The application process for graduate loans depends on whether you’re applying for federal or private student loans.
Graduate students “can generally avoid having to go through the verification process that some undergraduates must complete because they are receiving only non-need-based loans,” says James Anderson, director of financial aid at Montclair State University.
Direct PLUS loans are federal loans reserved for graduate students and parents of undergraduates. If you want to apply for a Direct PLUS Loan, which offers higher limits than the standard graduate loan, you’ll fill out a separate application after you submit the FAFSA on the Federal Student Aid website. Interest rates are also higher for Direct PLUS loans at 7.54%.
With private loans, you’ll submit an application directly with the lender of your choice. Before you do this, get prequalified with multiple lenders to see your estimated rate, compare offers and choose the best fit for you. Prequalification typically uses just a soft credit check, which doesn’t hurt your credit score.
Regardless of where you apply, you’ll typically need to provide some personal information, income and employment information, your school name and other relevant details.
Graduate student loan limits can vary by lender and type of student loan. With direct unsubsidized loans, for instance, you can borrow up to $20,500 per year and $138,500 in total, including undergraduate loans. On the other hand, federal Direct PLUS Loan amounts are limited to the cost of attendance for your school minus other financial assistance you receive.
If you’re thinking of getting private student loans, check with each lender to find out how much you can borrow. Note that private lenders may also have annual and lifetime limits.
If you’re applying for federal graduate student loans, no minimum credit score is required. In fact, if you apply for direct unsubsidized loans, no credit check is involved in the application process.
Direct PLUS loans do require a credit check, but the Department of Education uses your credit history only to determine if you have significant negative items on your credit report. Examples are bankruptcy, foreclosure, wage garnishment or other things that suggest an adverse credit history.
With private student loans, the credit score requirements can vary by lender. In general, most lenders expect a score in the high 600s to qualify. If your credit score isn’t where it needs to be, or you do qualify but the terms aren’t favorable, a creditworthy co-signer can boost your odds of getting a loan with affordable terms.
- Scholarships: Check nonprofits, educational institutions and professional associations. Try Fastweb, an extensive scholarship search platform, and Sallie Mae’s interactive tool to find grad school scholarships. But also fill out the FAFSA, which will determine whether you are eligible for need-based scholarships from your school or state.
- Federal work-study programs: Students earn money for school through part- or full-time campus jobs. Fill out the FAFSA to qualify.
- Grants: Complete the FAFSA to be considered for grad school grants. For school-specific grants, check with your school’s financial aid office. You may find grants from nonprofits, government organizations, professional groups and others, but also ask your department head or adviser.
- Employer sponsorship: Some employers offer tuition reimbursement as a benefit, paying for all or part of your education costs. You might have to commit to staying at the company for a certain amount of time after reimbursement.
- Income-share agreement: You receive money to fund your education, and the ISA will take a cut of your income after you graduate.
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Graduate student loans work similarly to undergraduate student loans, with only a few key differences. For starters, graduate federal loans typically have higher limits, which help students get the financing they need and make up for fewer other financial aid options.
However, these loans also charge higher interest rates than undergraduate loans. For federal student loans disbursed before July 1, 2023, interest rates are 4.99% for undergraduates and 6.54% for grad students.
Federal student loans may be subsidized or unsubsidized, but all graduate loans are unsubsidized.
Graduate student loans from private lenders may have higher interest rates than undergraduate loans from the same lenders.
However, lenders typically offer a range of rates based on your creditworthiness. If you’ve managed to build a credit history by the time you’re a graduate student, you may qualify for a lower rate than what you could’ve gotten on your own as an undergrad.
There are both benefits and drawbacks to using graduate student loans to help fund your education. As with any financial decision, it’s important to consider the pros and the cons before you pull the trigger:
- Loans can help you afford a graduate or professional degree.
- You don’t need to make payments until after you leave school.
- Loan money can be used to cover educational and living expenses.
- Graduate loans carry higher interest rates than undergraduate loans.
- Graduates are not guaranteed jobs to pay back their debt.
- Student loan payments can delay other important financial goals.
If you choose to borrow, know that borrowing as a graduate student is somewhat different than borrowing as an undergraduate. The federal direct loan borrowing limit is higher for graduate students, and you will also have access to the Grad PLUS loan program if direct loans are not enough. In addition, you may have a stronger credit history as a graduate student, which means you may be able to get lower rates from lenders outside the federal loan program and save money over time.
To recap, here are the picks:
