After graduating with your undergraduate degree, you might decide not to take any time off, and instead jump straight into a graduate program.
Graduate programs tend to be more expensive than undergraduate ones, which means paying for college gets even harder. Luckily, there are graduate student loans available. Both federal and private student loans have options for graduate students. In this article, we will help you decide which ones are right for you.
Federal graduate student loans
After you’ve exhausted all your free money options through grants and scholarships, look at federal student loans to borrow money.
There are a few different graduate student loans available, including:
Direct Unsubsidized Loans: These are loans available to undergraduate, graduate, and professional students, and you don’t need to prove financial need to qualify. With unsubsidized loans, interest accrues while you’re in school, whereas subsidized loans (which are only available to undergraduate students) delay interest until after you graduate.
Grad PLUS Loans: Direct PLUS loans are available to graduate or professional students (Grad PLUS loans), as well as parents of dependent undergraduate students (Parent PLUS loans). These loans are available if there are still gaps in funding you need to cover. A credit check is required, and if you have adverse credit history, you might need to meet some extra requirements to qualify.
You can borrow up to $20,500 in Direct Unsubsidized Loans each year you’re in school. While there isn’t a numerical limit on how much you can borrow in Grad PLUS Loans, you’ll get approved for whatever isn’t covered in other aid.
Direct Unsubsidized Loans for a graduate or professional have a 6.08% interest rate, while Grad PLUS Loans have a 7.08% interest rate. Both types of loans have fixed interest rates set by Congress. This means they can change every year. However, once you’ve borrowed for that year, your interest rate won’t change when it comes time to repay your loan. Your fixed interest means you’ll make the same payments for the life of your loan.
For both types of federal student loans for graduate students, you’ll need to complete a FAFSA. And for every year you’re in need of federal aid, you’ll need to reapply.
When it comes to repayment, both Direct Unsubsidized Loans and Grad PLUS Loans are available for a Direct Consolidation Loan. That means you can combine all your federal loans into one manageable payment. Unsubsidized Loans and Grad PLUS loans are also both available for alternative income-driven repayment options, like PAYE and REPAYE.
Private student loans for graduate students
Private student loans can cover any funding gaps that federal loans fall short of. And for the most part, you should exhaust all your federal loan options before resulting to private student loans. That said, borrowers with excellent credit may be able to get better rates (and no costly fees) on a private loan than a Grad PLUS loan.
Private student loans are a helpful option when you’ve run out of other financial aid, but keep in mind that it might be more difficult to qualify, based on a few different factors.
Your credit score: The biggest determining factor is your credit score. Your score could be the biggest reason you’re accepted or denied a private student loan. While many lenders that offer private student loans have average-to-low score qualifications, the higher your score, the better your chances of securing the loan.
Your interest rate: Your credit score not only determines your approval or denial, but also your interest rate. Private student loan interest rates tend to be higher than unsubsidized student loan interest rates. Even if your potential lender gives you an interest rate range, your credit score will determine your rate. The higher your score, the lower your interest rate. And the lower your score, the higher your rate.
Your income: Debt-to-income ratio and how much you can pay off each month in student loan payments will also be determining factors. If you don’t have steady work and are already drowning in debt, you may not qualify for a private student loan.
Your cosigner: If you don’t have stellar credit (or any credit), you may need a cosigner to qualify for a loan on your behalf. A cosigner will agree to pay back your loan in the event you don’t. So if you miss a payment, your credit score will drop — and so will your cosigner’s. If you don’t have a good credit history or a cosigner who does, you may struggle to get approved for a private student loan.
Not all private student loans offer the same protections as federal loans. For example, you don’t get access to student loan forgiveness programs and you can’t consolidate private student loans (but you can refinance them). Private student loans don’t offer deferment or forbearance, but many lenders offer assistance if you find that your payments are too high or you’ve recently lost your job.
The good news is that if you’re looking to find out which lender is right for you, there’s a way to browse without applying and getting a hard credit check. Use Purefy’s rate comparison tool to see which lenders are offering the best rate for you.
Are you on the hunt for graduate student loans?
Paying for graduate or professional school can be as overwhelming as school itself — if not moreso. Instead of getting overwhelmed, take an inventory of your options and then decide which one is right for you.
After you’ve used all your free money through grants, scholarships, and other aid, it’s time to browse through loans. If you have the opportunity to take advantage of Direct Unsubsidized Loans, use them first. You’ll have a lower interest rate and friendlier repayment terms if you need to change your payment plan in the future.
Then try Grad PLUS Loans. While they have a higher interest rate, they’re still a federal student loan that has easier repayment options compared to private student loans, and more of a safety net if you have trouble finding a job after graduation.
After you’ve exhausted those options and you still need money, look into private student loans. You may even be able to get a better rate on a private loan than you can on a Grad PLUS loan, if you have excellent credit. It could be an attractive option, if the federal benefits are not as important to you as your bottom line.
Finding graduate student loans might feel daunting but you have options. See which ones are best for your individual financial circumstances before deciding which one is right for you.