Summary: Students attending graduate school or professional school can take out federal student loans from the Direct Loans program. Direct Unsubsidized Loans, sometimes called Unsubsidized Stafford Loans, offer a fixed interest rate and flexible repayment terms. Financial need is not required to qualify. Students are responsible for paying all of the interest that adds up, until the loan balance is paid off.

Direct Unsubsidized Loans (sometimes called Unsubsidized Stafford Loans) are low-cost, fixed-rate federal student loans available to graduate students, not just undergraduate students. Direct Unsubsidized Loans are the most common — and among the lowest-cost — ways to pay for graduate school and professional school.

*As of July 1, 2012, graduate students can only borrow Direct Unsubsidized Loans. Direct Subsidized Loans are no longer an option.

Key loan benefits for students attending graduate school or professional school:

  • Fixed interest rate of @SGIRCurrent% (unsubsidized) for the @AYCurrent academic year
  • Borrow up to $20,500 per year ($40,500 for medical school)
  • No payments while enrolled in school
  • Eligibility not based on credit

How to Apply for a Direct Unsubsidized Loan

You need to file the FAFSA (Free Application for Federal Student Aid) before you can take out federal student loans from the Direct Loans program.

  1. Complete the FAFSA or Renewal FAFSA (for returning students) at FAFSA.ed.gov.
  2. Receive a financial aid award letter by mail or email from your school's financial aid office. This letter will summarize your available financial aid.
  3. Contact your school’s financial aid office to accept the financial aid and student loans.
  4. Sign any associated paperwork such as the Master Promissory Note (MPN).

Eligibility

Direct Unsubsidized Loans are available to students attending graduate school and professional school.

Degree programs and common examples:

  • Masters: M.A., M.S.
  • Doctorate: Ph.D., Ed.D.
  • Business: M.B.A.
  • Law: LL.M., J.D., S.J.D.
  • Medical: M.D., D.O.
  • Dental: D.M.D., D.D.S.
  • Nursing: M.S.N., D.N.P.
  • Veterinary medicine: D.V.M.

Loan eligibility and the loan limits are not based on demonstrated financial need.

Interest Rates and Fees

The interest rates on Direct Unsubsidized Loans for graduate and professional students are fixed and do not change over the life of the loan. The interest rate for the 2018-2019 academic year is @SGIRCurrent%. This is less expensive than the @PLIRCurrent% interest rate on Grad PLUS Loans.

The interest on a Direct Unsubsidized Loan starts to add up (accrue) from the date the loan is first disbursed. If you don’t pay the interest as it accrues, it will be capitalized (added to the loan balance), increasing the size of the loan.

Fees on Direct Unsubsidized Loans

The current fee (loans first disbursed on Oct. 1, 2017, and before Oct. 1, 2018) on the Direct Unsubsidized Loan for graduate students is @SGOFCurrent%. This is less expensive than the @PLOFCurrent% fee on Grad PLUS Loans.

How Fees Affect the Total Loan Cost

Loan fees are basically a form of up-front interest. For example, if your loan has a 10-year repayment term, a 4% fee is the about the same as an increase of about .875% to 1% in the interest rate. If your loan has a 30-year repayment term, a 4% fee is the same as an increase of about .334% to .5% in the interest rate.

Loan Limits: How Much You Can Borrow

Students attending graduate school or professional school can borrow up to $20,500 per year in Direct Unsubsidized Loans. The aggregate (cumulative) loan limit is $138,500, including undergraduate debt (and no more than $65,500 in Direct Subsidized Loans).

Medical school and health professions students may borrow up to $40,500 per year and have an aggregate loan limit of up to $224,000. (Learn more about the borrowing limits for various medical fields of study.)

Direct Unsubsidized Loans for Graduate Students — Borrowing Limits

Students attending graduate school or professional school who have exhausted eligibility for the Direct Unsubsidized Loan can take out a Grad PLUS Loan, another low-cost, fixed-rate federal student loan.

How Loan Funds are Distributed

The U.S. Department of Education sends the Direct Loan funds to your school to be credited to your account. In most cases, the loan will be sent (disbursed) in at least two installments.

Loan funds are credited to your account in this order:

  1. Tuition and fees
  2. Room and board (if you are living in college-owned student housing)
  3. Other school charges (with your permission)

If any loan funds remain in your account, the credit balance will be refunded to you by check, cash, debit card, or electronic funds transfer (EFT) to your bank account. Remember, the refund must be used to pay for your education expenses, such as textbooks, supplies, and equipment.

In-School Deferment and Grace Period

While you are enrolled in school at least half-time, your Direct Loan will be placed into deferment, which means you don’t have to make any payments. In addition, you don’t have to make payments during the 6-month grace period after you graduate or drop below half-time enrollment status. Just remember that interest on your loan will start to accrue (add up) as soon as loan funds are sent to your school. Even though you aren’t making any payments, interest is still adding up.

Repayment

The standard repayment term on Direct Loans is 10 years. However, you can qualify for a longer repayment term if you consolidate the loans or have more than $30,000 in federal student loans with a single lender.

Graduate students who borrow Direct Unsubsidized Loans are generally eligible for all of the different repayment plans offered by the U.S. Department of Education.

Eligible repayment plans:

Comparison of Federal Student Loans for Graduate Students

Direct Unsubsidized Loan

  • @SGIRCurrent% fixed interest rate
  • @SGOFCurrent% fee *
  • Demonstrated financial need not required
  • Annual borrowing limit: $20,500 ($40,500 for medical students)
  • You are responsible for paying all interest

Perkins Loan

*No Perkins Loans will be disbursed after June 30, 2018

  • 5% fixed interest rate
  • No fee
  • Exceptional financial need required
  • Annual borrowing limit: Up to $8,000
  • Federal government pays the interest while you are in school, during the grace period, and during periods of authorized deferment.

Grad PLUS Loan

  • @PLIRCurrent% fixed interest rate
  • @PLOFCurrent% fee *
  • Demonstrated financial need not required
  • Annual borrowing limit: Cost of Attendance (COA) minus other financial aid received
  • You are responsible for paying all interest

Recommendations

  1. File the FAFSA every year to maintain eligibility for student aid.
  2. Take out the maximum amount of Direct Unsubsidized Loans and Perkins Loans (if eligible) before considering a Grad PLUS Loan.
  3. Compare the costs and benefits of Grad PLUS Loans and private student loans. If you have excellent credit or a strong cosigner, you may get a lower interest rate with a private student loan.
  4. If you are denied for a Grad PLUS Loan due to an adverse credit history, find a cosigner (also called an endorser) and reapply.