Your Guide to Graduate School Loans
9 Min Read | Published: August 5, 2024
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Financing grad school can seem daunting. See how to cover the cost of your tuition and other expenses with graduate student loans (federal and private).
At-A-Glance
- Federal student loans and private student loans can help you pay for graduate school by spreading out the cost.
- As you compare loans for your graduate degree, consider factors like interest rates, repayment plans, fees, and potential benefits.
- In addition to loans, you may also be able to cover the cost of your education with scholarships, grants, work-study programs, income-based assistance, and part-time jobs.
Graduate school can be a good long-term investment in your future. However, it can be difficult to cover the high cost. According to the National Center for Education Statistics, graduate students at public universities pay an average of over $11,000 per year, just for tuition and related fees.1
Taking advantage of graduate student loans could be a good solution to help spread the costs of graduate school and make your education more affordable. Before you start applying, here’s a closer look at the various student loan options that may be available to you as a current or future grad student.
Types of Federal Graduate School Student Loans
Just like undergraduates, graduate students can also obtain federal student loans.
There are a few different types of federal student loans, including:
- Direct Unsubsidized Loan
You can take out a Direct Unsubsidized Loan, even if you don’t show financial need. These loans are available for both undergraduate and graduate students. With a Direct Unsubsidized Loan, interest will start to accumulate on the date you receive the funds from your school.2 - Direct Subsidized Loans
Direct Subsidized Loans are available for undergraduate students with financial need. They cover all accrued interest while you’re in school, as well as during deferment and grace periods.3 - Direct PLUS Loans
Direct PLUS Loans are specifically created for graduate students as well as eligible parents who want to finance their children’s education.4 These loans are unsubsidized and have a fixed interest rate, meaning that interest will accrue while the student is in school. Keep in mind that there are two types of Direct PLUS Loans: the Grad PLUS loan and the Parent PLUS loan.5
The repayment plans for these loans include the Standard Repayment Plan, the Graduated Repayment Plan, and the Extended Repayment Plan. When you graduate, you will automatically be enrolled in the Standard Repayment Plan, unless you opt for a different plan. If you’d like to be placed on a different plan, you’ll need to contact your loan servicer.6
How to Apply for Federal Graduate School Student Loans
If you’re interested in federal graduate student loans, you’ll need to complete the Free Application for Federal Student Aid (FAFSA). Be prepared to share your Social Security number, federal income tax returns, and bank statements (if applicable).7
Your college or university will use your FAFSA information to determine your financial aid eligibility. Then, they’ll send you an award letter that explains how much aid you qualify for. You can work with your school’s financial aid office to claim the aid if you’d like.8
Types of Private Student Loans
Unlike federal student loans which are funded through the federal government, private student loans are offered by private lenders. These loans may use your credit score to determine eligibility. In general, private student loans come from state-based and nonprofit lenders or for-profit lenders.9
- State-Based Student Loans
Depending on where you live or attend graduate school, you may qualify for state-based student loans. State-based student loans are typically private loans offered by state agencies and non-profit organizations. These loans are considered private student loans, which means they don’t qualify for federal benefits. However, they can provide better terms than other private lenders.10 - For-Profit Lenders
For-profit lenders who offer graduate student loans include banks, credit unions, and lenders. These loans may have higher borrowing limits than federal student loans do. They may have higher interest rates as well. They also may focus on your credit score to determine eligibility, so if you don’t have strong credit, then you may want to consider applying for them with a cosigner, a close friend, or a family member with strong credit.11
How to Apply for Private Graduate School Student Loans
When applying for private graduate student loans, it’s a good idea to shop around. Fortunately, many private lenders will let you prequalify online and check potential rates and terms without any impact to your credit.
You can compare your options and zero in on the ideal loans for your unique situation. Once you find a loan you’d like to pursue, you may fill out a formal application online or in person at a local branch.12
Comparing Loan Options
As you compare student loans for graduate school, keep the following in mind:13
- Interest Rates
Ideally, you’d choose the loan with the lowest interest rate. The less you spend on interest, the more money you’ll save on your graduate education. A better rate can lead to thousands of dollars in savings. - Repayment Plans
Repayment plans for graduate student loans can vary greatly. Your interest charges and monthly payments may be spread out equally over the life of your loan. In some cases, you might start off with lower monthly payments that go up over time. You might also find repayment plans that are tied to your monthly income and require you to pay a percentage of your earnings each month. - Fees
Some loans come with fees, such as origination fees, application fees, and disbursement fees. Since fees can increase your overall cost of borrowing, it’s important that you understand what they are and determine how much you’ll pay for them in the long run. - Benefits
Federal loans usually offer additional benefits, such as student loan debt forgiveness programs and income-based repayment plans.
It’s important to choose carefully when contemplating federal and private student loans, since each loan has different interest rates, repayment terms, and fees.14
Alternatives to Graduate School Student Loans
When it comes to graduate school student loans (or any student loans), it’s always worth looking into alternative options that can help you to pay for your education, helping you to keep your student loan debt down.15
- Grants
Grants are typically awarded based on financial need. Once you receive a grant, there’s a good chance you won’t have to repay it. They’re often offered by state or federal financial aid that is given to a specific college or university. - Scholarships
Graduate scholarships can be need-based or merit-based. As with grants, they don’t require repayment. You might be able to secure a scholarship by earning a high GPA, for example. - Work-Study Programs
The federal work-study program is offered to undergraduates and graduates who demonstrate financial need. If you qualify for work-study, you may be able to work a job while you study and use your earnings to help cover your education. - Part-Time Job
Depending on the nature of your graduate program, you may be able to get a part-time job while you’re in school. A part-time job, such as tutoring or food delivery may offset some of your expenses and make your degree more affordable. - Savings
If you build up savings, you can apply some of it toward graduate school. The earlier you start saving, the more money you’ll have available to you and the less you’ll have to borrow. It may be a good idea to consider putting your savings in an account that will generate interest. A high-yield savings account (HYSA) is one account you’ll want to consider. A HYSA will typically offer a much higher return on your savings compared to a traditional savings account.
- Income-Share Agreements
With an income share agreement (ISA), you can receive funds for your education while you’re in grad school and repay it via a fixed percentage of your income once you graduate. The percentage and repayment term will be determined after you commit to the agreement.16 - Employer-Paid Tuition
Some employers will cover a portion of or all of your graduate education. Do your research and try to find a job with a company that offers tuition reimbursement. This is a perk that certain companies may offer as part of their employee benefits package.
Did you know?
Before you move forward with a graduate degree, you’ll want to make sure it’s the right move for your particular field. Do research to understand what type of salary you can expect in your particular field with a postgraduate degree.17
Frequently Asked Questions
The FAFSA is for undergraduate and graduate students who are interested in federal student loans. It’s important to complete it as soon as you decide to pursue a graduate education.18
The Pell Grant is not for graduate students. It’s geared toward undergraduates who show financial need.19
There is no limit to the number of grants, scholarships, and other types of financial aid you can apply for. However, there is a limit with federal student loans, and may include loans received for undergraduate study.20
The Takeaway
Graduate school can be an expensive endeavor. By understanding the types of federal student loans and private student loans available to you, you’ll find it easier to cover its cost. You should also explore alternative funding options, such as scholarships, grants, work-study programs, and part-time jobs.
1 “Trend Generator,” National Center for Education Statistics
2,3,4,14 “Federal vs. private student loans: What's the difference?,” Bankrate
5 “What is a Direct PLUS loan?,” Consumer Financial Protection Bureau
6 “Federal Student Loan Repayment Plans,” Federal Student Aid, an Office of the U.S. Department of Education
7 “What information will I need to fill out a FAFSA form?,” Federal Student Aid, an Office of the U.S. Department of Education
8 “How Financial Aid Works,” Federal Student Aid, an Office of the U.S. Department of Education
9,11,12,19,20 “Financial Aid Guide for Graduate Students,” BestColleges
10 “State Student Loans,” LendEDU
13 “Things To Compare / Contrast While Researching Student Loan Options,” CollegeRaptor
15,17,18 “How to Pay for Grad School,” Forbes
16 “Income share agreements: Everything you need to know,” Bankrate
Anna Baluch is a personal finance writer from Cleveland, OH. She enjoys helping people from all walks of life make smart financial decisions. Her work can be seen on Credit Karma, Forbes, LendingTree, Insurify, and many other publications. Connect with Anna on LinkedIn.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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