You might think that you know a thing or two about student loans, but graduate student loans are a whole other beast. This post will help you navigate all the little differences you’ll encounter when applying for graduate loans.
In some ways, graduate students are way ahead of the student loan game. Many already took out loans during their undergraduate years and so the Free Application for Federal Student Aid (FAFSA) and all its eccentricities are familiar. You probably already know a lot about different types of student loans and the terms involved.
How Graduate Student Loans are Different
1. Your Parent’s Income No Longer Matters
When you’re filling out the FAFSA, you only have to fill out your own financial information. If you had a hard time getting loans during your undergraduate years because one or both of your parents made too much money, you don’t have to worry. All they care about is your personal financial information and they give you a loan based on that.
2. You’re Eligible For More Money:
Graduate school is more expensive and many graduate students are at different stages of their lives than undergraduate students. Maybe you have kids, or maybe you don’t think you can eat ramen and live with a roommate anymore. The extra money that you’re eligible for thanks to the increases can ensure that you can pay your bills while furthering your education.
How much more you’re eligible for depends on which loan program you’re looking at. When it comes to Stafford student loans, you can take out $20,500 a year in graduate student loans so long as your total debt including your undergraduate loans does not exceed $138,500. The problem is that these loans are unsubsidized, which means they begin accruing interest immediately even if you don’t have to start paying until you graduate. Students in medical and health professions can potentially take out up to $47,167, and their lifetime limit is $224,000.
Graduate students are also eligible for Graduate PLUS loans, which can be used to cover all expenses including living expenses. The one challenge with this program is that it requires a credit check – so anyone with bad credit will have a hard time accessing these. These loans qualify for federal repayment options like loan forgiveness and income based repayment.
Perkins Loans are also available but only to graduate students who meet certain income and asset criteria. These loans are hard to get and are given out via your school. These loans have a fixed interest rate of only 5% and students can get up to $8,000 a year. The benefit of these loans is that interest only begins accruing 9 months after you graduate.
Private Loans are the way some graduate students go since they can sometimes get better interest rates. However, as many of these loans have variable interest rates that mean that the rates can increase dramatically over the course of the loans. Some lenders do offer fixed interest loans but most lack the repayment options that federal loans offer. If you must get private loans look for loans that offer help if you’re unemployed and defer payments until after you graduate. If you can, try to make payments while you are in school as this will save you tons of money.
3. There’s No Free Money
At least, there’s no free money from the government. While low-income students might have been helped out during their undergraduate degrees with Pell Grants, they won’t see anything like that during their graduate schooling. The upside is that many graduate programs have funding of their own that they offer to students through scholarships, fellowships, assistantships, and opportunities to be teaching assistants.
4. You’ll pay a Higher Interest rate
The joys of seeking a second (or third) degree are that you get to pay more in interest on your graduate student loans. You are not eligible for subsidized student loans so the loans you get will start accruing interest on the day you get the money. Also, while you might be able to defer your undergraduate student loans, they will still continue to accumulate interest while you’re in school. Because of this interest bonanza, most people suggest that you try to pay at least the interest on your loans while you’re in graduate school.
5. Make Sure Your Degree is Worth It
If you already have student loans from your undergraduate degree, make sure that whatever salary you’ll be earning with the help of your graduate degree will be enough to pay off all of your student loans. There are websites that have student loan calculators that can help you gauge your monthly payments. Remember, that many private graduate student loans have variable interest rates so be sure to factor in rises in interest rates. If your program makes sense then apply for loans. You can always refinance to a lower or fixed rate later.
Great Private Graduate Student Loan Providers
Federal loans are still the best option, by far for graduate student loans. Your school might also offer student loans. If you need some good options for private graduate student loans, then be sure to check out what these companies offer:
- Sallie Mae
- College Ave
- Citizen’s Bank
- Charter One