Understanding Graduate Loans

As a graduate student, you may be juggling both a career and your studies. It can be hard to find the time to understand the financial aid process. Realize that the decisions that you make today can have a huge impact on your financial future. That's why it's important to review all of your financial aid options and study the various types of graduate loans before making your decision. Check out our Financial Planning section, or visit Collegeloan.com to learn about more financial aid options for graduates.

Is there anything I should do before taking out graduate loans?

The first thing you should do is look for free money, like grants or scholarships. Once you fill out the FAFSA, the financial aid award letter that you get from your school will detail any scholarships or grants that were awarded to you. You can also apply for additional scholarships available through your school, your workplace and in your community. Depending on your field of study, you may also be able to apply for special fellowships and grants.

Are private graduate loans for me?

That depends on your situation. Many graduate students don’t know that they are eligible for increased federal Direct loan limits. You can borrow up to $20,500 per year in Direct Stafford loans; $40,500 for certain health profession programs. Direct Stafford graduate loans should always be maximized before using private graduate loans. If your degree and living expenses aren’t met by Direct loans and any cash or savings you plan on using, you can consider private graduate loans. You should also check with your employer to see if there is a tuition reimbursement plan available.

What are the types of graduate student loans?

There are basically 2 types of graduate student loans:

  1. Direct Stafford graduate loans
    The Direct Stafford Loan has increased borrowing limits for graduates, a fixed interest rate of 6.8% for the 10/11 school year, and some great deferment benefits in case you ever run into financial hardship. Graduate Stafford Loans should always be used before considering private graduate loans. Direct Stafford Loans have an origination fee of 1%.
    Graduate students can now also access the Direct Grad PLUS Loan, which can cover up to the total cost of attendance minus any other aid you have received. The Grad PLUS Loan was designed to be used once you have maximized your Direct Stafford Loan funds. The Grad PLUS Loan has a fixed interest rate of 7.9% and an origination fee of 4%.
  2. Private graduate loans
    Private graduate loans can cover your school and living expenses after you have maximized free money (scholarships, grants, tuition reimbursement) and Direct graduate Stafford and Grad PLUS loans. Private graduate loans were built with you in mind – there are little or no payments until you are finished with school or drop below half-time status. In addition, private graduate loans are often less expensive than credit cards or personal loans.
Important Information

Private graduate loans are credit based. Depending on your income and credit history, you may qualify for the loan on your own. In today’s financial environment, don’t be surprised if you are asked to obtain a credit-worthy co-signer. The interest rate on private graduate loans is generally variable. If you currently have a good income and credit history, you can apply for a private graduate loan to see if your rate and fees will be better than the Grad PLUS Loan (7.9% fixed interest rate, origination fee of 4%). If you are not working, or do not have a strong credit history, the Grad PLUS Loan is probably your best option. Direct Stafford, Grad PLUS graduate loans and private graduate loans can be tax deductible.

Where can I find Direct and private graduate loans?

Direct graduate loans, including both the Direct Stafford and Grad PLUS Loans, are made solely through the Department of Education. You can complete the application for these loans (after you complete the FAFSA) on the government’s website www.studentloans.gov.

Private graduate loans are provided by banks and credit unions. Check with your school’s financial aid office to see if they can provide you with a list of lenders. You can also find lenders by doing your own search for private graduate loans on the internet. For more information on obtaining private graduate loans, check out our lending site www.collegeloan.com.