Types of graduate student loans
When you need to borrow money to pay for graduate school, you have three main options: federal Direct Unsubsidized student loans, federal grad PLUS student loans and private student loans. There are pros and cons of each option, though in some cases you may need to borrow from both federal and private sources.
Federal graduate student loans
Federal student loans are originated by the U.S. Department of Education and are loaded with borrower protections and flexibility. Within this program, graduate students can choose between a Direct Unsubsidized student loan and a grad PLUS loan.
You can borrow up to $20,500 each school year with a Direct Unsubsidized student loan, with a $138,500 aggregate limit. A grad PLUS loan allows you to borrow more — up to 100 percent of the cost of attendance. In general, it's best to maximize your unsubsidized loan options first, as interest rates are lower than those of grad PLUS loans. Additionally, you must go through a credit check for grad PLUS loans, which is not the case for Direct Unsubsidized Loans.
To apply for either of these loans, you'll have to complete the FAFSA, which opens on Oct. 1 each year. If you're applying for a grad PLUS loan, you'll also have to fill out a separate application once the FAFSA is complete. If this is your first time receiving a Direct Loan or grad PLUS loan, you'll be required to complete entrance counseling.
Private graduate student loans
Private student loans are originated by private financial institutions, such as banks, credit unions and online lenders. You have dozens of options to choose from, but each lender sets its own rates, terms and eligibility requirements. Rates are commonly anywhere from 3 percent to 15 percent and can be fixed or variable. The exact rate you're quoted depends on your credit score and financial profile. As such, you'll have to go through a hard credit check in order to be approved for a loan.
Unlike with federal student loans, you'll generally have a range of repayment terms to choose from with private lenders, usually between five and 20 years. Private student loan lenders also often offer degree-specific loans that are tailored to the needs of law school, medical school, business school and more.
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