans are available to graduate and professional students.
- Covers the full cost of attendance minus any other financial aid received.
- Offers flexible repayment plans, including income-driven repayment options.
- Higher interest rates compared to Direct Unsubsidized Loans.
- Requires a credit check but has more lenient approval criteria than private loans.
Private Student Loans For Graduate Students
While federal loans should be considered first, some students may need additional funding beyond what a federal loan may provide.
Private student loans, are offered by banks, credit unions, and online lenders, and can fill the gap.
Credit Requirements
- The approval of the loan depends on credit history and income level.
- Unlike federal loans, private loans do not offer income-driven repayment plans.
- Some lenders require a co-signer if the student does not have a strong credit profile.
Interest Rates And Terms
- The interest rates may be fixed or variable, depending on the lender.
- Loan terms vary by lender but usually range from 5 to 20 years.
- Interest rates are typically higher than federal loans unless you have excellent credit.
Loan Forgiveness And Repayment Options
Graduate students should consider their repayment and forgiveness options when choosing a loan.
Federal loans offer more flexible repayment options, which can make managing debt easier.
Income-Driven Repayment Plans
- Available for federal student loans.
- Includes plans like Income-Based Repayment (IBR) and Pay As You Earn (PAYE).
- Monthly payments are based on income and family size.
Loan Refinancing
- This allows borrowers to consolidate multiple loans into one loan with a lower interest rate.
- It can also be done through private lenders but removes federal loan benefits.
Public Service Loan Forgiveness
- Available for federal loans if you work for a qualifying nonprofit or government organization.
- Requires 120 qualifying monthly payments while working in public service.
Alternative Funding Options
Before taking out loans, graduate students should explore other funding options like scholarships and grants, which do not require repayment.
Many universities, private organizations, and government agencies offer funding based on merit, financial need, or specific areas of study.
University-Sponsored Scholarships
- Often based on academic merit or research contributions.
- Many graduate programs offer fellowships and assistantships that cover tuition and provide stipends.
External Scholarships
- There are organizations and foundations offer scholarships for students pursuing specific fields.
- Also, it requires separate applications, essays, and sometimes interviews.
Frequently Asked Questions
How Much Can I Borrow For Graduate School?
Direct Unsubsidized Loans have a limit of $20,500 per year, while Grad PLUS Loans cover up to the full cost of attendance minus other aid received.
Do I Need A Co-Signer For A Graduate Student Loan?
Federal loans do not require a co-signer, but some private lenders may ask for one if you have a limited credit history or low income.
Can I Get Loan Forgiveness For Graduate Student Loans?
Yes, federal student loans may qualify for forgiveness programs like PSLF or income-driven repayment forgiveness after 20-25 years.
