How to Get Student Loans for Grad School When You’ve Maxed Out Your Federal Loans

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$164,800. That’s the average cost for four years of medical school.

$138,492. That’s what aspiring lawyers are paying for their degrees, according to data from U.S. News.

Whatever advanced degree you’re studying for, chances are you’re dealing with high tuition costs. Low-interest Direct Loans from the Office of Student Aid can help you cover them, but they only go so far.

When the federal financial aid well dries up, you might have to look to other sources for funding.

Before delving into how to get student loans for grad school, let’s answer an important question: What is the maximum student loan amount for your lifetime?

Federal student loan limits for Direct Loans

Federal Direct Loans, which currently have a fixed interest rate of 6.00% for grad students, can be a huge help in paying for school, but they might not cover your full cost of tuition.

That’s because your eligibility is limited by two factors. First, the federal government sets the following federal student loan limits for graduate students:

  • An annual limit of $20,500
  • An aggregate lifetime limit of $138,500, including any federal loans you already received as an undergraduate. (Note that some health profession students can take out even more; speak with your financial aid office if this could apply to you.)

Not only do these federal student loan limits put a cap on how much you can borrow, but your school’s financial aid office might also curb your borrowing. For instance, even though you’re technically eligible to borrow up to $20,500 per year, your financial aid office might only offer you $15,000.

That’s because your financial aid package depends on both the school’s budget and the information you provide on the FAFSA.

Whether you can borrow the maximum amount, you still might not have enough to pay for grad school. If you find yourself in this situation, you could cover the gap in one of two ways: with a Grad PLUS Loan or a private student loan.

Here’s how to get student loans for grad school when you can’t get any more Direct Loans.

1. Consider taking out a Grad PLUS Loan

Grad PLUS Loans are another federal option for student loans, but they have different terms than Direct Loans.

For one, you can borrow up to the cost of attendance of your school, minus any other financial aid you’ve already received. Second, Grad PLUS Loans have credit requirements. To be eligible, you have to submit both the FAFSA and an application showing you don’t have an adverse credit history. If you do, you could apply with an endorser who has better credit.

Grad PLUS Loans have higher interest rates than Direct Loans. They come with a fixed interest rate of 7.00%, as of July 1, 2017. They also have an origination fee of 4.264 percent.

That means if you took out $20,000, you’d have to pay an origination fee of $852.80. Over 10 years of repayment, you’d pay $7,866 in interest.

Grad PLUS Loans come with flexible repayment plans, including Extended Repayment and Income-Based Repayment, but they don’t necessarily offer the lowest interest rates. Before choosing a Grad PLUS Loan, you might look into your options for private student loans to see if you can snag an even lower rate, especially if you have good credit.

2. Compare offers from private student loan lenders

When considering how to get student loans for grad school, look into private lenders. Banks, credit unions, or online student loan companies might be a good option if you qualify for a low interest rate.

Private lenders look at your credit, income, and debt-to-income ratio before approving you for a loan. If you have strong credentials — or can apply with a cosigner who does — you could secure a low interest rate.

As a result, your private loan could cost less than a Grad PLUS Loan. Citizens Bank, for example, offers variable rates starting from 2.80% and fixed rates starting at 4.72%. What’s more, Citizens Bank doesn’t charge an origination fee.

Let’s again consider that example of a $20,000 loan on a 10-year repayment plan. At a 5.25% interest rate, you’d pay $5,750 in overall interest — more than $2,000 less than you would pay with a Grad PLUS Loan. Plus, you wouldn’t have to deal with the $852.80 origination fee at all.

In this case, a low-interest private loan could be superior to a Grad PLUS Loan. If you have decent credit, it’s worth shopping around with multiple lenders so you can find the loan with the lowest possible interest rate.

However, private student loans don’t always have the most flexible repayment plans. If you’re worried about your ability to pay back the loan, sticking with a federal loan — and the borrower protections that come with it — could be the safer way to go.

If you decide a private student loan is right for you, it’s easy to submit a full application online. After you fill out your information, the lender will contact your school to certify your information.

Applying for a private student loan is an easy online process. But make sure to compare offers from multiple lenders and consider Grad PLUS Loans before committing.

Don’t forget to search for free money

When you’ve run up against the federal student loan limits for grad students, you might need to take out a Grad PLUS Loan or a private student loan.

Of course, before taking on student debt, you should always seek out grants and scholarships. You might also search for a part-time job to cover expenses or start a side hustle to earn some extra income.

By taking these proactive steps today, you can reduce the amount of debt you have to pay back tomorrow. But if you’ve taken advantage of alternative options — and thought through a plan for repayment — then taking out additional loans could be the right financial move.

Just make sure to compare your options so you can find the right student loan for you.

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* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.

1 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

(1)All rates shown include the auto-pay discount.  The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.

Information advertised valid as of 11/4/2019. Variable interest rates may increase after consummation.


2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Important Disclosures for Discover.

Discover Disclosures

  1. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
  2. View Auto Reward Debit Reward Terms and Conditions at DiscoverStudentLoans.com/AutoDebitReward.
  3. Aggregate loan limits apply.
  4. Lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover Undergraduate Loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.00% as of January 1, 2020. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit discover.com/student-loans/interest-rates for more information about interest rates.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

4 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).

  1.  Rates are as of July 1, 2019 and include auto-pay discount. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment. Variable rates may increase after consummation.

5 Important Disclosures for Citizens.

Citizens Disclosures

Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2019, the one-month LIBOR rate is 1.70%. Variable interest rates range from 2.80% – 11.06% (2.80% – 10.91% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.72% – 12.19% (4.72% – 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.

Please Note: International Students are not eligible for the multi-year approval feature.

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2.87% – 10.75%*,2Undergraduate and Graduate

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2.80%
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3.52% – 9.50%4Undergraduate and Graduate

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2.80% – 11.06%5Undergraduate and Graduate

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

 

Published in Big Money Decisions, Paying for College, Student Loan Repayment, Student Loans