The Basics of Graduate Loans
Each type of loan offers different benefits, insurance policies and rates. In general, they operate just like a regular student loan. However, there are some differences that you need to know about.
First off, you can borrow more because graduate school tends to be more expensive than undergraduate school. Some of the upper level aggregate limits can even reach over $100,000. This can be dangerous if you are not prepared to pay the monthly payment rate when you graduate. As a general rule of thumb, for every $10,000 you borrow, the amount you owe will be about $120 a month on a 10-year plan.
Federal vs. Private Student Loans
Federal student loans often require you to be a half-time (not part-time) student to postpone repayment until after graduation. On the other hand, private loans generally require you to start repayment right away. So, if you aren’t able to shell out monthly payments while you’re studying, make sure you are selecting the loan that works with your schedule.
Federal Graduate Loan Options
Federal Stafford Loans
With a Stafford loan, you get a fixed interest rate. This means the initial interest at the creation of the loan will not change from year to year, and payments start six months after graduation.
In order to qualify for a Stafford loan, you must:
- Be a U.S. citizen and grad student
- Attend school for at least half time
- Have no prior defaulted federal loans
If you meet all the criteria, you can borrow up to $20,500 per year with a maximum of $138,500 for an entire academic career. Then you have to pay a loan fee of about 1%. So, if you borrow $20,000 for that year, you’ll receive $19,800 with $200 going to fees. But you are still responsible for all $20,000 when repayment time comes.
Federal Graduate PLUS
A Federal Graduate PLUS loan is your second federal loan option. It has all the same requirements as the Stafford loan plus a credit check that can have an endorser (someone who backs your credit score if yours isn’t high enough).
Just like a Stafford loan, payments begin six months after graduation. It also has an initial fee, but it depends on how much you take out. Unlike the Stafford loan, the Federal Graduate PLUS, has no aggregate limit and the interest rate is not fixed, so it varies depending on the year you take it out.
Graduate Private Loans
Private loans are the alternative if the federal loan road doesn’t look like it’s for you. A private loan comes directly from a bank or credit union and can have more flexible interest rates or payment terms.
They can also offer unique benefits, like lower interest rates for keeping you GPA up. However, unlike a federal loan, private loans almost never offer any forgiveness, insurance or deferment options.
Hopefully now you feel better about picking a loan option to help pay for graduate school. Continue to research what options are out there for graduate school loans and reach out to a financial advisor or guidance counselor for more information on all things student loan and finance related.