Federal Graduate Student Loans Benefits
Federal Graduate Student Loans are financing options designed to help students pay for their graduate studies. Since federal student loans offer better protections for borrowers, you should always consider them before taking out private student loans.
This guide to federal graduate student loans will help you understand the type of federal loans you can get, as well as which private loans to consider in case you exceed your federal borrowing limits.
Federal Graduate Student Loans
To become eligible for federal graduate student loans, you must complete the Free Application for Federal Student Aid (FAFSA).
Graduate students have the choice of two different types of federal graduate student loans to help cover the costs of graduate studies. These are:
- Direct unsubsidized loans
- Grad PLUS loans
Direct Unsubsidized Loans
While undergraduates can get direct subsidized and direct unsubsidized loans, graduate students are only limited to unsubsidized loans. This means that the government does not pay interest on loans while you are in school or deferred after you graduate.
Direct unsubsidized loans (a type of Stafford loan) always have favorable loan terms, including a low fixed interest rate. Before borrowing, you should understand all of these key loan terms:
- Graduate students can borrow a maximum of $20,500 per year in unsubsidized loans. And the maximum aggregate limit for both subsidized and unsubsidized loans, including student and graduate loans, is $138,500.
- To be eligible, graduate students must be enrolled at least part-time in a university program that confers a degree or certification and participates in the direct loan program. You must also complete the FAFSA renewal.
- The current interest rate on these loans is 5.28% for graduate or professional students.
- The current origination charge on these loans is 1.057%.
Your credit score is not a factor when your eligibility for direct unsubsidized loans is determined.
Grad PLUS Loans
Another option for the students who seeking federal graduate student loans is Grad PLUS Loans, which are part of the Direct PLUS Loan Program. However, they have different eligibility rules and conditions than direct loans.
- The maximum Grad PLUS loan amount you can borrow is equal to the cost of attending your graduate or professional program minus any other source of financial assistance, such as direct unsubsidized loans, scholarships, and student grants for college.
- To be eligible, graduate or professional students must be enrolled at least part-time in a program that will lead to a graduate degree, professional degree or certificate. You also cannot have an adverse credit history and you must meet the general requirements associated with obtaining financial assistance.
- The current interest rate for new Direct PLUS loans is 6.28%.
- The current origination charge on new loans is 4.228%.
It is important to note that you cannot apply for Direct PLUS loans with bad credit, unlike unsubsidized loans. The interest rate and origination fees are also fixed, as with unsubsidized loans, but the relatively high rate and fees mean that private student loans are sometimes more affordable.
Federal Student Loan Comparison Chart
|Perkins Loan||Parent Plus |
|Who Can Apply?||Under Graduate |
|Parents Of |
|Parents Of |
|Is Financial Need Proof Required?||YES||NO||YES||NO||NO|
|Is There Any Credit Check Required?||NO||NO||NO||YES||YES|
|While I Am In School Will The Interest Accrue?||NO||YES||YES||YES||YES|
Pros and Cons of Federal Graduate Student Loans
There are both advantages and disadvantages of your graduate school with federal student loans or FAFSA loan.
Benefits of Federal Graduate Student Loans
- Interest rates are fixed: you don’t have to worry about shopping around with many different lenders. You just need to complete the FAFSA and offer yourself fixed rate loans determined by the government.
- You have flexibility in repayment options: you can choose from many different payment plans after you graduate, including some income-oriented plans.
- You benefit from many protections for borrowers: you may be eligible for the forgiveness of public service loans with federal graduate student loans. You also have more options to defer or hold your loans for longer periods if you are having financial difficulties.
Disadvantages of Federal Graduate Student Loans
- You may be limited in the amount you can borrow. If you are only looking for direct subsidized loans, there are strict limits and you may not be able to borrow enough to finance your education.
- You have to pay origination fees. Many private lenders offer private loans that do not have to pay these upfront fees.
- You have no choice in loan services. The Department of Education will assign you a repairman. With private loans, on the other hand, you can shop around and find a lender who has a good track record of top-notch customer service.
Other Best Graduate Student Loans
1. Ascent Graduate Student Loan
The Ascent student loan is a good option if you or a co-signer has excellent credit.
Although federal interest rates are historically low for the 2021-22 academic year, you can still get a better rate with a private student loan. You’ll almost certainly pay less in fees: Grad PLUS loans come with an origination fee of over 4%, while most private lenders don’t charge these fees.
The Ascent student loan is distinguished by its flexibility. The lender offers a nine-month grace period and a 24-month forbearance period, both of which are longer than many other lenders.
2. College Ave Graduate Student Loan
College Ave is a good choice if you are doing your graduate studies. Unlike many lenders, including the federal government, College Ave offers graduate student loans if you attend school less than half time.
In addition to Ascent and College Ave, graduate students considering private student loans may want to consider Discover, SoFi, RISLA, and Wells Fargo. It’s best to get quotes from multiple lenders before you apply to make sure you’re getting the best rate possible.
3. Prodigy Graduate Student Loan
Prodigy is a good choice for graduate international students who do not have a US citizen co-signer. You can qualify for a Prodigy student loan without a co-signer; loan decisions are based on your future income rather than your current financial situation. Prodigy only offers variable rate loans, which are riskier than fixed rate options, and does not lend to borrowers in all 50 states.
4. Stride Funding Revenue Sharing Agreement
An income sharing agreement, or ISA, is not a student loan, but graduate students can use one to finance their education by these Education Loans. Stride Funding prioritizes ISA lending to graduate students, especially those in the STEM and healthcare fields.
With an ISA, you agree to pay a percentage of your future income in exchange for initial funding. You can refund more or less than you receive. Be sure to compare ISAs and student loans to understand their potential costs before you borrow.
5. Perkins Loans
Loans made through the Federal Perkins Loan Program are made available to undergraduate and graduate students and are reserved for those in exceptional financial need. While Congress sets fixed interest rates for the term of the federal graduate student loans, Perkins loans have a separate fixed rate, which is somewhat lower.
As with Stafford loans, no credit history is required to qualify for a Perkins loan. Not all colleges participate in this program, however, so be sure to check with your school’s financial aid office for more information.
Which Student Loan Is Best For You?
If you need loans to pay for your graduate studies, the best option will probably be federal graduate student loans. These offer protections that private graduate school loans lack, including income-oriented repayment plans and loan cancellation programs.
These benefits can come in handy depending on how much you owe – the average graduate student debt is $82,000, including undergraduate loans – and your career plans. For example, you might want to pursue the entire civil service student loan forgiveness if you are planning to get a doctorate. and work at a university.
If you don’t work in a nonprofit or don’t need federal benefits, compare private student loans to see what interest rate you would qualify for. Many lenders offer specific graduate student loans products depending on the degree you are pursuing:
- Best loans for medical schools.
- Best loans for law schools.
- Best MBA Student Loans.
- Best loans for veterinary schools.
- Best Nursing Student Loans.
- Best loans for pharmacy schools.
Most lenders will not ask you to pay off student loans while you are in graduate school, as long as you are enrolled at least part-time. But depending on how much you receive as a graduate student, making payments can save you money because all federal graduate student loans bear interest, which increases the amount you owe.
Which Student Loan Is Right For Me : Federal Loan Or Private Loan?
A comparison of student loans doesn’t give a one-size-fits-all answer, but because of the low fixed rates and repayment assistance programs available, it’s generally best for students to use up their unsubsidized and subsidized direct federal loans before they start. consider private student loans.
However, there are limits to the amount you can borrow under the direct loan program. Private student loans come into play if federal funds are not enough to cover tuition fees reimbursement.
Before deciding how you will finance your education, it is important to consider the differences between private student loans and federal loans as they apply to you and your overall financial situation.
Benefits of Federal Graduate Student Loans
The benefits of federal graduate student loans include:
- fixed interest rates for the term of the loan
- repayment assistance options (including income contingent repayment)
- subsidized loans for those who need them
Benefits Of Private Student Loans
A private student loan may offer a lower interest rate, depending on your credit rating and income (or that of your co-signer). Some also offer higher loan limits and fixed interest rates. Private student loans do not require a demonstration of financial need.
Federal Direct Loan PLUS vs Private Loan
If you are a parent you can apply for Parent PLUS Loan or graduate student considering a Direct PLUS loan, you may want to consider a private student loan. If you have a strong credit history, you may be able to save money with a private student loan.
Just be sure to consider the benefits – such as the civil service pardon – that are unique to the federal program before making your final decision.
“What’s The Difference Between Financial Aid And A Student Loan? “
Student loans – federal and private – are all part of your financial aid package, which can also include scholarships and endowments. When you work directly with your school’s financial aid office, you are sure to have a complete picture of your options. Your school determines your costs, so this is a solid place to start exploring all of the support options.