How to Find the Best Graduate Student Loans

Graduate education is an important investment in your future, but financing it is a challenge that can feel overwhelming on top of your already busy schedule. The current economic climate, marked by rising tuition costs and fluctuating interest rates, means prospective graduate students need to research and understand their loan options thoroughly. That’s why our team of experts has put together this guide to help you navigate every aspect of graduate student loans and student lines of credit, ensuring you make the most informed decision possible.

What Are Graduate Student Loans?

Graduate student loans are specifically designed to help students fund their postgraduate education. It’s important to shop around for the best deal on federal or private loans that will fit your needs. And as always, be mindful of how much you borrow in order to manage your future repayment. Here are some of the key differences between undergraduate and graduate student loans:

Higher Borrowing Limits: Graduate loans generally offer higher borrowing limits compared to undergraduate loans, reflecting the higher cost of graduate education.
Interest Rates: The interest rates on graduate loans can be higher, and they may accrue interest while you’re still in school.
Credit Requirements: Some graduate loans, especially private ones, require a good credit history or a cosigner.

Assessing Graduate Student Financial Needs

Calculating the Cost of Your Graduate Program

To determine how much you need to borrow, start by calculating the total cost of your graduate program. This includes tuition, fees, books, supplies, and living expenses. Here’s how to break it down:

Tuition and Fees: Check your school’s website for the latest tuition rates and any additional fees.
Living Expenses: Factor in rent, utilities, groceries, transportation, and other personal expenses.
Additional Costs: Include costs for textbooks, supplies, technology, and any other materials required for your studies.

Determining How Much You Need to Borrow

Once you’ve assessed your total costs, subtract any financial aid, scholarships, or grants you might receive. The remaining amount is what you’ll need to cover with loans or lines of credit. It’s essential to borrow only what you need to minimize future debt.

Federal vs. Private Graduate Student Loans

Graduate student loans come in two primary types: federal and private. But be mindful of the details, because each type has its advantages and drawbacks.

Federal Graduate Student Loans

Federal loans are funded by the government and typically offer more favorable terms. Key features include:

Fixed Interest Rates: Federal loans have fixed interest rates, providing predictability in repayment.
Income-Driven Repayment Plans: Options like PAYE (Pay As You Earn) and REPAYE (Revised Pay As You Earn) base your payments on your income.
Loan Forgiveness Programs: Federal loans may be eligible for loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF).

Types of Federal Graduate Student Loans

Direct Unsubsidized Loans

Eligibility: Available to graduate students without a need-based requirement. This means you can qualify for these loans regardless of your financial situation, making them accessible to a wider range of students.
Benefits: Fixed interest rate and flexible repayment options. These loans offer predictable monthly payments, and you can choose from various repayment plans that suit your financial circumstances after graduation.

Grad PLUS Loans

Eligibility: Requires a credit check; available to graduate students who need to borrow beyond the unsubsidized loan limits. This makes them suitable for covering higher education costs that exceed what other federal loans can cover.
Benefits: Higher borrowing limits and eligibility for income-driven repayment plans. Grad PLUS loans allow you to borrow up to the full cost of attendance, and they can be repaid through plans that adjust based on your income, ensuring manageable payments.

Perkins Loans

Eligibility: Based on financial need; availability varies by institution. These loans are awarded to students demonstrating exceptional financial need, but their availability depends on the funding each school receives.
Benefits: Low interest rates and subsidized interest during school and grace periods. Perkins Loans are advantageous because they offer a lower interest rate compared to other federal loans, and the government pays the interest while you’re in school and during deferment periods.

Private Graduate Student Loans

Private loans are offered by banks, credit unions, and other financial institutions. Key features include:

Variable Interest Rates: Some private loans have variable rates that can change over time. These rates are typically tied to a financial index, such as the prime rate, and can increase or decrease periodically.
Credit-Based Terms: The terms of private loans often depend on your credit score and financial history. Lenders assess your creditworthiness to determine the interest rate, loan amount, and repayment terms you qualify for.
Repayment Flexibility: Private loans may offer different repayment options. Some private lenders provide options like interest-only payments while in school or deferred payments until after graduation.

Interest Rates and Repayment Terms: What to Look For

When comparing private loans, pay close attention to:

Interest Rates: Compare fixed vs. variable rates. Fixed rates provide stability, while variable rates can start lower but may increase over time, potentially affecting your total repayment amount.
Repayment Terms: Look for terms that fit your financial situation, including grace periods, deferment, and forbearance options. These terms can provide flexibility during periods of financial hardship, helping you manage your debt more effectively.

Pros and Cons of Private Loans

Pros

Higher Borrowing Limits: Can cover the full cost of attendance. This is particularly useful for students attending expensive programs or those with significant living expenses.
Competitive Interest Rates: Especially for borrowers with excellent credit. Good credit can qualify you for lower interest rates compared to federal loans, reducing the overall cost of borrowing.

Cons

Less Flexible Repayment Options: Fewer options for income-driven plans or loan forgiveness. Private loans typically do not offer the same level of repayment flexibility as federal loans, which can make them harder to manage if your financial situation changes.
Credit Requirements: May require a cosigner if you have limited credit history. If you don’t have a strong credit profile, securing a private loan can be challenging without a cosigner, which can limit your borrowing options.

Exploring Student Lines of Credit

What Are Student Lines of Credit?

Student lines of credit are flexible financing options offered by banks and credit unions, allowing students to borrow up to a certain limit as needed, rather than receiving a lump sum.

Benefits of Student Lines of Credit

Flexibility: Borrow only what you need, when you need it, reducing unnecessary debt. This flexibility allows you to manage your finances more effectively, drawing funds as expenses arise rather than taking a lump sum.
Interest Savings: Pay interest only on the amount you borrow, not the entire credit limit. This can result in significant savings over time, especially if you only use a portion of the available credit.
Revolving Credit: Repay borrowed amounts to restore your credit limit, providing ongoing access to funds. This feature offers continuous financial support throughout your studies, making it easier to handle unexpected expenses.

Interest Rates and Repayment Terms

Student lines of credit may come with variable or fixed interest rates. Repayment terms can vary, but typically full repayment starts after graduation.

Pros and Cons of Student Lines of Credit

Pros

Ongoing Access to Funds: Unlike traditional loans, you can draw on the line of credit as needed. This ensures that you have financial resources available throughout your education, adapting to your changing needs.
Potentially Lower Minimum Payments: Since you may not need to borrow the full amount, your minimum monthly payments can potentially be lower than with a traditional loan. This can be helpful while you’re still in school and managing other financial obligations.
Potentially Lower Interest Rates: Often lower than private loan rates, especially for students with good credit. Lower interest rates can make lines of credit a more affordable option over the long term.

Cons

Variable Interest Rates: Rates can fluctuate, potentially increasing your repayment amount. This variability can make it harder to predict your future financial obligations, requiring careful budget management.
Credit Requirements: Strong credit history or a cosigner is often required. If you lack a solid credit background, obtaining a student line of credit might be challenging without additional support.

Resources and Tools for Graduate Student Loans

Online Calculators and Financial Planning Tools

Use online tools to estimate your loan payments and plan your budget. Websites like the Office of Federal Student Aid and private lender sites offer useful calculators.

Financial Aid Offices and Counseling Services

Leverage your school’s financial aid office for personalized advice and resources. They can help you understand your loan options and application process. Working with a credit union will also provide more personalized service than that of a traditional bank.

Scholarships, Grants, and Fellowships: Additional Funding Options

Explore scholarships, grants, and fellowships that do not require repayment. Many organizations offer funding for specific fields of study or research projects.

The Bottom Line on Graduate Student Loans

Securing the best graduate student loans and understanding the benefits of student lines of credit requires careful consideration of your financial needs, loan options, and repayment strategies. If you understand the differences between federal and private loans, assess your total costs, and explore all available resources, you can make informed decisions to finance your higher education.

If you’re considering a line of credit from a credit union to help pay for your graduate school expenses, we can help match you with one.