After I finished my undergraduate degree, I realized that my bachelor’s in communications didn’t help me advance far in my chosen field, or help me earn much money.
After a little research, I found that attending a prestigious school in journalism could help me find higher-paying jobs as a writer. However, I didn’t have the funds to write a check to Syracuse University. Instead, like 53% of grad students, I knew I needed to borrow money, probably starting with Direct student loans.
Here’s how I got the money I needed to pay for graduate school, and how you can, too.
How much federal money can you borrow as a grad student?
Subsidized loans are not available to grad students. But you can borrow up to $20,500 per year using unsubsidized Direct student loans for graduate school. There’s no credit check for a Direct Unsubsidized Loan.
However, you’ll pay a higher interest rate. For loans issued after June 30, 2017, the rate for graduate unsubsidized loans is 6.00%, compared to 4.45% for undergraduate loans.
If you need more than the limit for Direct student loans, you can apply for a Direct PLUS loan. A PLUS Loan does require a credit check, though, and the interest rate is 7.00%. But you can borrow what you need to meet the rest of your school expenses.
Owed to the higher rate on PLUS Loans, If you have good credit, it can make more sense to apply for private student loans to bridge any funding gap.
I maxed out my federal Direct loan amount to pay for a one-year grad program. After receiving a small merit-based scholarship from Syracuse University, I ended up with a gap of about $12,000, which I bridged with a private loan.
Step 1: Get your FSA ID
Begin by getting a Federal Student Aid ID account, if you don’t already have one. While you can complete step two, filling out your Free Application for Federal Student Aid, without an FSA ID, you do need to create one during the application process if you want to sign your application electronically.
If you already have an FSA ID, filling out the FAFSA can be easier, since it automatically fills in some of your information. Chances are that if you took out federal loans in your undergraduate days, you have an FSA ID.
Step 2: Fill out your FAFSA
Before you can get Direct student loans or any other type of federal student aid you need to complete the FAFSA.
You need the following information to fill out your FAFSA:
- Social Security number (or alien registration number if you aren’t a U.S. citizen)
- Federal income tax returns and related records
- If applicable, other financial information such as bank statements, investment records, and untaxed income
During the application process, you need to specify which schools should receive your information. You must request at least one school, but you can direct your application to more than 10 colleges.
In addition to Syracuse, I also sent my FAFSA results to Utah State University. It’s relatively easy to search for eligible schools and add them to your application.
As you can see, there aren’t a lot of steps to filling out your FAFSA. As a grad student, you might not have to worry about parent demographics.
The Department of Education classifies grad students as independent. The main exception to this rule is if you plan to attend law school or enter a medical or nursing program. In some cases, your school might require parental information for its financial aid determinations. But for the most part, you’re likely to skip that.
Once you reach the financial information portion of your application, make it easier on yourself by linking up to the IRS website. It’s easy to use. I was able to import the information in a matter of seconds. Much easier than pulling up your tax return and hunting down the information.
Once you have your financial data squared away, you’ll be required to sign your FAFSA. You have to agree to only use the funds for approved education-related expenses.
If you need help filling out the FAFSA, you’ll find hints throughout the application. Plus, you can save your application and come back to it later. I was able to complete my own graduate FAFSA in about 10 minutes. It’s possible to complete it in even less time.
Step 3: Consider your graduate financial aid package
Using the information you submitted, your chosen graduate schools will put together and send you financial aid packages. In addition to loans, you might be offered a scholarship like I was. You might also be invited to apply for a fellowship or an assistantship in teaching or in research.
The aid package offered by your school might not cover your total cost of attendance. If that happens, you’ll need to look for other funding options. That’s where Grad PLUS Loans and even private student loans can come in.
Figure out your shortfall, and then decide what to do next.
Step 4: Apply for a Direct PLUS Loan
Direct student loans include the PLUS option. A Grad PLUS Loan can cover your funding gap. It’s a way to get extra money for your continuing education if you’ve reached your maximum in other federal programs.
In order to complete a PLUS Loan application, you must have an FSA ID. Some of your application will be prefilled using previously submitted information through your FSA ID.
However, you’ll also need to provide additional information:
- Employer or self-employment information
- Requested loan amount
- Desired loan period
You’ll also have to agree to a credit check and await the decision. If you’re denied, you can obtain an endorser or provide a statement detailing your extenuating circumstances. Afterward, you’ll have to complete PLUS Credit Counseling.
I never applied for a Direct PLUS Loan because the program didn’t exist when I attended grad school. Today, I’d probably opt for a private student loan again because it’s possible for me, based on my credit score, to get a rate of around 4.00%. That low rate could result in significant savings over a PLUS Loan.
When to get a private student loan for grad school
Choosing the best student loans for you requires a bit of research and planning. You’ll always be better off not borrowing money. But you might not have been able to save up enough money for grad school, or maybe you couldn’t get scholarships or grants.
Even if you did nab financial aid, the cost of attending graduate school might still exceed your resources. That’s when you turn to student loans.
It’s a good idea to start with federal Direct student loans. They give you access to income-driven repayment and other protections that might not come with private loans. Plus, if you aren’t sure whether your credit and income will stand up to the scrutiny of private lenders, a federal loan could provide you with the money you need.
It’s important to realize that some private lenders require that you begin repayment in school. With federal loans, you know you have a buffer before you have to start paying the money back. Double-check with a private lender to see if you can wait until you finish school to begin repayment.
Consider your expected income after you graduate, too. If you can get a good interest rate on a private student loan and don’t think you’ll need federal protections based on your income, it’s possible to save money on interest with a private loan.
Once you exhaust that option, it’s time to choose between Direct PLUS Loans and private student loans. If you have good enough credit and a solid income, or you can get an eligible cosigner, it might be a better deal for you to get private student loans.
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