Student loans can be confusing and overwhelming — especially when added to the already stressful time of choosing a college and figuring out how to pay for it. That pressure can be even greater when it comes to graduate school, which can often be significantly more expensive than undergraduate.
The Student Loan Ranger will try to alleviate some of that confusion by comparing the different loan types available to graduate students. We’ve listed these in our order of preference, starting with those that offer the most benefits and protections and working our way down. In general, we recommend exhausting your annual eligibility in one before exploring the next.
[Learn about paying for graduate school.]
Federal Perkins Loans
While this program is winding down, there will still be limited availability for graduate students who have received prior Perkins loans. Specifically, up until Sept. 30 and only for graduate students who received a past Perkins loan prior to Oct. 1, 2015.
This past loan must be from the school they are currently attending, and the new loan must be used to continue or complete the same program for which they received their prior Perkins loan. Remember too that not every school participates — and even if they do, their Perkins funding may be on the low side.
If you fit into that tiny eligibility box, you could receive up to $8,000 for the year. Perkins loans have an aggregate limit of $60,000, but that also includes any Perkins you may have received as an undergraduate student. Perkins are a good first choice of loan as no interest accrues as long as you are at least half time in school and the rate is 5 percent.
Repayment begins once you are below half time in school for nine months or nine months after you complete your program — whichever comes first. Perkins loans are also eligible for many forgiveness options — especially in careers related to public service. Finally, Perkins loans can be made eligible for the income-driven repayment plans by consolidating them into the federal direct loan program.
Federal Stafford Loans
Federal Stafford loans are another good option for graduate students. Eligible students may receive up to $20,500 per year of unsubsidized Stafford loans with an aggregate limit of $138,500, which includes any Stafford loans borrowed while obtaining an undergraduate degree.
Interest begins accruing as soon as the loan is disbursed, and while the rate is fixed, the amount is based on when the loan was first disbursed. Stafford loans for graduate students disbursed between July 1, 2015, and June 30, 2016, are fixed at 5.84 percent.
In addition to interest rate costs, there is an origination fee of around 1 percent that is taken off the top of the amount you borrow and is used to pay for the administration of the program. So if you borrow $10,000, the school and you will only receive $9,893.20. Repayment begins six months after you graduate or become enrolled less than half time, and these loans are eligible for all of the income-driven plans as well as Public Service Loan Forgiveness and other benefits.
[Find out how to calculate the return on investment of a graduate degree.]
Federal Graduate PLUS Loans
Still not enough? Well the first thing you should do is watch your debt levels — remember that for every $10,000 you borrow, you can expect a payment of around $120 per month for 10 years. There’s an old saying — if you live like a lawyer when you’re a student, you’ll live like a student when you’re a lawyer.
With that said, we understand that grad school can be expensive, which is why this loan program exists. Graduate students may borrow up to the cost of attendance for the year — which can include some living expenses — minus other aid received. There is no annual or aggregate limit to g raduate PLUS loans. There is a mild credit check, but those who fail have the option to find an endorser.
Payments are due six months after you become less than half time or graduate, and interest begins accruing right from disbursement. Interest rates vary based on when the loans are first disbursed. These loans also have an origination fee; just like the Stafford loan, this fee is taken off the top of the loan amount.
[Understand how student loan repayment changes after graduate school.]
Private Loans
Private loans are also an option for graduate students, but with all the lower payment and forgiveness options available under the private loan programs, it may be better to keep your borrowing within the federal program. In total, you may receive aid up to the cost of attendance.
Remember to set yourself a goal to borrow the least amount possible. If you receive more than needed, you can always return the money. Federal loan funds returned within 120 days of disbursement have that portion of interest and origination fees waived as well, which makes it a free loan for that period.
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Understand 4 Options for Graduate School Loans originally appeared on usnews.com
