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 graduate school 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.
Student loans you can use for grad school
If you need help covering the cost of attendance and more school expenses, here are two primary sources of loans for graduate students.
- Loans from the federal government: Graduate and professional school students currently have two types of federal student loans available to them: Direct Unsubsidized Loans (also called Stafford Loans), and Direct PLUS Loans (also called Grad PLUS Loans).
- Loans from private lenders: Some banks, credit unions, and online lenders offer private student loans, allowing you to borrow money from a non-government source. You should consider private student loans as a second choice to federal loans if you still need help paying for grad school.
Click below to learn more about each specific type of loan:
Graduate student loans comparison
If you’re trying to decide which type of graduate loan is best for your situation, use the chart below to compare your options.
|Direct Unsubsidized Loan||Direct PLUS Loan||Private Loan|
|Rate type||Fixed||Fixed||Fixed or variable|
|Loan limits||Annual maximum: $20,500 each year (some exceptions)|
Aggregate maximum: $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 may have higher limits.
|Cost of attendance minus any other aid you've received||Varies by lender|
|Rates||6.6% (disbursed on or after July 1, 2018 and before July 1, 2019)||7.6% (disbursed on or after July 1, 2018, and before July 1, 2019)||Varies based on your credit|
|Fees||1.062% (disbursed on or after Oct. 1, 2018, and before Oct. 1, 2019)||4.248% (disbursed on or after Oct. 1, 2018, and before Oct. 1, 2019)||Usually none, but varies by lender|
|Grace period||6 months||None||Varies by lender|
|Credit check required?||No||Yes, but can use a cosigner if your credit isn't up to par||Yes, but can use a cosigner if your credit isn't up to par|
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. As a grad student, however, you only qualify for Unsubsidized Direct Loans. That means you’re responsible for all interest accrued from the date the loan is first disbursed.
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. As a grad student, you can use them when your annual Direct Loans are not enough or you’ve hit your 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 for a PLUS loan 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 a credit check would show 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 to sign on with you.
How to apply for federal loans for grad school
You must submit the Free Application for Federal Student Aid (FAFSA) each year that you wish to receive federal financial aid. As long as a school participates in the Direct Loan Program, the FAFSA is all that’s needed to apply for a Direct Loan. Your school will offer whatever Direct Loan you qualify for before a Direct PLUS Loan.
To apply for a Direct PLUS Loan, however, you must:
- Complete the FAFSA: Make sure you’ve filled out the FAFSA first.
- Check with your school: Since each school is different, talk to your school’s financial aid office to get instructions on how you should apply for a Direct PLUS Loan.
- Submit a PLUS loan application: In most cases, you’ll fill out the government’s supplementary information form and follow any instructions there for your specific school.
Schools will use the information you provide on your FAFSA to determine the loans 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 loan amount you absolutely need to pay for your education.
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.
In general, federal student loans offer lower interest rates that are fixed and flexible repayment terms. These loan terms make federal loans the best first choice for you as a grad student.
Repayment plans for grad school federal loans
You have six months after you graduate, leave school, or drop below half-time to repay your federal loans — with the exception of your Direct PLUS Loans. Direct PLUS Loans don’t have a grace period, so you’ll need to start paying those immediately.
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. Here are the different repayment plans for federal student loans:
- Standard repayment plan: 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 10 years, with fixed monthly payments.
- Income-driven repayment: You can switch to an income-driven repayment (IDR) plan, which caps monthly payments based on your income.
- Deferment or forbearance: If you qualify, deferment or forbearance can temporarily pause your payments.
Be aware that while the last two (and other) repayment options may lower your monthly payments, they may also stretch out your loan repayment term, which could cause you to pay more in interest over the life of the loan.
Private student loans
Many banks, credit unions, online lenders, and other financial institutions offer private student loans. Rates and terms on private student loan debt varies by lender and depend on the borrower’s creditworthiness.
Usually, private loans make sense only if other financial 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.
Where federal loans have fixed rates, 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.
Another perk is that some lenders might even offer you discounts for good grades.
How to apply for a private student loan
Follow these steps to apply for a private student loan:
- See if you prequalify: Credible allows you to compare your private student loan options by completing one simple form. You can see if you prequalify for a loan with a number of lender partners without impacting your credit score. You can even try out multiple cosigners to see if a cosigner can help you qualify for the loan with better rates.
- Consider a cosigner: Many grad students don’t have the credit history to qualify for the best loans on their own. Adding a cosigner, someone with a longer and stronger credit history than yours will often allow you to get much better rates, or even help you qualify for a loan.
- Apply to the lender that’s right for you: Once you get your prequalified rates with Credible, 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 options you’re signing up for.
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.
|Lender||Fixed Rates From (APR)||Variable Rates From (APR)||Get Rates Through Credible|
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Citizens Bank Student Loan Rate Disclosure
Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of July 1, 2019, the one-month LIBOR rate is 2.40%. Variable interest rates range from 3.89%-11.76% (3.89%-11.61% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.90%-12.19% (4.90% - 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.
Leah Schmerl contributed to the reporting of this article.