Graduate Student Loans: The Ultimate Guide

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October 18, 2023 6 min read Liaison

Here, you’ll find out everything you need about graduate student loans — federal and private.

Key Takeaways

To apply for federal loans (Direct Unsubsidized and Grad PLUS loans), you need to fill out FAFSA (Free Application for Federal Student Aid) paperwork.

Federal student loans have fixed interest rates, more favorable repayment plans, and other features like loan forgiveness programs.

With Direct Unsubsidized loans, you can take up to $20,500; with Grad Plus loans, there’s no limit.

Banks, credit unions, other financial organizations, and online lenders offer private student loans. Your credit score and credit history are important for these loans.

Private student loans usually have a higher borrowing limit than federal loans. They have variable interest rates, and there is often no protection for borrowers.


Do you have financial hardships and think about graduate student loans as a solution? While there are federal and private student loans, federal loans are usually a better option as they have lower interest rates and more favorable repayment plans.

According to a 2023 National Center for Education Statistics (NCES) report, 74% of graduate students received financial aid during the 2019-2020 academic year.

In this article, we cover information about federal and private student loans, including their benefits, eligibility requirements, and how they differ from each other. Also, we discuss the repayment plans you can choose if you decide on federal student loans.

graduate student loans - federal and private


Types of Graduate Student Loans

You can choose between federal and private loans if you’re seeking financial aid options as a graduate student. In the following sections, we cover the different types of each loan.

Federal Graduate Student Loans

To apply for federal student loans (and also grants and scholarships), you need to submit the FAFSA (Free Application for Federal Student Aid).

  • Interest rates on federal student loans are fixed and usually lower than those on loans from private lenders.
  • You don’t need a credit check for direct unsubsidized loans.
  • Federal student loans offer flexible income-driven repayment plans, which is good for low-income students.
  • There are forgiveness programs for federal student loans that can help you with part of the debt or completely forgive the remaining loan balance.
  • Borrowers facing financial hardship that prevents them from making loan payments may be eligible for deferment or forbearance, during which time payments are temporarily paused or reduced.
  • Most federal student loans have a grace period, which is a period after graduation when borrowers aren’t required to make payments. This provides a transition period for borrowers to find employment and establish themselves financially.
  • Federal loan consolidation allows borrowers to combine federal student loans into a single loan with one payment per month. This can simplify repayment and extend the repayment term, reducing the monthly payment amount.
  • Federal student loans can be paid off early without incurring prepayment penalties, allowing borrowers to save on interest by making extra payments ahead of schedule.

Direct Unsubsidized Loans

As a graduate student, you can opt for a Direct Unsubsidized federal loan. To be eligible, you must be enrolled at least half-time in a program that will end with you earning a degree or certification.

You will not need to make payments on the loan while in school, in deferment, or during the grace period.

You can borrow up to $20,500 each year. The school's attendance cost determines the loan amount minus any other financial aid received.

The origination fee for Direct Unsubsidized loans is 1.057% and will remain unchanged until October 19, 2024.

Direct Unsubsidized Loans have favorable loan terms for graduate students compared to private student loans. The interest rate is low and fixed at 7.05% in 2023.

Repayment typically begins six months after graduation, leaving school, or dropping below half-time enrollment.

Grad PLUS Loans

A Direct PLUS Loan is another option with different eligibility requirements than Direct Loans. To be eligible, you need to be enrolled in a program (at least half-time) that will lead to a graduate degree or a certificate. Your credit score will be evaluated, and if you have an adverse credit history, you’ll need to meet additional requirements. Generally, credit requirements are less strict than with private loans.

You can use a Grad Plus loan if you cannot cover all of your tuition expenses and student fees with a Direct Unsubsidized loan, which has a borrowing limit based on the cost of attendance.

The interest rate for Direct PLUS loans disbursed on or after July 1, 2023, is 8.05%.

Private Graduate Student Loans

There are many sources of private student loans — banks, credit unions, and online lenders. Interest rates on private loans aren’t fixed, there are fewer protections for borrowers, such as forbearance or loan forgiveness programs, and you cannot change the repayment schedule.

Just like with a Direct PLUS loan, your credit score and history will be evaluated if you choose a private loan. If you have a bad credit history or low credit score, you can use a co-signer who will be responsible for the loan if you default.

Usually, borrowing limits are higher on a private loan.

Repayment Plans for Federal Student Loans for Graduate School

The table below shows different repayment plans offered to graduate students looking for federal loans.

Repayment Plan Name Repayment Schedule
Standard Repayment Plan Payments are a fixed amount, and the loans can be paid off within 10 years (for Consolidation Loans, within 10 to 30 years).
Graduated Repayment Plan Payments gradually increase over time, usually once every two years. With these plans, loans can be paid off within 10 years.
Extended Repayment Plan Payments can be fixed or graduated for those with balances exceeding $30,000. Students are able to pay off loans within 25 years.
SAVE (ex REPAYE) Plan  With this plan, monthly payments are 10% of your discretionary income. The outstanding loan balance will be forgiven if you haven't paid back your loan in full after 25 years.
Pay As You Earn Repayment Plan (PAYE) Monthly payments under this plan are 10% of discretionary income.
Income-Based Repayment Plan (IBR) Monthly payments can be 10% or 15% of discretionary income, depending on the date of your first loan.
Income-Contingent Repayment Plan (ICR) The monthly payment will be less than 20% of discretionary income or the amount of money you would pay on a plan with a fixed payment over 12 years.

Graduate Student Loans — Conclusion

If you’re seeking financial aid, you have two borrowing options — federal and private student loans. To apply for federal aid, you have to fill out and submit the online Free Application for Federal Student Aid (FAFSA).

Best graduate student loans are federal because they generally have more favorable terms and conditions.

You can take two types of federal loans as a graduate student — Direct Unsubsidized and Grad PLUS loans. Direct Unsubsidized loans have a borrowing limit of $20,500 per year, while Grad PLUS loans don’t have a limit.

Federal graduate student loans offer several advantages, including fixed interest rates which are lower than with private loans, income-driven repayment plans, various loan forgiveness programs, and the option to consolidate multiple loans into a single monthly payment. Borrowers can also pay off federal loans early without facing prepayment penalties.

Private graduate student loans, offered by banks, credit unions, and online lenders, differ significantly from federal options. Private loan interest rates are not fixed, and there are fewer borrower protections. A borrower’s credit history is crucial in obtaining private loans; those with unfavorable credit may require a co-signer.

Always remember to consider your financial situation and goals carefully before taking any type of loan.


You can pay tuition and other student fees with graduate student loans. When repaying the loan, you need to consider the interest that accrues since the disbursement day. You can borrow $20,500 annually with a Direct Unsubsidized Loan.

Only undergraduate students who demonstrate financial need have the option to apply for Direct Subsidized loans.

There are loan forgiveness programs for graduate students who have financial hardships.

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