If you’re considering earning a master’s degree or Ph.D. to meet your personal and professional goals, one of the first questions you are likely to ask is “How am I going to pay for graduate school?” You have several funding options, including private graduate student loans as well as federal student loan options.
Should I Start with Private Graduate Student Loans?
When you paid for your undergrad degree, you may have heard that you should exhaust federal loans first. That is still a good rule of thumb for undergraduate school, however, you may want to adjust your thinking when comparing private student loans for graduate school to the Federal Direct Loan Program. This is because there are origination fees and interest rates on federal loans for graduate school that may actually be more expensive than the current rates you will find on private student loans.
Unlike loans for undergraduate school, all federal graduate school student loans are unsubsidized (meaning you will be responsible for the interest that accrues on your loan while in school and during your grace period).
The federal program offers all borrowers the same interest rate, and charges origination fees for loans disbursed through the Direct Stafford Loan Program as well as the Grad PLUS Loan program, whereas private student loan lenders will offer competitive interest rates based on the current market trends and the borrowers’ employment and credit history (or that of your cosigner if applicable), and typically do not charge origination fees. For borrowers of graduate student loans, a private student loan may be a more cost-effective option.
Federal Student Loans for Graduate School
You can apply for a Federal Direct Loan by completing the FAFSA (Free Application for Federal Student Aid). The good news is that graduate and professional students are always considered independent students, which makes completing the FAFSA easier in most cases ─taking fewer than 30 minutes on average.
There are two types of federal Direct Loans available to graduate students, Direct Unsubsidized Loans and Direct Grad PLUS Loans.
Federal Direct Unsubsidized Loans
Eligible students may borrow up to $20,500 per year, and students in certain health profession programs (like med school) may receive additional amounts each academic year. If you choose to apply for Federal Direct Unsubsidized Loans, do it as soon as possible. File the FAFSA early, and make an appointment with the financial aid advisor at your chosen university for more specific details on the federal loan options available to you.
Federal Direct Grad PLUS Loans
If the amount you are eligible to borrow in unsubsidized loans isn’t enough, you may consider applying for a Grad PLUS loan. Keep in mind that, unlike unsubsidized loans, PLUS loans require a credit check. All the more reason to keep your credit score healthy. (We’ve got tips for that, too!)
Federal Perkins Loan
The Federal Perkins Loan program is currently being phased out; however, if you have previously borrowed through the Perkins Loan program as a graduate or professional school student, you may still be eligible for an additional Perkins Loan. Because these loans are being phased out, it is recommended that you speak with the financial aid office at the college or university you plan to attend to find out if you are eligible to receive student aid through this program.
How Much Can I Borrow?
Loan amounts will vary by lender, but the following guidelines will help you understand minimum, maximum and aggregate borrowing limits.
- Minimum loan amount – Most lenders have a minimum loan amount of $1,000 or $2,000. Check with your chosen lender for more information on terms.
- Annual loan limit– Private graduate student loans, similar to federal loans, impose annual maximum loan limits. Generally speaking, you may borrow up to the total school-certified cost of attendance (less other financial aid). Lenders may also impose an annual maximum which may vary based on your level of study. Check with your lender for specifics.
- Aggregate loan limit – The aggregate limit refers to the cumulative amount of loan funds you may borrow over time, during the course of your education. These amounts will vary by lender.
Repayment Options for Private Graduate School Loans
One of the benefits of private student loans is the variety of repayment options available to borrowers.
When you first obtain your private student loan you will need to indicate to the lender whether or not you’d prefer to make payments on the loan interest while you are still in school. In some cases, lenders may offer an incentive (i.e., discounted interest rate) to do so. Here are some additional repayment terms to look for, keeping in mind that options vary by lender.
- Interest-only payments while in school.
- Fixed, monthly payments while in school. The amount is often as low as $25 per month.
- Deferred repayment. No payments will be required while in school or during the grace period.
- Graduated repayment. Depending on the lender, you may be able to elect interest only payments for the first year following graduation to help you transition to full repayment.
- ‘Standard’ repayment. This simply means you pay interest and principal each month for the designated repayment term until the loan is paid in full.
- Forbearance or deferment. Some private loan lenders will work with you during times of hardship. The forbearance or deferment periods are discretionary and vary by lender. But it’s good to know that in certain circumstances, you may be able to get temporary relief.. Keep in mind that the deferment or forbearance options for private student loans will not as generous as the federal program.
How Much Will My Student Loan Payments Be?
You can estimate your payments by using an online calculator tool such as our student loan repayment calculator. Our online tool gives you advanced options to estimate your monthly payment amount, total interest, and total amount to be repaid during the repayment term.
Other Ways to Pay for Grad School
It should not be a foregone conclusion that you will have to borrow money to pay for grad school. Besides loans, there are other ways to help fund your education. You should always start with money you don’t have to pay back. If you don’t have enough cash saved up, the following programs may offer another means of covering your graduate school expenses.
Graduate School Scholarships
A common misconception is that scholarships are in limited supply for graduate students. There are myriad scholarship opportunities available for graduate and professional school students. Websites like StudentScholarshipSearch.com and Career One Stop from the US Dept. of Labor can help you track down monetary awards that fit your academic goals. Some awards are portable (also known as "external"), while others require you to attend a specific college or university. If you’ve already settled on a school, be sure to follow-up with their financial aid office to find out about the availability of scholarships administered by the school itself. You don’t need to wait for acceptance to do this, in fact, the sooner you contact them, the better.
Grants for Graduate Students
Grants are an excellent way to reduce the cost of graduate school. Unlike scholarships, which are often merit-based, grants are more likely to be awarded based on demonstrated financial need. Some grants are tied to certain fields of study, while others may be available only to those of a specific gender, heritage, personal or professional affiliation, etc. Like scholarships, grants may be portable or related to a particular institution. Colleges and universities often have grant money that they award to their graduate students affiliated with specific programs, under-represented groups, or research projects. Don’t procrastinate! The earlier you apply for this type of aid, the better.
Federal TEACH Grants
There are some grants available to those pursuing an advanced degree in teaching. Some like the Teacher Education Assistance for College and Higher Education (TEACH) Grant come with specific requirements attached. If your dream is to become a teacher, this program may help you achieve it.
Federal Pell Grants
Federal Pell grants are generally only available to undergraduate students. However, in some cases a student enrolled in a post-baccalaureate teacher certification program might be eligible to receive a Federal Pell Grant.
A fellowship can be a great tool in paying for graduate school. Some fellowships are portable and can be used at different colleges or universities while others are issued by a specific university for study only at that institution. (Are you noticing a trend? This is one of the things scholarships, grants, and fellowships all have in common.) Fellowships vary greatly in the amount of award, and may have several qualifications. Though most graduate students are not awarded fellowships, they are worth researching, as they often cover a large portion of tuition and fees and may provide a stipend as well.
If you served in the military and earned education assistance (GI Bill), you may be able to apply unused benefits toward a graduate degree. Likewise, if your spouse or parents have unused GI Bill benefits, they may be able to transfer these benefits to you. The rules for transfer of GI Bill benefits often have very specific requirements which the U.S. Department of Veterans Affairs has outlined in greater detail on its website.
If you are currently serving in the military, you may qualify for tuition assistance to cover some or all of the costs associated with obtaining your master’s or professional degree. You may even be able to supplement the military tuition assistance program with funds from VA education benefits programs (like the GI Bill). The rules for tuition assistance vary by branch of service, so if you’re in the Air Force and your sister was in the Navy, don’t assume your benefits will be the same as hers. The education center where you are stationed is a good place to start gathering details on your specific eligibility for these programs.
You may have seen graduate students working for faculty members. What’s that all about?
Graduate assistantships are available at many colleges and universities, and function as employment opportunities for the student while providing both financial support and practical experience. Schools may offer any number of these positions: Teaching Assistant (TA), Research Assistant (RA), Graduate Assistant (GA), or Graduate Research Assistant (GRA).
While the number and type of assistantships a college or university may offer is typically limited, graduate students in need of additional funding should seriously consider applying. Assistantships often cover some or all of your tuition and fees and may also come with a stipend (a.k.a., get paid to go to grad school). This is a great opportunity to advance your career as well by establishing working relationships with professionals in your field of study and building your resume.
It Is Within Your Reach
This is just a sample of some of the avenues to explore on your way to earning an advanced degree. Apply early and follow-up with the college or university’s financial-aid office. In the meantime, start your search for portable funding options, and begin comparing lenders for private student loans. Last, but perhaps most important, don’t forget to fill out the FAFSA as soon as it becomes available in October for your upcoming academic year. With a little planning, you will be able to attend graduate or professional school without going broke!