Graduate Student Loans
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Remaining competitive in your professional field is more important today than it ever has been. With the majority of working professionals today having a college degree, you may find it harder and harder to stand out in your career. Although graduate school used to be a luxury, it is slowly becoming a necessity to move up the career ladder. Continue reading to learn more...
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What is a graduate student loan?
A graduate student loan is a type of loan specifically designed to help graduate students finance their higher education. These loans are available to students pursuing advanced degrees such as master's degrees, doctoral degrees, or professional degrees (e.g., law or medicine). Graduate student loans can be obtained from both federal and private sources.
- Federal Graduate Student Loans: The U.S. Department of Education offers federal student loans for graduate students. The two main types of federal loans available to graduate students are Direct Unsubsidized Loans and Grad PLUS Loans.
- Direct Unsubsidized Loans: These loans are available to eligible graduate students regardless of financial need. Interest begins accruing from the time the loan is disbursed, and the borrower is responsible for all interest payments.
- Grad PLUS Loans: These loans are credit-based loans available to graduate students to cover the cost of education beyond other financial aid. They have higher interest rates compared to Direct Unsubsidized Loans and may require a credit check.
- Private Graduate Student Loans: Private student loans are offered by private lenders such as banks, credit unions, and online lenders. These loans are based on the borrower's creditworthiness and may require a cosigner if the borrower has limited credit history or a low credit score. Private student loans typically have varying interest rates and repayment terms depending on the lender.
Top Graduate Student Loan Lenders
Ascent
✔ Loan Term: 5, 7, 10, 12, 15, and up to 20 years
✔ Fees: No application or origination fees
✔ Cosigner release: Yes.
Citizens
✔ Loan Term: 5, 10, 16 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.
College Ave
✔ Loan Term: 5, 8, 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.
EDvestinU
✔ Loan Term: 7, 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.
INvestEd
✔ Loan Term: 5, 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.
Sallie Mae
✔ Loan Term: 10, 15 years
✔ Fees: No application, origination, or prepayment penalty fees
✔ Cosigner release: Yes.
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.
- Direct Unsubsidized Loans - Unlike a subsidized loan the borrower is responsible for all interest, even while they are in school
- 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?
A graduate student loan can typically be used to finance various advanced degree programs. Here are some examples of degrees for which graduate student loans are commonly used:
- Master's Degrees:
- Master of Business Administration (MBA)
- Master of Science (MS)
- Master of Arts (MA)
- Master of Education (M.Ed)
- Master of Social Work (MSW)
- Master of Public Health (MPH)
- Master of Fine Arts (MFA)
- Master of Engineering (MEng)
- Master of Public Administration (MPA)
- Master of Nursing (MSN)
- Doctoral Degrees:
- Doctor of Philosophy (Ph.D.)
- Doctor of Medicine (MD)
- Doctor of Education (Ed.D.)
- Doctor of Psychology (Psy.D.)
- Doctor of Pharmacy (Pharm.D.)
- Doctor of Dental Surgery (DDS)
- Doctor of Physical Therapy (DPT)
- Doctor of Jurisprudence (JD)
- Doctor of Veterinary Medicine (DVM)
- Doctor of Business Administration (DBA)
- Professional Degrees:
- Law Degree (LLB or JD)
- Medical Degree (MD)
- Dental Degree (DDS or DMD)
- Pharmacy Degree (Pharm.D.)
- Veterinary Degree (DVM)
- Optometry Degree (OD)
- Podiatry Degree (DPM)
- Chiropractic Degree (DC)
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 rate on a graduate loan?
The average interest rates on graduate student loans can vary depending on the type of loan and whether it is a federal or private loan. Here is an overview of the average interest rates for different graduate student loan options:
- Federal Graduate Student Loans:
- Direct Unsubsidized Loans: As of July 1, 2021, the fixed interest rate for Direct Unsubsidized Loans for graduate students is 5.28%. This rate remains the same for the life of the loan.
- Grad PLUS Loans: As of July 1, 2021, the fixed interest rate for Grad PLUS Loans is 6.28%. Grad PLUS Loans are credit-based loans available to graduate students, and the interest rate remains fixed throughout the life of the loan.
- Private Graduate Student Loans:
- Private student loan interest rates can vary significantly depending on the lender, the borrower's creditworthiness, income, and other factors. Private student loan interest rates for graduate students generally range from around 3% to 14% or higher. The specific interest rate offered to a borrower is typically based on their credit profile and the terms set by the lender.
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Can a graduate student loan be used to pay for living expenses?
Yes, a graduate student loan can typically be used to cover living expenses in addition to tuition and other educational costs. Living expenses may include rent, utilities, food, transportation, healthcare, and personal expenses. Many graduate students rely on student loans to help support themselves financially while pursuing their advanced degree.
What is the average graduate student loan debt in the United States?
- Master's Degree Debt: According to the National Center for Education Statistics (NCES), the average cumulative debt for master's degree recipients who graduated in the 2019-2020 academic year was approximately $66,000.
- Professional Degree Debt: Professional degree programs, such as law school or medical school, often result in higher debt burdens due to the longer duration of study and higher tuition costs. According to the Association of American Medical Colleges (AAMC), the average medical school debt for graduating students in 2020 was around $247,000.
- Doctoral Degree Debt: The average debt for doctoral degree recipients can also vary depending on the field of study and program length. According to the NCES, the average cumulative debt for doctoral degree recipients who graduated in the 2019-2020 academic year was approximately $98,900.
Is it possible to pay for graduate school without getting a loan?
Paying for graduate school is no easy feat. Often, taking out a loan is the only way that a student can pay for their education. However, it is possible to pay for graduate school without getting a loan.
Here are the best ways to get through school without debt:
- Scholarships and Grants: Research and apply for scholarships and grants specific to your field of study or academic achievements. These can provide financial assistance without the need for repayment.
- Fellowships and Assistantships: Many graduate programs offer fellowships or assistantship opportunities where students work part-time or assist faculty in research or teaching. These positions often come with stipends or tuition waivers, which can help offset the cost of tuition and living expenses.
- Employer Assistance: Some employers offer tuition reimbursement or assistance programs for employees pursuing advanced degrees. Check if your employer has such programs or explore job opportunities with companies that provide educational benefits.
- Savings and Income: If possible, save money before entering graduate school to use towards tuition and living expenses. Additionally, consider working part-time while attending school to generate income that can help cover costs.
- Crowdfunding and Fundraising: Explore crowdfunding platforms or consider reaching out to family, friends, or alumni networks to seek financial support for your graduate education.
- Reduced Course Load or Part-time Study: Consider taking fewer courses per semester or pursuing part-time study while working to manage expenses more effectively.
- Negotiating Tuition: In some cases, you may be able to negotiate with the graduate school or department for a reduced tuition rate or explore opportunities for in-state tuition if applicable.
How to qualify for a graduate student loan
To qualify for a graduate student loan, follow the following steps outlined below:
- Research Loan Options: Start by researching and understanding the types of graduate student loans available, including federal and private loans. Learn about their eligibility criteria, interest rates, repayment terms, and benefits.
- Complete the Free Application for Federal Student Aid (FAFSA): To qualify for federal loans, complete the FAFSA online at fafsa.ed.gov. Provide accurate information about your financial situation, including income, assets, and tax returns. The FAFSA determines your eligibility for federal student aid programs, including federal loans.
- Review Financial Aid Award Letters: After submitting the FAFSA, you will receive financial aid award letters from your chosen graduate schools. These letters outline the types and amounts of financial aid you are eligible to receive, including federal loans. Review the offers carefully and compare them to make an informed decision.
- Accept or Decline Financial Aid: Once you receive the financial aid award letters, decide which loans you want to accept. Consider factors such as interest rates, repayment terms, and any other conditions associated with the loans. Accept the loans by following the instructions provided by the school.
- Complete Entrance Counseling (for Federal Loans): If you are accepting federal loans for the first time, you may need to complete entrance counseling. This is an online session that provides information about your rights and responsibilities as a borrower.
- Sign the Master Promissory Note (MPN): For federal loans, sign the MPN, which is a legal document stating your agreement to repay the loans and outlining the terms and conditions. This is typically done online.
- Explore Private Loan Options: If federal loans do not fully cover your educational expenses, consider private student loans. Research different lenders, compare interest rates and repayment options, and apply for private loans that best meet your needs.
- Provide Required Documentation: Whether applying for federal or private loans, you may need to provide additional documentation, such as proof of enrollment, income verification, or other requested information. Ensure you fulfill any requirements promptly.
- Review and Accept Loan Terms: Once approved for the loans, carefully review the loan terms and disclosures provided by the lender. Understand the interest rates, repayment schedules, fees, and any other terms associated with the loans. If acceptable, accept the loan offer.
- Keep Track of Borrowing and Repayment: Throughout your graduate studies, keep track of the loans you have taken, the amounts borrowed, and any changes in your financial situation. Develop a plan for managing repayment after graduation, including exploring options for loan consolidation, forgiveness, or income-driven repayment plans.
Which graduate student loan is best for you?
Common knowledge is that the first loan you should take out is the federal unsubsidized loan. Why? Because this loan has lower rates, better benefits such as a grace period post-graduation, and there is no credit check or income requirement necessary to receive it.
The downside with this loan is the lower maximum amount available. The max annual allotment is often lower than most grad schools cost per year. This means that you will need another loan in addition.
After this, it’s up to you to decide if you do a personal loan or the federal PLUS loan. Both of these will require a credit check, and the PLUS loan has a higher interest rate that can often be beaten if you search diligently for a private loan.
Comparing the interest rates, potential grace periods, repayment options, and other aspects of the loan can help you make the decision that will leave you in the best financial position going forward.
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