Loan Options for Graduate Students

Are you seeking financial aid for your graduate school? Then learn everything about graduate student loan options here such as loan features, amount limits, interest rates, terms and more.

Updated by Deepu M on 16th September 2019

Graduate student loan borrowed is considered to be an investment for a career. Analyzing and understanding the purpose of this loan can help you finance your education optimally.

When you have exhausted all your savings and other sources to finance your graduate studies, the next most recommended option would be looking for federal financial aid. A federal student loan would be a great idea before you look for private graduate student loans.

If you believe that a graduate student loan is an option for you to finance your postgraduate studies, before taking any step further, understanding the type of loan is important. It's also important to know how much loan should be borrowed and application processes.

This article would get you complete information on various options available for a graduate loan.


List of contents


What is Graduate Student Loans?

Graduate student loans are the loans that are offered to students pursuing their graduate degrees. The loan amount would also get influenced by the field of profession that the borrower is planning to enter. Students have a number of options to borrow money for their studies. These options are presented by the federal government and private lenders. There are many differences between these lenders but below are similar features that these loans will have for graduate students.

Repayment with interest - Interest will be charged from the day of disbursement of the loan amount. The borrower has a legal obligation to repay back with interest for a number of periods depending on the terms of the loan.

Grace period - Borrowers are provided with a grace period to postpone their repayment soon after they graduate from the course for up to or more than six months, waiting for them to get employment. This grace period would differ with private lenders. Borrowers pursuing professional courses like medical, dental and law would be offered with more grace period.

Disbursement to College - The graduate loan requested will be approved and directly disbursed to the college's financial aid office, the student does not get this loan amount in their hands


Factors to be considered

Whichever the type of loan a borrower has, they must have goals to manage the loans and pay off the loans as early as possible. So borrowers have to borrow loans depending on their priorities. Graduate student loan with a low-interest rate, no fees and with flexible payment options will be the best graduate loan. If a student is looking for the best graduate loan then they must consider the following factors. 

1. Low-interest rate and fees - The amount to be borrowed by a graduate is typically three times higher than the amount borrowed by an undergraduate. As loan amount gets higher, the amount paid as interest also gets higher. It is wise to choose a lender who lends loans with a lower interest rate, so a borrower could save on total cost.

2. Look for charges - Always look for the application and origination fees with most lenders, as these details aren't openly disclosed as other disclosed details. Choose the loan that does not have these fees or the loan with the least amount of fees.

3. Attention to advertised rates - Borrowers have to look for advertised rates on a graduate student loan. These advertised rates would be the best option to borrow. Borrowers with a low credit score will get a loan for a higher interest rate which can be avoided by referring to the advertised low-interest rates.

4. Collect rate quotes - The lenders check your credit score and will present an interest rate to a borrower. Borrowers can compare the interest rate offered by lenders and can choose the best and lowest interest rate offered by lenders to borrow graduate loans.

5. Option in repayment - Another factor to be considered is the flexibility in the repayment options. Federal and private loan lenders would offer borrowers to repay the loan with small monthly payments. A lender with the best graduate loan will offer multiple repayment options to borrowers.

6. Amount of loan - A lender would look for the maximum amount you require to finance your graduate, a borrower would get loan amount approved on the basis of degree they choose in case of federal loans. This will be combined with many other factors in the case of private lenders.

7. Graduate loan terms - The standard term offered for a graduate loan is 10 years. If still, borrowers look for more flexibility to shorten or lengthen the term, they have to check the options with different lenders.

The monthly payment would get affected by the loan term. The longer-term would bring a lesser monthly payment. Consequently, you would be paying more interest amount for the whole life of the loan. Deciding shorter term will increase your monthly payment but ultimately helps you to get debt free as earlier as possible, with paying less interest amount.


Federal Student Loans for Graduates

Graduate students can avail of graduate loans from two different sources - Federal and Private.  Federal Student loans are initiated by the Federal Government, Students can get Federal Direct Loan and Direct Graduate PLUS Loans which are part of federal loan programs, where students apply by filling FAFSA. These loans are offered with different interest rates.

These are the types of Federal Loans offered to the students 

  • Federal Direct Loan

  • Direct Graduate PLUS loan

The amount of the graduate loan will be determined based on the information you submit during the application. Mostly, the size of a loan would get influenced by factors like attendance cost and any other financial aid received. Programs like the Federal Direct Subsidized loan are not provided to a graduate student.

Direct Student Loans

Direct Student Loans or the Federal Direct Loans help to provide financial assistance to an undergraduate student, graduate student, and parents of these students. This program provides loan assistance to students under Direct subsidized and Direct Unsubsidised loans where graduates are only offered unsubsidized loans. It is also known as the Stafford loan. Borrowers are provided with loan amounts ranging from $20,500 to an average of $ 138,500.

Features of Federal Direct Loan

1. Interest rate

These loans are given with a fixed interest rate. The interest rates will be renewed on 1st July of every year. Students are provided a loan with an interest rate of 6.6% currently.

2. Fees

Stafford loan will be charged with origination fees of 1.062% on the loan amount you borrow. This fee is deducted as instigated by the federal government. As when fees are charged on the disbursed loan amount, received amount will be lesser than the amount you borrowed as a borrower is fully responsible to repay the borrowed amount.

3. Repayment

Borrowers are instructed to start repayment after six months of graduation. The repayment options provided include the following.

  • Standard Payment Plan

  • Graduated Repayment Plan

  • Extended Repayment Plan

  • Revised Pay As You Earn Repayment Plan (REPAYE)

  • Pay As You Earn Repayment Plan (PAYE)

  • Income-Based Repayment Plan (IBR)

  • Income-Contingent Repayment Plan (ICR)

  • Income-Sensitive Repayment Plan

Advantages of Federal Direct Loan

  • Students are offered with comparatively lesser interest rate than the interest rate charged on a private graduate loan

  • Direct Federal Loan borrowers are given a more flexible repayment option and related benefits which are not given by private lenders

  • This loan is given without credit score check, thus there is no need for a cosigner

Learn more on Federal student loans


Direct Graduate PLUS Loan

This loan can be availed by both student and parent, the loan amount will be fixed by considering the cost of attendance as mentioned by college and by deducting any other financial aid received by students. Maintaining the best credit score is a must to qualify for this loan. This loan can be availed only after filing FAFSA.

Features of Direct Graduate PLUS Loan

1. Interest rate

These loans are given with a fixed interest rate, the interest rate will be renewed 1st July of every year according to federal law. Students are provided a loan with an interest rate of 7.6% in the current year.

2. Fees

Graduate PLUS Loan will be charged with origination fees of 4.248% on the loan amount you borrow. This fee is deducted as instigated by the federal government.

3. Repayments

Borrowers are instructed to start repayment after six months of graduation if a borrower is a student, if in case of a borrower is a parent then repayment would typically start soon after disbursement of the loan amount. The repayment options provided include the following.

  • Standard Payment Plan

  • Graduated Repayment Plan

  • Extended Repayment Plan

  • Revised Pay As You Earn Repayment Plan (REPAYE)

  • Pay As You Earn Repayment Plan (PAYE)

  • Income-Based Repayment Plan (IBR)

  • Income-Contingent Repayment Plan (ICR)

Advantages of Direct PLUS Loan

  • The loan amount is disbursed for the entire cost of attendance minus any financial aid availed by the student

  • A borrower can avail a loan with the help of a cosigner if the student's credit score is bad

  • Various options in repayment


Private Graduate Student Loans

Private Graduate loans can also be availed from private lenders. They are initiated and funded by banks, credit unions or private investors. Unlike Federal graduate loans, private loans have a lot more variety of options. This is because the lenders are free to design a program as specific as they like it to be, all the while complying with the federal and/or state law whichever is applicable to them.

Features of Private Graduate Student Loan

1. Interest rate

Private Student Loan lenders offer student loans with two different types of interest rates - the fixed rates and variable rates. Borrowers should decide on the type of interest rates they want before the loan gets approved. It's not always possible to switch the interest rate type after the loan gets approved, thus borrowers should be aware of what type they choose.

2. Fixed interest rate loan

 If a borrower decides to take a loan with fixed interest, this interest rate will never change for the whole life of the loan. Framing the fixed interest rate would mainly depend on the lender's decision, market rates and also borrowers credit score.

If the borrower wants to take a long term loan, it is better to choose a fixed interest rate. As the borrower will be in a position to repay their loan amount in a long period and the interest rate also would not increase in the future.

3. Variable interest rate loan

 Similar to the fixed interest, the variable interest rate would be determined by market rate and borrowers credit score. It is suitable for short term loans as it can be lower than fixed interest rates when the market favors it.

4. Repayment

Private Student Lenders usually provide between 5 to 20 years. The repayment option is different for all lenders.

Advantages of Private Graduate Loan

  • Borrowers are given a choice among fixed and variable interest rate

  • A graduate loan can be availed by a borrower for any graduate or professional degree

  • Origination fees are not always charged


Benefits of having Cosigner

Private Student Loan Lender will only approve the loan request if the borrower has a good credit history or if they have a cosigner. Mostly, a cosigner is recommended to be a parent or other relatives. In case any default in repayment happens the cosigner is made responsible for the loan. It means any default in repayment will affect credit score for both the borrower and cosigner. It’s good to be aware of this point.

A creditworthy cosigner not only helps in achieving the eligibility criteria for the loans but also increases the chance of having a lower interest rate. This ultimately results in a lower interest amount paid over the life of the loan.


5 Best Private Graduate Loans

The following is a list of five of the best private graduate loans in the market. 

1. Citizens Bank Graduate Student Loan

This bank is known for Multiyear approval. This special feature can help the student to get Private Student Loan approval for all academic year at once, but not insisting the borrower to get approval for each and every academic year. This Bank allows the borrower to choose an option of interest rate, fixed and variable interest for the loan amount for graduate students.

Benefits

  • No application and origination fees

  • It provides a loan term with 5, 10 and 15 years 

  • Fixed interest rate range from 5.39% - 11.35% APR, and its variable interest rate in a range from 4.04% - 10.80%.

  • Like any other lender, they also provide a discount rate of 0.25 on auto repayments

  • Helps borrowers to avail loan amount from a range of $1,000 to $150,000

  • Provides loyalty discount

  • Helps Students to get a deferment or forbearance period, by postponing the repayments

2. Discover Graduate Student Loans

It is one of the renowned leaders in the US for its credit card network. It is an online lender, it was a financial service provider with traditional services, but in recent years it started with providing student loans and refinancing with attractive interest rates. it is famous for not charging loan fees.

Benefits

  • It disburses student loan with both fixed and variable interest rates

  • Its variable interest rate range from 4.12% - 11.87% APR, and its fixed interest rate range from 5.49% - 12.99% APR

  • The loan term is disclosed with 15 to 20 years

  • The best part is no application, origination or late fees imposed by this lender

  • It provides a discount of 1% on a new student loan, to a borrower who has 3.0 and good GPA

3. SoFi Graduate Student Loans

It is one of the leading student loan lenders also refinance the student loan, which has refinanced student loan worth $18 million, which has refinanced to more than 250,000 members. It accepts a request for a student loan, a student who has a credit score of less than 650.

Benefits

  • SoFi provides loan to all graduate, postgraduate from all field of professional studies

  • Service like refinancing and parent finance is available

  • Fixed rates of 4.73% – 11.99% APR and variable rates of 3.42% – 11.70% APR

  • The loan term can be chosen from 5 years

  • There are no application and origination fees

  • Discount is given on auto payment and also additional discount as SoFi Loan Discount

  • Multiple repayment options

4. Sallie Mae Graduate School Loan

Sallie Mae is a renowned student leader in the US market today. This company offers private student loans in both fixed and variable interest rates for undergraduate and postgraduate students. this company also have one of the unique product that no competitors have if a parent wants to send their children to private school by using K-12.

Benefits

  • Sallie Mae offers student loans at any variation that exists in the market, as they are quite large

  • Loans can be availed by a student as well as parents for education purposes

  • No application and origination fees

  • No prepayment penalties

  • All process is made easy to apply online and it takes about 15 minutes to apply

  • The variable interest rate for loan ranges from 4.50& to 10.11%

  • The fixed interest rate for loan ranges from 6.00% to 10.23%

  • Advantage of getting cosigner release if a borrower makes 12 on-time payment.

5. MPower Student Loan

This lender helps students in availing loans in both the USA and Canada for International Students. It allows loan without referring to credit score and collateral. Which also not require a cosigner. It disburses loan based on their academic performance and career plan.

Benefits

  • MPower offer loans to international students in the U.S and Canada

  • Provides student loan refinancing to international students

  • Need no cosigner, collateral or credit history

  • It offers loan with only one fixed interest rate of 11.59% APR

  • Loans with a repayment term of 1 to 10 years

  • Allots loan $2001 to $50000

  • Students get discount on reporting the proof of graduation and employment

  • Discount on-time repayment and also on auto repayment


Conclusion

Graduate students can avail of a loan for their education in various ways, but availing loans from Federal Direct Loan, Direct Graduate PLUS Loan, and Private Graduate Loan will be the best option. As they provide various benefits to borrowers in all the way from the initial step of applying to repayment. All the features are borrower-friendly.

A graduate student is expected to analyze and compare various lenders loan options with their benefits for borrowers.


FAQ's

  How much in loans can a graduate student 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).

  Can graduate students get Stafford Loans?


Graduate students can borrow up to $20,500 and up to $138,500 in total for their studies which also includes the Stafford Loans taken while being enrolled in college. Students in some Health-related fields have higher maximum loan limits and can borrow up to $224,000 in total.

  Can I defer my student loans if I go to grad school?


While you're in graduate school, you have the option of deferring payments on the student loans you have previously taken out. Deferment means that you are not required to make payments on your student loans. You are allowed to defer student loans when you are enrolled at least half-time in graduate school.

  How much financial aid do graduate students get?


Graduate students' federal aid consists mainly of unsubsidized Direct Student Loans of up to $20,500 per year and possible eligibility for work-study funding, where they can find jobs on campus or in the community and work to earn their award allocations.