It’s wise to explore student loan options before borrowing to pay for graduate or professional school. Many graduate school students borrow money to finance their education, but with a few options to consider, choosing the right student loan can feel almost as complicated as choosing a program of study.
What’s more, a mainstay of graduate student loans — Direct Graduate PLUS loans — are no longer in the mix starting July 1, 2026.
Students will need a new strategy. “The sunsetting of Direct Graduate PLUS will likely push many students into the consumer marketplace,” says Chris Hanlon, director of financial aid at Lebanon Valley College.
No matter the loan type you choose, you’re not alone if you’re feeling overwhelmed about paying for graduate school. Finding the funds is often more challenging than finding money to pay for undergraduate programs. First, graduate school is usually more expensive. There are also simply fewer “free money” resources like scholarships and grants available to grad students.
This is why many graduate students use student loans to cover at least part of their cost of attendance. Learn more about the three main options for graduate school loans and their terms and conditions.
[Read: Best Student Loans for Graduate School]
A Big Change for 2026
Grad PLUS loans will no longer be an option for new borrowers after July 1, 2026. Historically, the Grad PLUS loan allowed graduate students to borrow up to the full cost of attendance. However, for some borrowers, these loans became problematic because the higher limits made it easier to amass massive amounts of debt, says Ashley Akin, certified public accountant, tax consultant and senior contributor at CEP DC.
On the other hand, not having that option will require a much different strategy moving forward. “Our new ‘fend for oneself’ student and parent borrowing will be very new for everyone involved,” says Hanlon.
3 Options for Graduate School Loans
Student borrowers still have three major options to fund graduate school.
Federal Direct Student Loans
These federal loans are unsubsidized, but come with favorable borrower benefits and protections. The first advantage is that there is no credit check, which makes it easier to qualify.
As for how much you can borrow, beginning July 1, 2026, maximum loan amounts for this program are changing. The annual limit of $20,500 is staying the same, but the new aggregate limit is $100,000 — not including undergraduate loans.
Before, the aggregate limit was $138,500, including undergraduate loans.
If you’re studying in a professional student program, like law or medicine, the annual limit is $50,000 with an aggregate limit of $200,000.
Federal loans offer income-driven repayment plans and Public Service Loan Forgiveness for people who work in certain public jobs. “I always recommend that clients try to use federal loans before private ones,” says Akin. “If your income falls after you graduate and you are struggling to pay the student loans, there are more repayment and forgiveness options available on federal loans.”
Hanlon agrees, noting that even though federal borrowing is often more expensive, consumer benefits are valuable. He lists possible PSLF, deferment and forbearance provisions, and regulatory protections supporting default prevention, school fraud and deceptive sales practices.
Interest rates are set every year and are somewhat higher for graduate students than for undergraduate students. All federal student loans also have an origination fee that is taken off the top of the amount you borrow.
Interest begins accruing as soon as the loan is disbursed, but payment is deferred while you are in school. After you leave school or drop below half-time enrollment, there is a six-month grace period before you are required to begin repayment.
[Read: Best Student Loan Refinance Lenders.]
Private Student Loans: State-Based and Nonprofit Lenders
You can also consider borrowing from a nonprofit or state-based organization. These organizations, which are guided by public-purpose missions, were typically founded solely to help students and families pay for school. The Education Financial Council has a list of available programs by state.
“Some of these have fixed rates in the 3% to 6% range, and also have income-driven repayment plans for students agreeing to work in certain fields or remain in the state after graduation,” says Akin. Most of these loan programs also do not charge origination fees.
If you plan to work in a public service field, you should know that these loan options are not eligible for the federal PSLF program. If you wish to seek loan forgiveness for public service, stick with federal loans.
[Read: Best Private Student Loans.]
Private Student Loans: For-Profit Lenders
Private student loans from banks and other for-profit lenders are also an option for graduate students. “If after full use of direct or loans you still have additional cost — the cost that would have in the past been covered by Federal Direct Graduate PLUS — then take time to shop interest rates (and other terms) with a private student loan provider,” says Hanlon.
Being an informed borrower means getting and comparing quotes from several different lenders to ensure you receive the best deal possible. You should also pay attention to other terms and conditions as they can vary by lender. “Interest rates can also increase if they are variable,” says Akin.
Like with state-based and nonprofit loans, you may be able to save money if you have strong credit and can qualify for the lowest possible interest rates. Be sure to ask whether the lender offers any borrower benefits, like an auto-debit discount, or options that lower or pause your monthly payment in times of financial difficulty.
Note that these loans are not eligible for federal benefits like PSLF.
Is Borrowing for Graduate School a Good Idea?
Graduate programs are expensive. It’s important to understand how much to borrow overall and whether you will be able to manage your monthly payments after graduation — especially if you already have student loan debt from your undergraduate degree.
Consider using a tool like the Education Department’s online Loan Simulator to help you understand whether borrowing is the right decision for you.
“Just because you can borrow a certain amount does not mean you should,” says Akin. “Graduate school can open doors. But smart borrowing will protect your future and help you build wealth instead of just paying off debt.”
More from U.S. News
Private vs. Federal Student Loans: What’s the Difference?
How Existing Student Loan Debt Affects Graduate School Prospects
Is Graduate School Worth the Cost?
3 Options for Graduate School Loans originally appeared on usnews.com
