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More than a million Americans enroll in graduate and professional schools each year, pursuing advanced degrees to achieve career goals. If you’re one of them, you’ll need to decide how to finance your post-collegiate education.

You should always look to grants, scholarships, and work-study options first, but if they fall short of your needs, another option to consider is graduate student loans.

Here’s what you need to know to find the best graduate student loans for you.

What kinds of loans are available to graduate students?

There are two primary sources of loans for graduate students:

Federal government

The U.S. government, via the Department of Education, lends money to American students to help them pay for their educations. Graduate and professional school students currently have two types of federal student loans available to them: Direct Loans (also called Stafford Loans), and Direct PLUS Loans (also called Grad PLUS Loans).

We’ll describe each in more detail below, but in general, federal student loans offer low, fixed interest rates and flexible repayment terms and options that usually make them the best first choice for grad-student borrowers.

You may have heard of a third type of federal loan, called a Perkins Loan. The federal government allowed the Perkins Loan program to expire on September 30, 2017, and no new Perkins Loans have been issued after that date. If you have a Perkins Loan now, you’ll receive disbursements through June 30, 2018. You’re responsible for repaying any Perkins Loans you received during the course of your education.

Private lenders

Some banks, credit unions, and online lenders offer private student loans, meaning you borrow money from a non-government source.

Most grad students should consider private student loans as a second choice to federal loans if they must borrow at all. Many borrowers won’t qualify for private loans with low-interest rates, and the federal loan repayment options protect borrowers in ways private lenders can’t always match.

What are Direct Loans?

Direct Loans are the most common type of federal student loans and are relatively easy to obtain as long as you meet basic eligibility requirements. You must be enrolled in school at least half-time and, usually, in a program that awards a degree or certificate. The school must also participate in the Direct Loan program (your school’s financial aid office will tell you if it does).

Your credit score and history don’t play a role in getting Direct Loans, which is good news if either is spotty. Your financial need is not a consideration, either.

Some undergraduate students qualify for subsidized Direct Loans where the government pays for, part of the interest on their loans. Grad students, however, only qualify for unsubsidized Direct Loans. That means they’re responsible for all interest accrued from the date the loan is first disbursed.

Key points about Direct Loans for grad students:

  • Loan limits: Grad students are subject to both annual and lifetime (or “aggregate”) limits. With some exceptions, grad students can receive no more than $20,500 each year in Direct Loans. The aggregate maximum is $138,500, including all federal loans received as an undergrad and, for most students, only $65,500 of that total can be in subsidized loans. Graduate and professional students in certain health profession programs (like dentistry) may have higher annual Direct Loan limits and higher lifetime limits. Your school’s financial aid office will be able to give you more detailed information about your specific situation
  • Interest rates: For a Direct Loan first disbursed to a grad student between July 1, 2017, and June 30, 2018, the interest rate is 6%. Interest rates may be different for loans disbursed earlier and can change for future years. The interest rate is fixed for the life of the loan
  • Loan fees: Direct Loans are subject to a loan fee, a percentage of the loan amount that is proportionately deducted from each loan disbursement. For loans first disbursed between October 1, 2016, and September 30, 2017, it’s 1.069%. For loans first disbursed between October 1, 2017, to September 30, 2018, the fee is 1.066%

What are Direct PLUS Loans?

Direct PLUS Loans are federal loans available to grad students and to parents of dependent undergraduates. They work as a back-up or supplement to Direct Loans. Grad students may use them when their annual Direct Loans are not enough to meet their needs, or they’ve hit their lifetime Direct Loan limit. Interest rates on Direct PLUS loans are typically higher than on Direct Loans, and eligibility requirements are more stringent.

Like Direct Loans, to be eligible you must typically be enrolled at least half-time in a degree- or certificate-granting grad school program, and be enrolled at a school that participates in the Direct PLUS Loan Program.

However, your credit history does play a part in determining your eligibility for Direct PLUS loans. If you have an adverse credit history — you’ve been late paying off debt, or have bankruptcies or other negative financial events on your record — you can still get a Direct PLUS loan, but you’ll have to either convince the Department of Education that extenuating circumstances caused your problems, or find a cosigner with good credit to cosign the loan with you, promising to repay the loan if you do not.

Direct PLUS Loans have other key differences from Direct Loans:

  • Loan limit: The maximum amount you can borrow via Direct PLUS loans is the cost of attendance (determined by the school) minus any other financial assistance received, including Direct Loans. PLUS loans have no aggregate limit
  • Interest rate: The interest rate for a Direct PLUS Loan first disbursed between July 1, 2017, and June 30, 2018, is 7% and is fixed for the loan’s life. Rates may change in future years. While you need to be creditworthy to obtain the loan in the first place, your creditworthiness doesn’t affect the interest rate. Interest starts accruing upon the first disbursement
  • Loan fees: Like Direct Loans, the loan fee for a Direct PLUS Loan is a percentage of the loan amount that is proportionately deducted from each loan disbursement. For loans first disbursed between October 1, 2016, and September 30, 2017, it’s 4.276%. For loans first disbursed between October 1, 2017, and September 30, 2018, the fee is 4.264%

How can I get a federal loan for grad school?

To apply for a Direct Loan or a Direct PLUS Loan, you must complete the Free Application for Federal Student Aid (FAFSA®). You must submit the FAFSA each year that you wish to receive financial aid.

FAFSA got you feeling overwhelmed? Check out some tips and tricks to make filling out the FAFSA easier here.

As long as a school participates in the Direct Loan Program, the FAFSA is all that’s needed to apply for a Direct Loan. Schools will use the information you provide on your FAFSA to determine the Direct Loan for which you qualify, and will offer it to you as part of your financial aid package. You can accept all, some, or none of it. Generally speaking, it’s best to borrow only the amount you absolutely need to pay for your education.

For Direct PLUS, schools require more than the FAFSA. Start by filling out the government’s supplementary information form, and follow any instructions there for your school. Your school will offer whatever Direct Loan you qualify for before a Direct PLUS Loan.

Any federal loan money you receive for grad school automatically applies first to your student account, to pay the balance of what you owe for tuition and fees. Whatever’s left is sent to you, to use for other education-related expenses like books or public transportation.

How do I repay my grad school federal loans?

You must start repaying your federal loans six months after you graduate, leave school, or drop below half-time. You’ll be on the default Standard 10-year Repayment Plan unless you make other arrangements with your loan servicer (the company that collects your loan payments). The Standard repayment plan requires you pay off your federal loans in no more than ten years, with fixed monthly payments.

If your monthly payments are too much, the government provides ways to make them more manageable. This flexibility is a key benefit to federal student loans.

With federal loans, you can switch to an income-driven repayment plan, which caps monthly payments based on your income. You can also see if you qualify for deferment or forbearance, which will temporarily pause your payments. Or, you can consolidate multiple federal loans into a single Direct Consolidation Loan.

Be aware that while these (and other) repayment options may lower your monthly payments, they may also stretch out your loan repayment term, which will mean you end up paying more in overall interest.

What are private graduate student loans?

Many banks, credit unions, online lenders and other financial institutions offer private student loans. Rates and terms on private student loans vary by lender and depend on the borrower’s creditworthiness.

Usually, private loans make sense only if other aid and federal loans aren’t enough to cover your expenses. You should never take on a private loan without at least knowing what Direct and Direct PLUS Loans you qualify for.

What is the difference between fixed and variable interest rates on private student loans?

Most private lenders offer both fixed and variable interest rate options on student loans, and your lender may offer you a choice between the two.

Fixed vs. variable interest rates

Fixed Interest RateVariable Interest Rate
What is it?A fixed interest rate remains the same for the life of the loanA variable interest rate changes - or varies - over the loan term, based on market interest rates, usually either the London Interbank Offering Rate (LIBOR) or the Prime Rate index. Variable rates typically start out lower than fixed rates
Interest rate rangesAbout 4% to 12% or more*About 3% to 10% or more*
Interest rate capsN/AGenerally 15% to 18%
Best for:Borrowers who want consistent monthly payments, even if they may end up paying a little moreRisk-tolerant borrowers who want lower monthly payments to start, and are comfortable with unpredictable and potentially inconsistent monthly payments after that if it means they may pay less overall.  Lenders decide how frequently the loan’s interest rate - and therefore the monthly payments - can change

*The lowest interest rates are typically available only to borrowers or co-signers with excellent credit, and in some cases for those enrolled in certain graduate programs, typically for professional degrees like MBAs.

Interest isn’t the only way a private lender may charge you money. Lenders may deduct an origination fee from each disbursement. They may assess big fees if you miss payments. Consider your total potential loan costs when evaluating private loan options. Some lenders offer discounts for good grades.

How much can I borrow in private student loans?

Loan amounts range dramatically between lenders. Some lenders limit loans to your school’s cost of attendance minus, in some cases, the other financial aid you receive. Some limits are upwards of $250,000, usually for certain professional graduate programs like law or medicine.

Term lengths can vary, too, from as little as five years to 20 years. Typically, the shorter your loan term, the less you’ll pay overall (since interest won’t accrue for very long), but the higher your monthly payments could be.

How can I get a private student loan?

Applying for a private student loan is typically a two-step process.

  • See if you prequalify: You can use a site like Credible to complete a two-minute form to see if you prequalify for a loan with a number of lender partners without impacting your credit score. Then, you can compare your options side-by-side. You can even try out multiple co-signers to see if a co-signer can help you qualify for the loan with better rates
  • Apply to the lender that’s right for you: Once you get your prequalified rates, do your research and see if you can find an offer that suits your needs. Remember to read the terms and conditions, and make sure you’re aware of the interest rate and repayment option you’re signing up for

A note about co-signers: Many grad students don’t have the credit history to qualify for the best loans on their own. Adding a co-signer, someone with a longer and stronger credit history than yours will often allow you to get much better rates, or even qualify for a loan at all.

By co-signing your loan with you, your co-signer agrees to pay off your loan if you fail to do so. Some lenders will allow you to release your co-signer once you’ve made a certain number of consistent payments and have met income and other requirements.

Remember, your co-signer’s credit is on the line, so repay your loan responsibly.

What are repayment plans for private student loans?

There are four common repayment plans for private student loans, although not all lenders offer each of them:

  • Immediate repayment: You must make full monthly payments while you’re still in school
  • Interest-only repayment: You must pay only the interest on your loan while you’re still in school
  • Partial interest repayment: You make a flat monthly payment while still in school that only covers part of the interest you owe
  • Full deferment: You pay nothing while you’re enrolled in school, and only begin repayment once you graduate

Private lenders are rarely as accommodating with repayment options as the federal government if you’re struggling to make your payments.

Before you take out a loan, understand how the lender will modify your payments if they become unmanageable. If you run into trouble, contact your lender right away to explore your options.