Graduate Student Loans

In the United States, the average cost of a master’s degree is between $30,000 and $120,000. Graduate school isn't cheap. Taking out a loan is often one of the first things a graduate student will do. Let’s go over everything you need to know about graduate student loans.

What is a graduate student loan?

A graduate student loan is exactly what it sounds like - a loan that is intended to help students pay for graduate school. While functionally they are the same as undergraduate loans, there are slight differences in the application, allotments, qualifications, and other aspects of the loans themselves.

Depending on who you choose to receive your loan from, there is a specific process to follow that we’ll cover later in the article. A student loan is meant to be spent solely on education expenses. This doesn't just mean tuition, however. Other eligible expenses include books and room and board at the school you are attending.

Top Graduate Student Loan Lenders

Private Student Loans

Ascent

✔ Variable APR: 1.46%-11.31%
✔ Fixed APR: 3.21%-13.02%
✔ Degrees: Undergraduate and graduate student loans
✔ Loan Term: 5, 7, 10, 12, 15, and up to 20 years
✔ Fees: No application or origination fees
✔ Cosigner release: Yes.

FIND MY RATE

Private Student Loans

Citizens

✔ Variable APR: n/a
✔ Fixed APR: 3.23%-11.70%
✔ Degrees: Undergraduate and graduate student loans
✔ Loan Term: 5, 10, 16 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.

FIND MY RATE

Private Student Loans

College Ave

✔ Variable APR: 0.94%-11.98%
✔ Fixed APR: 2.94%-12.99%
✔ Degrees: Undergraduate and graduate student loans
✔ Loan Term: 5, 8, 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.

FIND MY RATE

Private Student Loans

EDvestinU

✔ Variable APR: 2.37%-6.73%
✔ Fixed APR: 3.02%-8.22%
✔ Degrees: Undergraduate and graduate student loans
✔ Loan Term: 7, 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.

FIND MY RATE

Private Student Loans

INvestEd

✔ Variable APR: 1.69%-5.65%
✔ Fixed APR: 3.33%-7.69%
✔ Degrees: Undergraduate and graduate student loans
✔ Loan Term: 5, 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.

FIND MY RATE

Private Student Loans

Sallie Mae

✔ Variable APR: 1.13%-11.23%
✔ Fixed APR: 3.50%-12.60%
✔ Degrees: Undergraduate student loans
✔ Loan Term: 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.

FIND MY RATE

How do graduate student loans work?

Like any other loan, the graduate student loan process all begins with the application. If you are hoping for federal loans, the first thing that needs to be done is to fill out your Free Application for Federal Student Aid, or FAFSA.

Once the application has been processed, your school’s financial aid office will provide you with a list of loan options. It’s important to note that the only way you can receive federal loans is directly through your school, so do not apply elsewhere.

Once you have selected the loans you want, going forward all money will be paid directly to the school. If you have any money left over after expenses, you will receive the money to use on other expenses.

Private loans involve a more in-depth application process. Private loans do need to be applied for externally unlike federal loans. And when you apply, a credit check will be ran to see how much the financial institution is willing to loan you.

Private graduate student loans tend to be the last option for borrowers due to their often higher interest rates and fewer benefits offered.

Types of graduate student loans

There are two types of graduate student loans available for students - federal and private.

The differences can be major, so make sure you are comfortable with the below info before proceeding.

Federal student loans

Federal loans are issued by the federal government. In the case of the United States, they are funded and dispersed by the Department of Education. There are currently two types of federal loans that graduate students can receive.

1. Direct Unsubsidized Loans - Unlike a subsidized loan the borrower is responsible for all interest, even while they are in school
2. Direct PLUS Loans - The only federal loan that requires a credit check, however, the disbursement limits are higher than other federal loans

Private student loans

Private loans are provided by financial institutions like banks and credit unions. These loans involve an application directly with the financial institution, and will almost always involve a credit check.

Checking interest rates, grace periods, repayments options, and other aspects of the loan will help you make the best choice when choosing a graduate student loan.

Which degrees can a graduate loan be used for?

Graduate student loans can be used to pay for any degree that a student wishes to study for. However, depending on which degree you are studying for, there may be a variety of options that you should consider when it comes to student loans.

Medical School - The average cost of medical school in the United States is about $55,000 per year. With direct unsubsidized loans maxing out at $20,500 per year - students would need to turn to scholarships, PLUS loans or private loans to make up the difference.

Law School - Similar to medical school, law school averages roughly $50,000 per year. If after accounting for scholarships and direct federal loans, more money is still required - students should look towards either private loans or direct PLUS loans.

MBA - Going to school for an MBA is much more manageable. In the United States, the average total cost for an MBA is $60,000. Of course, going to a top school will be more expensive, while attending a local school could be much cheaper.

When deciding on how to pay for school, do your research and check if any private financial institutions offer special loans for your degree. Certain banks offer loans for specific degrees with unique terms.

Pros & cons of graduate student loans

When deciding on whether or not to take out a loan, sometimes a good old-fashioned pros and cons list is the biggest help.

PROS

• Available for nearly everyone - federal unsubsidized loans are available to all students regardless of financial need, making school an option for everyone.
• Repayment Options - many student loans offer various repayment options, allowing you to customize the loan to fit your situation
• Make more money - With certain exceptions, most people that attend graduate school will greatly increase their salary, providing a more stable future.
• Finish school faster - If you only pay what you can afford with cash each semester, it may add years to your education. A loan can expedite the process and get you into your career much faster.

CONS

• Expensive - Let’s face it. Graduate school isn’t cheap. Leaving school with sometimes six figures of debt is daunting and could take a while to pay off.
• Potential of default - If you default on your student loans, your credit can be affected, wages garnished, and more.
• Difficulty for further financing - getting more loans in the future is difficult if you already have substantial debt.

How much can a student borrow towards graduate school?

How much a student can borrow towards graduate school depends entirely on what loan type they are receiving. Let’s go over the most common.

• Federal Direct Unsubsidized - The max a student can borrow is $20,500 annually, or $138,500 total.
• Federal Direct PLUS - The max a student can borrow is the total cost of attendance minus any other financial aid received.
• Private Student Loans - The max is determined by the lender depending on your financial picture, however, most private lenders tend to be similar to PLUS loans.

What are the average interest rates on a graduate loan?

Federal loans have a fixed rate that will remain the same for the duration of your loan.

As of December 2, 2021, the interest rate for federal Direct Unsubsidized Loans for graduate school is 5.28%.

The interest rate for federal Direct PLUS loans for either graduate school or parents is 6.28%.

For private loans, the interest rates vary greatly. Variable-rate loans will usually offer the lowest starting rates, while fixed-rate loans tend to be higher due to the guaranteed rate.