If you’re heading to graduate school, you’ve likely done the math on how much it costs. If you’re planning to take out student loans, you might be thinking you can draw from your experience with undergraduate student loans. Unfortunately it’s not that simple, the student loan rules are much different for graduate students.
Here’s what you need to know before you take on graduate student loans.
1. Federal student loan interest rates are higher
There have been many changes to student loan costs lately, and several more featured in the news with pending changes. But one thing’s for certain: graduate students pay higher interest rates than undergraduates do.
Student Loan rates are set by Congress and as of the 2013-2014 school year, they are tied to Federal Treasury notes. Currently interest rates are 4.66% for undergraduate student loans and 6.21% for graduate students. It’s possible these rates could change next year. The good news is that the current rate is lower than that from previous years, it was most recently 6.8%.
2. No subsidized student loans
As an undergraduate with subsidized student loans, you won’t be charged interest on your loans while you’re still a full-time student. This isn’t the case for graduate students, instead, your student loans 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 your principal balance of your graduate school loans. For example, if you borrow $10,000 when you start school, the balance will increase to about $11,300 two years later. That’s $1,300 more you owe than if you were an undergrad with a subsidized loan.
3. You can borrow more
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 loan debt for graduate school because of higher maximum loan limits. Current limits are $20,500 per year and $138,500 total for graduate or professional students. The total ($138,500) includes any loans for undergraduate you already have, which cannot be exceeded.
Students can borrow even more for medical school. The student loan limit is capped at $40,500 per year and $224,000 for these medical school students.
While borrowing more seems like good news as it gives students more opportunity, 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 this and use the money for nonessential expenses.
Too much student debt can lead to a debt nightmare (like it did for Student Loan Hero CEO, Andy Josuweit).
4. Parents not required
One change that makes the process easier is you don’t need to include your parents’ financial info on the FAFSA form. You’re considered an independent for graduate school, which means you fill out the form for yourself to gain access to the necessary student loans. FAFSA says it should take you less than an hour to fill out the online form, so don’t procrastinate!
5. Less need-based aid available
Even though you don’t have to count your parents’ income and assets, there likely isn’t as much need-based aid available. According to the U.S. Department of Education, Pell Grants are typically only available to undergraduate students. Even if you were eligible for your bachelor’s, you likely won’t be eligible for graduate school unless you meet some very limited exceptions.
Other need-based grants and aid may also be more difficult to find. Instead, you may have more luck with scholarships. Yes, finding scholarships can be difficult and competitive but if you’re creative and systematic in your approach, you could dig up more free money than you imagined.
6. Defer undergraduate loans
As a full-time graduate student, you’re allowed to defer payments on your undergraduate student loans. This doesn’t happen automatically (like it does while you’re an undergrad), but it’s a fairly simple request. 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 you work. If not, your bill will continue to grow.
There is some good news: if you have subsidized student loans from undergrad, 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.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
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.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* 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.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|