Undergraduate vs. Graduate: 8 Student Loan Differences

 December 23, 2019
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Undergraduate vs Graduate Student Loans

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If you’re planning to take out student loans for your second degree, you might think you could draw on your experience with undergraduate debt.

Unfortunately, it’s not that simple. Federal and private student loans are much different for undergraduate vs graduate students.

Before you take on graduate loans, consider these eight differences between the borrowing situations.

1. FAFSA forms
2. Need-based aid
3. Federal loan types
4. Federal loan interest rates
5. Federal loan borrowing limits
6. Qualifying for federal loan forgiveness
7. Private loan terms
8. In-school loan deferments

1. FAFSA form

There are many differences between being a dependent student and an independent one. As a graduate or professional student considered independent of your parents (and their finances), you should have an easier time completing the Free Application for Federal Student Aid (FAFSA) — the gateway to Federal Student Aid, including loans.

You’ll no longer need to attach mom or dad’s tax returns to your FAFSA paperwork. It should take you less than an hour to fill out the online form, so don’t procrastinate.

2. Need-based aid

Even though you don’t have to count your parents’ income and assets on your FAFSA form, which should lower your Expected Family Contribution or out-of-pocket cost, there likely isn’t as much need-based aid available to you as a grad student.

Federal Pell Grants, for instance, are typically only available to undergraduate students. Even if you received a Pell Grant for your bachelor’s degree, you likely won’t be eligible to receive one for graduate school. (Aspiring teachers participating in a postgraduate certificate program are the exception to this rule.)

Other need-based grants and aid may also be more difficult to find. Instead, you may have more luck with scholarships and fellowships. Other ways to pay for grad school without resorting to debt include seeking on-campus jobs, especially those with tuition reimbursement perks.

3. Federal loan type

If borrowing loans for your next degree becomes a necessity, the FAFSA opens the door to federal financing. But your options as a graduate student vary from those available to undergrads.

Undergraduate Graduate student
Direct Subsidized Loans Yes No
Direct Unsubsidized Loans Yes Yes
Direct PLUS Loans No Yes

If you borrowed subsidized student loans as an undergrad, for example, you weren’t charged interest on your loans while enrolled as a full-time student. This isn’t the case for graduate students. Instead, your student loan options — Direct Unsubsidized and Direct PLUS loans — would start accruing interest charges right away, whether you’re a full-time student or not.

The longer you take to finish graduate school, the more interest will be added on to the principal balance of your graduate school loans. For example, if you borrow $10,000 when you start school, the balance will increase to about $11,200 two years later. That’s $1,200 more that you would owe than if you were an undergrad with a subsidized loan.

4. Federal loan interest rate

Although federal student loan rates decreased across the board for the 2019-2020 school year, this fact remained unchanged: Graduate students pay higher interest rates than undergraduates do.

Student loan interest rates are set by Congress and are tied to Federal Treasury notes. Currently, rates are 4.53% for undergraduate student loans and range between 6.08% (Direct Unsubsidized Loans) and 7.08% (Direct PLUS Loans) for graduate students.

Of course, the higher your rate, the more interest you’ll have to fork over in repayment.

Direct Loan Comparison Undergraduate Graduate
Unsubsidized loan interest rate 4.53% 6.08%
Subsidized loan availability Yes No
In-school deferment option Yes Yes
Annual borrowing limit $5,500 to $12,500 $20,500
Aggregate borrowing limit $57,500 $138,500
Number of payments to qualify for forgiveness on REPAYE plan 20 years 25 years

5. Federal loan borrowing limits

As you’ve likely heard, both undergraduate and graduate student loan balances can add up to a whole lot. But it can be easier to rack up student debt for graduate school because of higher maximum loan limits.

Current allotments are $20,500 per year and $138,500 total for graduate or professional students. The latter limit includes any loans you already borrowed for your undergraduate degree.

Students can borrow even more in Direct Unsubsidized Loans for medical school and other health professional degrees. The student loan limit is capped at $47,160 per year and $224,000 for these students.

In addition, for PLUS Loans, there are no limits short of your school’s cost of attendance. You could borrow every last cent needed via a PLUS Loan.

While borrowing more seems like good news, it can translate to trouble. It’s tempting for students to take out more than they need to because graduate school student loans can be used for living expenses. Student loan money isn’t tracked or monitored, so it’s easy for students to abuse it, using the money for nonessential expenses.

6. Qualifying for federal loan forgiveness

Undergraduate and graduate students are eligible for student loan forgiveness programs like Public Service Loan Forgiveness. However, graduate and professional students face a longer path (25 years) toward forgiveness on the REPAYE income-driven repayment (IDR) plan. Undergrads could have their balance wiped away after just 20 years of qualifying payments.

With that said, many student loan repayment assistance programs exist exclusively for careers that require a postgraduate degree. Doctors, lawyers and teachers are among those professionals who could access relief programs offered by state governments, employers and other entities.

7. Private loan term

When federal student loans aren’t enough to cover your cost of attendance, you might consider private student loans. Again, however, private loans for undergraduate versus graduate students are anything but identical.

Most reputable lenders require undergrads to attach a cosigner to their loan application, for example. As a graduate student, you could net a lower rate by piggybacking on a creditworthy cosigner — but you could also qualify on your own.

In all likelihood, as a grad student, you’ll have a thicker credit file and could score a better deal on a private loan than you might have been able to snag as a wide-eyed underclassman.

Keep in mind, though, that banks, credit unions and online lenders vary their rates depending on the degree you’re pursuing. CommonBond, for instance, advertises five distinctive fixed and variable rate ranges for undergrads, grads and MBA students, as well as dental and medical program attendees.

Also, remember that it typically makes sense to prioritize federal loans over private debt options. Even the best private student loan companies listed on our site fail to match federal loan-only protections like IDR, deferment and forbearance, as well as governmental pathways to forgiveness.

8. In-school deferment

As a full-time graduate student, you’re typically allowed to defer payments on your undergraduate federal and private student loans.

Just beware: Interest will continue to accrue during deferment, too. If possible, you may want to continue to pay off interest on graduate student loans while you’re in school. If not, your bill will continue to grow.

There is some good news: If you have subsidized federal student loans from your undergraduate program, you won’t be charged more interest while they’re in deferment. You can find out how much interest will accrue using our student loan deferment calculator.

Undergraduate vs graduate student loans: Understand the differences before borrowing

There are a host of ways that your graduate or professional program will differ from your undergraduate experience. You could find yourself in smaller classes studying more specific material, for example. You might even have to put in the research to defend a serious thesis project.

As you know now, you’ll also have a new borrowing experience.

While being an undergraduate borrower might prepare you for the process as a graduate student, it’s essential to understand the differences before taking out more loans. In fact, you should review all of your financial aid options for grad school before making a decision.

Andrew Pentis contributed to this report.

Need a student loan?

Here are our top student loan lenders of 2021!
LenderVariable APREligibility 
0.99% – 11.98%1Undergraduate

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0.99% – 11.44%3Undergraduate

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1.50% – 11.33%4Undergraduate

Visit Ascent

1.12% – 11.23%5Undergraduate

Visit SoFi

1.15% – 11.01%6Undergraduate



Visit FundingU

3.80% – 9.36%8Undergraduate

Visit CommonBond

* 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.

Rates shown are for the College Ave Undergraduate Loan product and include autopay 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.

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. This informational repayment example uses typical loan terms for a first year graduate student 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 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 8/9/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

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

3 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
  2. Explanation of Rates “With Autopay” (APD)
    Rates shown include 0.25% APR discount when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

    Available Terms
    For Cosigned loans – 5, 7, 10, 12, 15 years. 
    Primary Only – 10, 12, 15 years

    In school deferred payment is not available in AL, AZ, CA, FL, MA, MD, MI, ND, NY, PA, and WA).

4 Important Disclosures for Ascent.

Ascent Disclosures

Ascent loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: AscentFunding.com/Ts&Cs.

Rates are effective as of 10/01/2021 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes income-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates.

1% Cash Back Graduation Reward subject to terms and conditions, please visit AscentFunding.com/Cashback. Cosigned Credit-Based Loan student borrowers must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs are available for the most creditworthy applicants and may require a cosigner.

5 Important Disclosures for SoFi.

Sofi Disclosures

UNDERGRADUATE LOANS: Fixed rates from 4.13% to 10.66% annual percentage rate (“APR”) (with autopay), variable rates from 1.12% to 11.23% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 10.90% APR (with autopay), variable rates from 1.10% to 11.34% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.08% to 10.86% APR (with autopay), variable rates from 1.05% to 11.29% APR (with autopay). PARENT LOANS: Fixed rates from 4.23% to 10.66% APR (with autopay), variable rates from 1.20% to 11.23% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 4/1/2021. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (>www.nmlsconsumeraccess.org).

6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

Undergraduate Rate Disclosure: Variable interest rates range from 1.15% – 11.01% (1.15% – 10.24 APR)Fixed interest rates range from 4.18% – 11.70% (4.18% – 10.83% APR).

Graduate Rate Disclosure: Variable interest rates range from 1.89% – 10.66% (1.89% – 10.41% APR). Fixed interest rates range from 4.64% – 11.23%% (4.64% – 10.95% APR).

Business/Law Rate Disclosure: Variable interest rates range from 1.89% – 9.22% (1.89% – 8.50% APR). Fixed interest rates range from 4.38% – 10.44% (4.38% – 9.72% APR).

Medical/Dental Rate Disclosure: Variable interest rates range from 1.89% – 8.02% (1.89% – 7.72% APR). Fixed interest rates range from 4.28% – 9.24% (4.28% – 8.94% APR).

Parent Loan Rate Disclosure: Variable interest rates range from 1.97% – 7.06% (1.97% – 7.06% APR). Fixed interest rates range from 4.94% – 8.58% (4.94% – 8.58% APR).

Bar Study Rate Disclosure: Variable interest rates range from 4.44% – 9.58% (4.44% – 9.52% APR). Fixed interest rates range from 7.39% – 12.94% (7.40% – 12.83% APR).

Medical Residency Rate Disclosure: Variable interest rates range from 3.53% – 7.03% (3.53% – 6.76% APR). Fixed interest rates range from 6.99% – 10.49% (6.98% – 10.09% APR).

Variable Rate Disclosure: Variable Rates are 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 June 1, 2021, the one-month LIBOR rate is 0.09%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%. 

Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.

Lowest Rate Disclosure: Lowest rates require a 5-year repayment term, immediate repayment, a graduate degree (where applicable), 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. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer.  Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.

Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.

7 Important Disclosures for Funding U.

Funding U Disclosures

Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.

8 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.  If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.