Should You Take Out Student Loans to Pay for Graduate School?
Don’t take on more student loan debt without a plan.
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A graduate degree can help you stand out in the job market and increase your earning potential. But is it worth taking on additional student loans so that you can continue your higher education journey?
Graduate programs account for 40% of total federal student debt, which has reached more than $1.5 trillion. Although a graduate degree may benefit your career, the decision to take out student loans for grad school should not be taken lightly.
What graduate student loan options are available?
Graduate students no longer qualify for subsidized federal loans where the government covers loan interest for certain periods of time like during your grace period or deferment. But you still have other federal and private loan options to explore.
Federal student loans for graduate school
Direct unsubsidized loans: Any student can access an unsubsidized loan, since they do not require proof of financial need. The borrower is responsible for paying interest on the loan straight out of the gate, which may or may not be feasible, depending on your financial circumstances.
You can apply for loan deferment or forbearance while you are in school, but this will mean that your interest will be capitalized when you move back into a repayment period. This means any accrued interest will be added to the principal balance of your loan.
Direct PLUS loans: The maximum amount you can receive from a direct PLUS loan is the difference between the cost of your program and any other financial aid you receive. To qualify for a Direct PLUS loan, you need to have a good credit history or be able to provide an endorser (or cosigner) with good credit who will repay the loan if you fail to do so.
However, you may still qualify if you are able to document extenuating circumstances related to your adverse credit history, such as showing that a delinquent credit account has been paid in full or a repayment arrangement has been set in motion with six months of on-time, full monthly payments.
Private student loans for graduate school
Graduate students can also finance their education by taking out private loans with banks or credit unions. Private loans tend to be more expensive than federal loans and require an established credit history or cosigner, so students should maximize their federal loans before resorting to private student loans.
Always do thorough research to compare the private student loans available to you. You want to find the lowest interest rate available and explore any additional benefits. Keep in mind that many private loans require payments be made while you are still in school and may come with limited repayment options compared to federal student loans.
How much can I take out in student loans for graduate school?
There are maximum annual loan limits in place regarding how much you can take out in federal student loans. Graduate students cap out at $20,500 in unsubsidized federal student loans each academic year. There is also an aggregate loan limit that factors in all federal student loans received from both undergraduate and graduate study. The graduate aggregate loan limit maxes out at $138,500.
There is no limit to how much you can take out in private student loans. Also, there are exceptions to federal student loan limits for graduate students enrolled in certain health professions. If you are enrolled in a graduate health profession program, reach out to your school’s financial aid office to determine if you qualify for additional federal student loan amounts.