How Do Graduate Student Loans Work?

By Kassondra Cloos | Published on March 6, 2026

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The average cost of graduate school is over $42,000 a year. And with fewer financial aid options than undergrad students, grad students can face tuition bills that make earning a graduate degree seem impossible.

Fortunately, you don’t have to pay for it all out of pocket. As a grad student, you’ll have access to higher education loans through both private lenders and the federal government.

Here’s what you need to know about graduate student loans – how they work, how to get them, and how you can make the loan repayment process easier.

What is a graduate student loan?

A graduate student loan is a type of loan specifically designed to help finance the cost of graduate school or advanced education. These loans are available to students pursuing master’s degrees, doctoral degrees, professional degrees, or other advanced degrees beyond a bachelor’s degree.

Graduate student loans can be borrowed from both federal sources, like the U.S. Department of Education, and private sources, including banks, credit unions, and other financial institutions. The funds can be used to pay for qualifying educational expenses like tuition, books, and housing.

Graduate student loans are not gift aid (like scholarships and grants). As loans, they must be repaid over time with interest. Interest rates for federal loans are usually fixed and set by the Department of Education, whereas private loan interest rates can be fixed or variable and are determined by individual lenders based on creditworthiness and other factors.

Types of graduate student loans

When you borrow a graduate student loan, you can get it from the federal government or a private lender.

Federal graduate student loans

If you borrow your loan from the federal government, you’ll have two options: Direct Unsubsidized Loans and Direct PLUS loans.

1. Direct Unsubsidized Loans: These loans are available to graduate or professional students enrolled in a program that leads to a degree or certificate. Unlike subsidized loans, they’re not need-based, and interest begins accruing on them as soon as the loan is disbursed. Graduate students are eligible to borrow more through the Direct Unsubsidized Loan program compared to undergraduate students.

2. Direct PLUS Loans: These loans are also available to graduate or professional students enrolled in a program leading to a degree or certificate. However, Direct PLUS Loans require a credit check and may have higher interest rates compared to Direct Unsubsidized Loans. Because they have no borrowing limits, graduate students can use Direct PLUS Loans to cover the remaining costs of education.

Private graduate student loans

Private student loans are another option for graduate students. These loans are provided by private lenders and their terms and conditions vary from lender to lender. Private loans for graduate students differ from federal loans in several ways:

1. Application Process: To apply for federal graduate student loans, students must complete the Free Application for Federal Student Aid (FAFSA). On the other hand, private loans typically have their own application process, which may require a credit check and additional documentation.

2. Interest Rates: Federal graduate student loans have fixed interest rates set by the government. Private loan interest rates, on the other hand, can be fixed or variable, and may vary depending on the borrower’s creditworthiness and other factors.

3. Repayment Terms: Federal graduate student loans offer more flexible repayment options, including income-driven repayment plans and loan forgiveness programs. Though private loans may have flexible repayment options, they are not required to offer income-driven repayment or student loan forgiveness.

4. Borrower Protections: Federal graduate student loans come with various borrower protections, such as deferment, forbearance, and potentially loan forgiveness options. Though some private lenders may offer these, they are not legally obligated to.

5. Cosigner Requirements: Federal student loans generally don’t require a cosigner. Private student loans, on the other hand, may require a cosigner, especially if the borrower has limited credit history or income.

How do I borrow a graduate student loan?

Borrowing a graduate student loan can be a confusing process, and it differs depending on whether you’re applying for a federal or private loan.

How to borrow a federal student loan for graduate school

If you plan on borrowing a federal student loan for graduate school, you’ll have to take these steps:

1. Complete the FAFSA: To apply for a federal student loan, you need to fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA helps determine your eligibility for federal financial aid, including student loans. Submit it online at fafsa.gov, and ensure you provide accurate and up-to-date information.

2. Receive the Student Aid Report (SAR): Once your FAFSA is processed, you will receive a Student Aid Report (SAR). The SAR summarizes the information you provided on the FAFSA and includes your student aid index (SAI), which is used to determine your eligibility for federal student aid.

3. Review your financial aid award letter: After receiving the SAR, the college or university you plan to attend will send you a financial aid award letter. This letter outlines the types and amounts of financial aid, including federal student loans, that you are eligible to receive.

4. Accept or decline the loan: In your financial aid award letter, you will need to indicate whether you accept or decline the federal student loan offered to you. If you want to accept the loan, you’ll need to complete additional steps, like signing a master promissory note to officially borrow the funds.

How to borrow a private student loan for graduate school

If you intend to borrow a private student loan for graduate school, on the other hand, here’s how you can expect the process to work.

1. Research and compare lenders: Unlike the federal government, private lenders don’t offer all the same rates and products to every borrower. So, start by researching and comparing different private lenders to find ones that offer graduate student loans with competitive interest rates, repayment terms, and borrower benefits.

2. Check eligibility and credit requirements: Each private lender has its own eligibility criteria and credit requirements for borrowers. You will need to meet those criteria, which may include having a good credit score, a steady income, or a cosigner.

3. Gather required documents: To apply for a private student loan, you’ll typically need to provide documents such as proof of enrollment in a graduate program, income verification, and personal identification.

4. Apply for the loan: Once you have selected a lender, you can start the application process by filling out an application. Usually the entire process can be completed online. Provide the necessary information accurately and completely.

5. Review loan terms: It is essential to carefully review and understand the terms and conditions of the loan before accepting it. Pay attention to the interest rate, repayment options, fees, and any borrower benefits. Make sure that you have a plan to manage payments once you graduate from school.

6. Sign the loan agreement: If you accept the terms offered, it’s time to sign the agreement. Once you do this, the contract between you and the lender is complete (though, if you change your mind, you have the right to cancel the loan up to three days after you sign)

7. Receive the funds: Once you have accepted the loan offer and signed the loan agreement, the funds will typically be disbursed directly to your school to cover your educational expenses.

Repayment options for graduate student loans

When it comes to repayment, graduate borrowers’ options are dependent on whether their loans are federal or private. Here are some common federal repayment options :

1. Standard Repayment Plan: This is the default repayment option for federal student loans. Under this plan, borrowers make fixed monthly payments over a period of 10 years or up to 30 years for consolidated loans.

2. Graduated Repayment Plan: The graduated repayment plan starts with lower monthly payments that increase every two years. The plan is designed to mirror the salary of a new grad as they progress throughout their career. The repayment term is typically 10 years, but it can be extended for up to 30 years for consolidated loans.

3. Income-Driven Repayment Plans (IDR): Income-driven repayment plans are designed to help borrowers struggling with high loan payments relative to their income. These plans calculate loan payments based on a percentage of the borrower’s discretionary income and family size. There are several IDR plans available, including Income-Based Repayment (IBR), Pay As You Earn (PAYE), Saving on a Valuable Education (SAVE), and Income-Contingent Repayment (ICR).

4. Extended Repayment Plan: The extended repayment plan allows borrowers to extend the repayment term to up to 25 years. This plan can be combined with a standard or graduated repayment plan. It may lower monthly payments but result in higher interest payments over the life of the loan.

If your graduate student loans are private, on the other hand, your repayment options will vary by the lender. With all private lenders, the options available to you will be based on how well you meet eligibility factors when you apply. Borrowers in better financial standing (good credit score, low debt, high income, etc…) will generally have more flexible options and higher loan amounts available to them.

Will my graduate student loans be eligible for forgiveness?

In some cases, your graduate student loans may be eligible for forgiveness. Federal student loans offer more forgiveness options than private ones. Here are a few common options for federal borrowers:

1. Public Service Loan Forgiveness (PSLF): PSLF is available to borrowers who work full-time for a qualifying employer in the public sector or certain nonprofit organizations. After making 120 payments, the remaining balance on the borrower’s Direct Loans may be forgiven.

2. Teacher Loan Forgiveness: This program is available to teachers who work full-time for five consecutive years at a low-income elementary or secondary school or educational service agency. Depending on the subject taught and other qualifications, eligible borrowers may qualify for up to $17,500 in loan forgiveness.

3. Income-Driven Repayment (IDR) Forgiveness: Borrowers who participate in an IDR plan, where their monthly payments are based on their income and family size, may be eligible for forgiveness after 20-25 years of payments.

4. Forgiveness for borrowers experiencing hardship: In cases of hardship, like disability or bankruptcy, or if you were a victim of fraudulent activity, you may be eligible for targeted forgiveness initiatives.

For private student loan borrowers, forgiveness options vary by the lender, and they are rarely as expansive as forgiveness options offered by the federal government. In some extreme circumstances, private lenders may be willing to cancel your debt. Speak with your lender to find out their policy.

It’s also worth exploring whether your employer or your state may be able to help pay off some of your loans. This is most commonly available for people working in healthcare industries, but in some states other fields also qualify.

Hardship options for graduate student loans

If you can’t afford to pay your graduate school loans once your grace period has ended, don’t panic. There are quite a few options for borrowers experiencing hardship.

These include:

1. Deferment and Forbearance

If you’re unable to make payments on your federal student loans, you can contact your loan servicer to request a period of deferment or forbearance. In both cases, this will give you a break from payments for a set period of time until, ideally, you’ll be able to resume your payments.

The difference between deferment and forbearance comes down to whether interest will accrue on your loan during this period. Federal Direct Subsidized loans won’t accrue interest during periods of deferment, while Federal Direct Unsubsidized loans will. All loans will accrue interest during forbearance. Depending on the loan you’ve borrowed, this interest may capitalize at the end of your forbearance or deferment.

2. Income-Driven Repayment Plans

If you’re struggling to pay down your student loan debt, you can request an income-driven repayment plan, or IDR plan. You’ll have to provide proof of your income and your family situation, and you’ll be assessed a new monthly payment based on your discretionary income. In some cases, especially with Biden’s new SAVE Plan, your payments may be reduced to zero. After you’ve made a set number of payments on an IDR plan, your loans may be forgiven.

3. Student Loan Consolidation

Student loan consolidation will bundle all your federal loans all into one loan with a new interest rate. This interest rate will be a weighted average of the individual rates for each of your existing loans rounded up to the nearest eighth percent.

Consolidating your loans will simplify your payments to one per month to one servicer, and it will allow you to choose a new loan term. What’s more, student loan consolidation allows you to maintain eligibility for federal repayment options, hardship protections, and potential forgiveness programs. You can consolidate all (or some) of federal loans you’ve borrowed, even if that’s a mix of undergraduate loans and graduate PLUS loans.

4. Student Loan Refinancing

Student loan refinancing can also help you lower your payments and potentially save money on interest over time. You’ll need to maintain a good credit score to qualify, among meeting other eligibility factors like steady income, manageable debt, on-time rent or mortgage payments, etc.

Private student loan companies all have their own policies for hardship and repayment. You won’t be able to get a federal IDR plan with a private lender, but you may be able to request forbearance and talk to them directly to explore your options. Every lender is different.

Earnest, for example, allows borrowers in good standing to request to skip a payment once per year. The payment is then redistributed equally across the rest of the months in the loan term.

Earnest also offers a nine-month post-graduation grace period for borrowers enrolled at least half-time, whether you’re an undergrad or in grad school (3 months longer than average). This gives you extra time to get on your feet while you’re looking for a job.

How much can I get in graduate student loans?

You can borrow up to $20,500 per year in unsubsidized Direct loans for graduate school. Grad PLUS loans are available for the full cost of attendance as set by your university, which includes tuition, fees, and living expenses.

Generally speaking, all U.S. citizens and permanent residents are eligible for federal loans, but if you have an adverse credit history, you may need an endorser (essentially a cosigner) for a PLUS loan. It’s worth noting that PLUS loans have higher interest rates than Direct loans. These rates are fixed and set by the government every year.

If you need additional funds, or if you want to look for lower interest rates, you can explore private student loan options. There is no limit to the amount of private student loans you can apply for—the only limit is what you’re able to get approved for.

Should I get a federal student loan or a private student loan?

Federal loans for a professional or graduate degree have higher interest rates than undergraduate loans, and also charge origination fees. Over time, these may be more expensive than private loans.

However, federal loans can give you significant peace of mind that there are systems in place to help you pay off your loans – like IDR plans, student loan forgiveness, deferment, and forbearance – even if you can’t afford payments for years on end.

If saving on student loan interest and loan fees is important to you, and if you have a stable job that gives you confidence you’ll be able to make your payments, a private loan may be a better option.

You may also want to consider what you need the money for. While PLUS loans can cover living expenses up to the cost of attendance set by your university, you may find that the institution’s expectations for what it costs to live in a city may not be sufficient for your lifestyle, in which case you may need additional funding.