Searching for Graduate Student Loans?
More College, More Loans
Always apply for federal student loans before consulting a private lender. The government has no interest in profiting from the arrangement and can offer better loan terms than those available in the private market.
Federal Loans For Graduate and Professional Students
You can find a useful summary of federal loans on this page, and the information below pertains specifically to those for graduate students.
Federal Perkins Loan Program
The best value you can find in a loan is the Federal Perkins Loan Program, usually called Perkins Loans. The interest rate is only 5%, but your finances must meet the definition of exceptional financial need, based on the information you provide on your Free Application for Federal Student Aid (FAFSA). Currently, about 1,700 colleges and universities participate in the Perkins program, and each of them has money in a revolving fund. They lend that money to students, and payments made on older loans are returned to the fund.
That means each school has a limited amount of money available to lend, and you should apply as soon as possible to increase your chances. Applications are prioritized by financial need, and the most you can borrow in a year for graduate school is $8,000 (with a cumulative borrowing limit of $60,000, including undergraduate debt).
Direct Unsubsidized Loans
Direct Unsubsidized Loans are not made based on financial need, and consequently they are a good option for all graduate students. You still need to fill out a FAFSA so your school can decide how much money you need to borrow for each academic year. There are limits on both your annual borrowing and the amount you can borrow during your career in school, and those amounts currently are:
- $20,500 per year, and
- $138,500 overall.
The overall limit includes any federal loans taken as an undergraduate, such as old Stafford loans made under the Federal Family Education Loan (FFEL) Program. If your graduate study is in a qualifying health profession, your overall loan limit rises to $224,000. The current interest rate is fixed at 6.8%, and there is a 1% origination fee (taken fractionally out of each loan disbursement).
Note: When reviewing the unsubsidized loan page, bear in mind that graduate students are by definition classed as independent students.
Direct Plus Loans
Direct PLUS Loans are the second federal option available to graduate and professional students. The U.S. Department of Education is the direct lender for PLUS loans, and the interest rate is currently fixed at 7.9%. Also fixed is the amount you can borrow, which is defined as your cost of attendance less any other financial aid.
The most noticeable difference in PLUS loans is the required credit check. The federal government has a set of rules for determining what constitutes an unacceptable credit history. Points to remember: You must not have experienced bankruptcy, foreclosure proceedings, repossession of property, delinquency, or default within the past five years. If your history does not pass muster, you can apply with a creditworthy cosigner (called an endorser by the government), or provide documentation of any mitigating circumstances explaining your financial troubles.
Some schools have begun to work with the federal loan programs as part of their financial aid services. As an example, Cornell advertises its participation in Direct Loans for graduate students here, and Duke and Brown do the same.
Plan Ahead for Loan Forgiveness
Loan limits on your federal loans may force you to seek other sources for your supplemental borrowing, such as private loans. If at all possible, avoid borrowing any large sum from a private lender, because such companies usually treat student borrowers no differently from others, making no concessions to the hardship of repaying a loan while still in school or before finding professional employment.
Fortunately, the federal government has established the Public Service Loan Forgiveness (PSLF) program, in which loan forgiveness is offered in exchange for public service work. That can be a perfect way to obtain a professional education without jeopardizing your financial future. The definition of public service is quite elastic: it covers any type of employment at a government agency (local, state, or federal), and also employment with any 501(c)(3) nonprofit.
Note: Religious activities such as education or proselytizing are excluded from the definition.
There are also special loan forgiveness plans available for certain service professions. Medical students can take advantage of programs like the National Health Service Corps Loan Repayment Program, which benefits primary care providers in medicine, dentistry, and mental health. The NHSC Students to Service program assists fourth year medical students, and the State Loan Repayment program uses federal money which is distributed by individual states.
Law students can take advantage of the John R. Justice Student Loan Repayment Program if they work as public defenders or state prosecutors. There are similar programs offered to teachers by the U.S. Department of Education and by many individual state governments.