Understand graduate student loans

Graduate student loans are an investment in your future; understanding how they work can help you pay for your graduate degree responsibly.

Loans are an investment in your future

Our 1-2-3 approach to paying for graduate school recommends that after you’ve used savings and money you don’t have to pay back, you should turn to federal financial aid and federal student loans. Only then should you consider a private graduate student loan. Here’s what you need to know about your options in graduate student loans, both federal and private.

Federal vs private loans for graduate students

While there are several ways to borrow money, the two general types of loans specifically designed for graduate students are federal loans and private loans. We’ll cover the differences between them, but there are some shared features:

  • You have to pay them back with interest.
    Interest begins to accrue (grow) from the day that your graduate student loan is disbursed (sent) to your school. Learn more about interest.
  • There’s a grace period.
    You’ll generally have six or more months after leaving graduate school before you begin making principal and interest payments on federal student loans. (The grace periods for private loans will vary depending on the lender.) Loans specifically for professional programs like law, medical, and dental degrees may have a longer grace period.
  • They’re disbursed directly to your graduate school.
    Unlike personal loans or loans for some career-related activities (residency and relocation), the graduate student loan money goes to the school’s financial aid office, not to you.

Federal loans for graduate students

There are two types of federal loans for graduate students.footnote 1 While both are funded by the federal government, there are differences in interest rate, and how much you can borrow from each.

  • Federal Direct Unsubsidized Loans
  • Federal Direct Graduate PLUS Loans

You can apply for both loans by filling out a FAFSA®. Based on the information you submit, the cost of attendance, and the amount of other financial aid you’re receiving, your graduate school will determine how much you can borrow.

Note: Direct Subsidized Loans (where the federal government pays the loan’s interest while you’re in school and during your grace period) aren’t generally available for graduate students.

Federal Direct Unsubsidized Loansfootnote 1

Federal Direct Loans (also known as “Stafford Loans”) aren’t based on financial need, and you’re responsible for paying all the loan’s interest. To get a Federal Direct Loan, you must be enrolled at least part-time.

Benefits

  • You’ll likely receive a lower interest rate with a Federal Direct Loan than with a private graduate loan.
  • Federal Direct Loans usually have more flexible repayment options and benefits than a private graduate loan.
  • They’re not credit-based, so there’s no credit check and you don’t need an endorser.

Considerations

  • You’re awarded a set loan amount based on your FAFSA information, and may need more money for your graduate program.
  • You’re charged a “loan fee,” a percentage of the disbursed loan amount.
  • Federal Direct Loans only offer a fixed interest rate.

Federal Direct Graduate PLUS Loansfootnote 1

If you need additional aid beyond your Federal Direct Loans, Direct Graduate PLUS Loans can help cover your graduate school costs. To get PLUS Loans, you must be enrolled at least half-time at an eligible school taking part in a program leading to a graduate or professional degree, or a certificate.footnote 1

Benefits

  • You can apply for your entire cost of attendance, minus any financial aid (like Federal Direct Loans) that you get.
  • If you have an adverse credit history, you may still be able to receive a PLUS loan if you meet additional requirements.
  • There are several types of loan repayment plans you can choose.

Considerations

  • This loan considers your credit; if you have an “adverse credit history,” you may be denied. Learn what constitutes an adverse credit history.
  • You’re charged a “loan fee,” a percentage of the disbursed loan amount.
  • The interest rate is higher than for a Federal Direct Loan. And, if you’re highly qualified, you may receive a lower interest rate with a private student loan.footnote 2
  • They only offer a fixed interest rate.

Private student loans for graduate students

Private student loans are offered by banks or credit unions, rather than the federal government, and you apply directly with them. A lender will consider your credit history, among other factors. If your credit isn’t up to their requirements, you may need a cosigner to increase your chance of approval.

Interest rates for private graduate loans are generally higher than for federal loans, but if you’re a highly qualified borrower, you may receive a lower interest rate than with a Direct Graduate PLUS Loan.footnote 2

Direct Graduate PLUS Loans require you to be enrolled at least half-time, but you may be eligible for private graduate student loans if you’re enrolled full-time, half-time, or less than half-time in an eligible school.

While we can’t speak to all private student loans, here are some of the benefits of Sallie Mae graduate student loans.

Benefits

  • You can have a choice of fixed or variable interest rates.
  • You can apply for a graduate school loan or one tailored for your specific field (business, medical, dental, law, or graduate health professions).
  • There’s no origination fee.
  • You can choose to make payments while you’re in graduate school or defer until after you leave.footnote 3
  • You can pay for all your school-certified expenses.footnote 4
  • If you have a cosigner on your graduate student loan, you can apply to release your cosigner.footnote 5

Considerations

  •  Private student loans usually don’t offer the same flexibility of repayment options as federal student loans; you generally can’t change your repayment plan after you take out a private student loan.

Related topics

Ways to pay for graduate school

Get tips to help you figure out how to pay for your graduate degree.

Learn about interest and capitalization

Understand what student loan interest and interest capitalization are and how they can affect your Total Loan Cost.

Sallie Mae Graduate School LoanSM

A Sallie Mae Graduate School Loan can help you pay for your master’s or doctoral degree. Choose the interest rate type and repayment option that work for you.

footnote 1. This information was gathered on 08/19/22 from https://studentaid.gov/understand-aid/types/loans/plus/grad.

footnote 2. Explore federal loans and compare to make sure you understand the terms and features. Private student loans that have variable rates can go up over the life of the loan. Federal student loans are required by law to provide a range of flexible repayment options, including, but not limited to, income-based repayment and income-contingent repayment plans, and loan forgiveness and deferment benefits, which other student loans are not required to provide. Federal loans generally have origination fees, but are available to students regardless of income.

footnote 3. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent.  Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment.

footnote 4. For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website may be subjected to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time.

footnote 5. Only the borrower may apply for cosigner release. To do so, they must first meet the age of majority in their state and provide proof of graduation (or completion of certification program), income, and U.S. citizenship or permanent residency (if their status has changed since they applied). In the last 12 months, the borrower can’t have been past due on any loans serviced by Sallie Mae for 30 or more days or enrolled in any hardship forbearances or modified repayment programs. In addition, the borrower must have paid ahead or made 12 on-time principal and interest payments on each loan requested for release. The loan can’t be past due when the cosigner release application is processed. The borrower must also demonstrate the ability to assume full responsibility of the loan(s) individually and pass a credit review when the cosigner release application is processed that demonstrates a satisfactory credit history including but not limited to no: bankruptcy, foreclosure, student loan(s) in default or 90-day delinquencies in the last 24 months. Requirements are subject to change. Shortest qualification period based on a August 14, 2020 review of national private loan programs offered by publicly-traded competitors.

footnote Sallie Mae does not provide, and these materials are not meant to convey, financial, tax, or legal advice. Consult your own financial advisor, tax advisor, or attorney about your specific circumstances.

footnote External links and third party references are provided for informational purposes only. Sallie Mae cannot guarantee the accuracy of the information provided by any third parties and assumes no responsibility for any errors or omissions contained therein. Any copyrights, trademarks and/or service marks used in these materials are the property of their respective owners.

footnote FAFSA is a registered service mark of U.S. Department of Education, Federal Student Aid.