Graduate school funding is a bit trickier than undergrad funding. Your options for loans and grants become more limited. And while work-study opportunities may be attainable and provide great experience, they often eat up a lot of time and offer low compensation.You do have options, though — whether you’re a grad student or a parent. This guide will take you through them all in detail.
Part I: Financing Options for Grad School
As far as federal options, there are two types of graduate student loans: Direct Unsubsidized Loans and Direct PLUS Loans. Each financing option looks different, and you may need a combination of both loans to fully fund your education.
Federal graduate student loan options and programs
|Loan Type||How much can I borrow?||What are current rates?||Origination Fee||Repayment Options||Where can I apply?|
|Direct Unsubsidized Loans||Up to $20,500. Medical students may be able to borrow more if they ask their school.||6.60%||1.066% if you take your first disbursement prior to Oct. 1, 2018. |
1.062% if you take your first disbursement between Oct. 1, 2018 and Oct. 1, 2019.
|Standard,Graduated,Extended,IBR,PAYE,REPAYE,ICR,PSLF||If you are eligible, Direct Loans are typically included in your financial aid package after you fill out the FAFSA.|
|Direct PLUS Loans||Cost of attendance after any other financial assitance has been applied.||7.60%||4.264% if you take your first disbursement prior to Oct. 1, 2018. |
4.248% if you take your first disbursement between Oct. 1, 2018 and Oct. 1, 2019.
*Does not apply to Direct PLUS Loans issued to parents.
|After you have filled out the FAFSA, you can apply here|
In order to qualify for any federal student aid, you need to meet certain requirements. Specifically, you must…
- Have a high school diploma, home-school high school education, GED or other certification of equivalency.
- Be a U.S. citizen or permanent resident.
- Have a Social Security number. This requirement is waived if you are from the Marshall Islands, Palau or Micronesia.
- Register with the Selective Service, if you’re a male age 18-25. If you do not do so during this time frame, it can impact your ability to access federal financial aid later in life.
- Be enrolled or accepted into a school with the aim of obtaining a degree, certificate or other recognized educational credential.
- Maintain good grades. Standards for this requirement vary from school to school.
- Certify that you aren’t currently in default on any federal student loans, that you owe money back on a grant, and that you will only use the money for educational endeavors. This certification happens on the FAFSA application.
If you meet all of these requirements, you now have to look at specific qualifications for each type of student loan.
Direct Unsubsidized Loans
In order to qualify for a Direct Unsubsidized Loan, you must be attending a participating educational institution and be enrolled at least half-time in a program that will lead to a degree or certificate. There is no need to demonstrate financial need in order to qualify for a Direct Unsubsidized Loan.
Direct PLUS Loans
Direct PLUS Loans have very specific credit standards. Qualification requirements include:
- Must be pursuing a degree or certificate at the graduate or professional level and be attending school at least half-time — or be the parent of a student who is doing so.
- Cannot have a debt that is currently 90 days delinquent with a balance of over $2,085.
- Cannot have an item worth over $2,085 sent to collections or written off in the two years prior to your application.
- Cannot have any of the following appear on your credit report in the past five years: default determination, bankruptcy, foreclosure, tax lien, repossession, wage garnishment or a write-off of other student loan debt.
These standards apply to both student and parent borrowers. If you cannot meet them, you can still borrow money by finding a cosigner who does meet these standards.
You may also be able to qualify if you can prove the blip on your credit report was caused by extenuating circumstances. In order to do this, you’ll need to complete credit counseling to the satisfaction of the PLUS program.
Pros and cons of federal grad school loans
There are times when taking out federal loans will be advantageous to you as a grad student and times when other options may make more sense. Let’s drill down into the pros and cons.
- Federal graduate student loans give you access to a number of repayment options, including some that adjust your monthly payments based on your current income.
- Some debt forgiveness programs, such as Public Service Loan Forgiveness, only apply to federal loans
- Credit requirements are typically more lenient than they are in the private sector.
- The fact that there are origination fees on Direct Unsubsidized Loans and Direct PLUS Loans is a major negative, as it will cost you money to borrow the money in the first place.
- Interest rates on Direct PLUS Loans could be bested by private loan rates if you have a good credit history. You may be able to save money by going to a private lender in specific circumstances.
- Direct Unsubsidized Loans and Direct PLUS Loans require at least half-time enrollment. If you are pursuing a graduate-level degree while working a day job, this may present a problem, depending on how many credits you are able to take on.
Federal grants and programs for grad school
While loans are money you will have to pay back, grants and work-study programs are sources of funding that you won’t need to repay. It’s essentially free money, and at the graduate level, you have a few federal options.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is a program that pays for part of your education as long as you promise to use your degree in a high-need, low-income area for four of the eight years following the completion of your education. You can also teach at a Bureau of Indian Education school during this time period to qualify.
High-need fields include:
- Bilingual education
- English language acquisition
- Foreign languages
- Special education
- Reading specialists
- Regional needs, which are updated annually
If your grant were disbursed today (or anytime between Oct. 1, 2018, and Oct. 1, 2019), the maximum amount you could qualify for would be $3,752.
If your school participates in the TEACH program, it will have specified which programs qualify for the grant. Get in touch with your financial aid office to find out if your program is eligible.
While you’re there, make sure you are eligible by checking your school’s academic requirements for qualification.
If you do not teach in a high-need field in a low-income or Bureau of Indian Education school for four of the first eight years after your graduation, your grant will turn into a Direct Unsubsidized Loan, which will have to be repaid.
After you have confirmed with your school that you are enrolled in an eligible program, you will need to fill out the FAFSA. You will also need to sign a letter of agreement and complete program-specific counseling.
It is extremely rare for a grad student to qualify for a Pell Grant. In fact, for eligibility purposes, you’re not allowed to be pursuing a graduate degree.
The only time Pell Grants are available after undergrad work is when you are pursuing a post-baccalaureate teaching certificate. Even then, your certificate program must meet the following requirements:
- It does not lead to a degree.
- It is a prerequisite in your state in order to work as a primary or secondary school teacher.
- It comes from a school that does not offer a bachelor’s degree in education.
- It must be a post-baccalaureate program.
And as a student, you must also be enrolled at least half-time, pursuing your initial teacher certification/licensure within your state.
For the 2018-2019 school year, the maximum award you can receive is $6,095. The amount you get will be based on financial need.
To apply for a Pell Grant, all you have to do is fill out the FAFSA.
If a financial need is demonstrated when you fill out the FAFSA, you may be offered a work-study position. If your school participates, you’ll be given an hourly or salaried job where you are paid at least monthly. Your financial need will determine the number of hours you receive.
The kind of job you are assigned will depend largely on your school. You may find yourself in one of these fields:
- Community service
- Positions at your school
- Fields relevant to your course of study
If you end up with a position on campus, you’ll likely be working for the school. If you are working off-campus, you’re more likely to be assigned to a position serving the public good or working in a position relevant to your future career.
You’ll make at least minimum wage, though as a grad student you may have some desirable skills that could land you a position with a pay boost.
Your school is obligated to issue you a paycheck at least once per month. The money will be paid directly to you unless you set up direct deposit payments, or you are applying your earnings toward tuition, fees or room and board.
Grants are a form of financial aid that you don’t have to pay back under most circumstances. However, if you don’t hold up your end of the educational bargain, you may have to return money that was paid to your school, or money you received as a refund check from your school.
You could end up owing money back for your federal grant if:
- You don’t meet TEACH program guidelines as outlined above.
- You drop out of school partway through the semester.
- You reduce the amount of credits you are taking after the grant has been issued.
If you are disappointed by your FAFSA options, you should know that there are other ways to find funding for your graduate-level education. Be sure to review these resources prior to taking out loans.
Federal grants at the graduate level are admittedly thin. If you’re looking for other ways to pay for school that don’t involve student loans, here are some additional federal agencies outside the Department of Education that may be able to help.
ROTC scholarships will pay for your education. You’ll also get a stipend for the time you spend at drill on weekends and may have your books covered as well.
In exchange for all of this money, you will be obligated to serve either on active duty or in the reserves after you have completed your education. Because you have a college education, you will enter the military as an officer.
Post-9/11 GI Bill
If you served in the military for at least 90 days after Sept. 10, 2001, and remain on active duty, or were honorably discharged due to disability after serving 30 consecutive days after the same date, the Post-9/11 GI Bill may cover your tuition and fees.
If a smaller portion of your service happened after Sept. 10, 2001, you may be eligible for prorated benefits.
All in-state tuition and fees will be paid at public schools, and up to $23,671.94 will be paid at private schools. This number changes annually.
If you still have a gap between how much the school charges and how much the Department of Veterans Affairs (VA) will pay under the latest version of the GI Bill, check to see if your school has opted into the Yellow Ribbon Program. Schools that do so reduce the tuition of veterans to meet the maximum VA payout, leaving you with no additional money to pay.
Yellow Ribbon schools may also provide funding equivalent to a Basic Allowance for Housing in addition to a stipend for books.
In certain cases, benefits may be transferable to minors, so if you are a parent who has unused GI Bill benefits, you may be able to give them to your child as they enter grad school.
AmeriCorps is a volunteer opportunity with some perks for college students. When you volunteer, you earn money for school through the Segal AmeriCorps Education Award. The amount of money you earn depends on how time-intensive your service is.
For example, currently, if you volunteer in an approved position for more than 1,700 hours over 12 months, you would qualify for an education credit worth $6,095 for the 2018-19 school year. You can only earn up to two full-time education credits. You can find further examples of how much you can earn on the Segal Award Eligibility page.
As a member of AmeriCorps, you may find yourself in one of the following positions or something similar:
- Relief efforts after a natural disaster
- Tutoring K-12 students
- Building affordable housing
- Working with local nonprofits and community groups
If you have served as an AmeriCorps member after Oct. 1, 2009, and are age 55 or older, you may have accrued educational benefits that you can pass on to your child, stepchild or grandchild. You can learn more program specifics here.
Other sources of federal grants for grad school
Higher education agencies in your state
Another great place to look for funding is the agency that handles higher education in your state. These state-level organizations typically offer grants. You’ll likely be prompted to visit your state’s website at the end of your FAFSA application, but if you want to learn more about available programs now, you can find yours here.
Your school’s financial aid office
Your school likely has endowments and partner employers — both of which might offer scholarship and grant opportunities. To find out what’s available at your school, schedule an appointment with the financial aid office.
Industry and professional organizations
Many industry and professional organizations offer some type of scholarship program for those studying in the field. Applying for these scholarships won’t just help you pay for school if you’re awarded — if you win one, it will look phenomenal on your resume.
Some of these organizations will require membership prior to application. While membership fees can be expensive, many such groups provide student-level memberships at a steep discount.
Private graduate student loans: A last resort?
Private graduate student loans are issued directly by lending institutions without the backing of the U.S. Department of Education. You can look to banks, credit unions or online marketplace lenders to access these loans.
- If you have a good credit history, you may be able to obtain a loan with lower rates than those currently offered through federal programs.
- You may be able to access more capital than you would with federal loans, depending on your credit history and the type of federal loan.
- You can shop around for different options. Some lenders don’t charge origination fees, and some are willing to work with you in cases of hardship.
- You will not have access to advantaged repayment programs like PAYE, REPAYE, IBR, ICR and PSLF (which are all covered in sections below).
- If you do not have a good credit score, interest rates may be higher than federal loans, or you might not be able to get a private loan at all, depending on your credit report.
- You have to shop around for different options. Some lenders will not work with you in cases of hardship, and factors like variable versus fixed interest rates may throw you for a loop if you’re not careful.
Questions to ask before you borrow private loans for grad school
Before you take out any graduate student loans, you’ll want to get answers to these questions:
This may vary, depending on your income and credit history.
This will typically be a range. If you have good credit, you may qualify for the best rates. If you don’t, you’ll be looking at the higher end of the spectrum.
Variable interest rates currently tend to start out lower. They may even stay lower for a set amount of time, but eventually they will move in accordance with the market. You may get lucky and have rates go down, but rates have been on the increase in recent years and are expected to continue to rise in the near term.
Fixed rates start out higher than variable rates but stay unchanged throughout the course of your loan term.
Shorter loan terms sometimes mean higher monthly payments, but you’ll usually end up paying less in the long term because of the way interest accrues over time.
If you can’t afford the monthly payments, though, you could end up paying late fees or damaging your credit. Longer loan terms may mean paying more interest by the time you’re through, but they also have the potential to lower your monthly payments.
Some lenders provide payment plans that allow you to defer payments until after graduation. Other payment plans start your payments immediately. Still others require interest-only payments while you’re in school, with principal payments being added after graduation.
Common fees to take note of are:
- Application fees
- Origination fees
- Late fees
- Prepayment penalty fees
Eligibility requirements to inquire about include credit requirements, citizenship/naturalization requirements and income requirements.
You’ll want to know if your lender offers any type of deferment in times of financial hardship. Some lenders will even work with you to help you find a new job or temporarily reduce monthly payments while you are in specific employment conundrums.
|Private Loans||Federal Loans|
|Not eligible for advantaged repayment options (REPAYE, PAYE, ICR, IBR, etc.)||Eligibile for advantaged repayment options|
|May or may not have origination fees||Have origination fees|
|Potentially stricter credit requiremnts||Potentially looser credit requirements : (depending on which private lender you're coparing them to) No credit requirements if we leave out PLUS loans|
|Interest rates potentially lower for those with good credit — can be much higher for those with bad credit||Interest rates likely higher for those with good credit (with the possible exception of Perkins Loans)|
|Often offer an option of variable or fixed rates||Only fixed rates for the products we are discussing|
|May require half-time enrollment||Definitely require half-time enrollment|
|Will probably need a co-signer if you're a young borrower — especially wihtout a job||Typically won't need a co-signer|
Part II: Repaying Grad School Debt
There is a slew of different repayment options, depending on which type of loan you take out. Whether you start repayment during your studies or after, here are some things you can do to prepare:
Federal grad school debt
Students are not required to make payments until six months after their graduation — or nine months if you have a loan from the now-expired Perkins Loan program. But just because you don’t have to make payments during this time period doesn’t mean you shouldn’t.
When to start repaying your federal grad school loan debt
The types of federal loans available to you as a graduate student accrue interest while you’re in school and during your grace period/deferment. You are not required to pay that interest immediately, but the unpaid interest will be added to your principal balance.
By making interest-only payments while you’re in school, you prevent the interest costs from multiplying upon themselves, saving you money.
You can pay toward the principal while you are in school as well, if you so choose, as there is no prepayment penalty on federal student loans.
Parents who have PLUS loans are typically required to start repaying immediately after the loan is disbursed. You can, however, request a deferment for the period during which your child is in school. It would be wise to at least make interest-only payments during this period if you choose to go this route.
Federal loan forgiveness and repayment assistance programs
Federal loans give you access to many advantaged repayment and forgiveness programs. Keep in mind that while many of these repayment plans are designed to make your monthly payment lower, they have the potential to cost you more over the course of your loan — especially if they don’t end in forgiveness — as interest will be charged over a longer period.
Income-Based Repayment (IBR)
If you took out your first student loan prior to July 1, 2014, and your student loan payments are more than 15% of your discretionary income, this program allows you to pay a maximum of 15% of your discretionary income for 25 years. After that point, your remaining debt is forgiven.
If you took out your first student loan after July 1, 2014, the capped percentage is 10%, and you will only have to pay it for 20 years.
Income-Contingent Repayment (ICR)
If you opt into the ICR plan, you would make payments for 25 years. After 25 years, your remaining debt would be forgiven.
Your monthly payments would be the lesser of these two options:
- 20% of your discretionary income
- What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income
Pay As You Earn (PAYE)
Take your income and subtract 150% of the poverty level in your state. If your monthly student loan debt payments are more than 10% of the difference, you may qualify for PAYE. Use this calculator to see if you qualify.
Your monthly payments will be limited to 10% of your income and will never exceed what you would pay on a 10-year Standard Plan. After 20 years, the remainder of your debt will be forgiven.
You only qualify for this plan if your first student loan was disbursed after Oct. 1, 2007, and you have received at least one disbursement since Oct. 1, 2011.
Revised Pay As You Earn (REPAYE)
REPAYE does not have the same timing restrictions of PAYE. In fact, the date you took out your loans is irrelevant. There are also no income restrictions.
However, while you will only have to pay 10% of your discretionary income, there is no protection stating that your payments will not exceed those of a 10-year Standard Plan. You could end up paying more with this program — especially with a higher income.
Remaining balances on graduate school loans will be forgiven after 25 years.
Public Service Loan Forgiveness (PSLF)
The future of this program is uncertain, but it is currently still open.
Under PSLF, you make payments for 10 years while you’re working 30-plus hours per week and considered a full-time employee by your employer. This job must be in a position of service (see list below), and the remainder of your loan balance will be forgiven. Your 10 years of payments should be made under IBR, ICR, PAYE or REPAYE.
Qualifying public service jobs include positions at:
- Governmental organizations
- 501(c)(3) organizations
- Non-501(c)(3) organizations providing one of these services:
- Public or school library services
- Emergency management
- Service on behalf of the U.S. military
- Public education
- Early childhood education
- Law enforcement
- Public interest legal services
- Public services for the disabled or elderly
- Public health
States have regional needs in a number of different fields, including medicine, education, social work, veterinary sciences, law and more. Across the country, there are programs offering to pay off portions of your debt if you agree to live and work in high-need communities.
Repaying private grad school debt
Different lenders will require different repayment terms from their borrowers. Be sure to understand what is expected of you before signing on the dotted line. Ask questions like:
- Will I be required to make payments while I am in school?
- If so, are they interest-only payments?
- Will there be a grace period after graduation?
- Do you have any deferment options in case of economic hardship?
- What is the maximum time allowed for deferment?
When you should start repaying private grad school debt
The sooner you can pay off debt, the better. If your loan requires you to make principal and interest payments, make them without delinquency.
If your lender gives you the option of making interest-only payments while you’re in school and/or in a grace period, it’s a smart financial move to to save you significant interest.
Before you make any payments prior to your due date, make sure there is no prepayment penalty. Otherwise, a good portion of the money you think you’re throwing at your debt could end up going toward fees instead.
Learn more: Refinancing grad school debt
If you can get a lower interest rate on your student loans by refinancing, you may be able to save money as long as you pay off your debt in the same amount of time.
In order to avoid ruining your credit score, you may also want to refinance if you can’t afford your monthly payments. Find out more about potential advantages to refinancing here.
|Type of Loan||Federal||Private|