2 Federal Student Loan Options for Graduate Students

Graduate student loans are student loans that are available only to graduate students. They can be divided into federal graduate student loans, which are issued (either directly or indirectly) by the US Department of Education, and private graduate student loans, which are issued by private lenders. When it comes to federal graduate student loans, the students can apply for the same loans as the undergraduate students, but there are a few differences in the way the loans are set up and how much money graduate students can expect to get.

Graduate Federal Student Loan Basics

As with undergraduate federal student loans, graduate federal student loans are distributed through either the Federal Direct Student Loan Program or the Federal Family Education Loan Program (FFELP). Under the Direct Loan program, all the funds are provided directly by the federal government. Under FFEL program, the federal government guarantees and partially funds the loan. The rest is paid by a private lender.

Stafford Loans

For much of their existence, Stafford loans were the only federal student loans graduate students could qualify for. The Stafford loans originally had variable rates--rates that shifted in May of each year based on the value of US Treasury bills. However, the rates became fixed as of 2006. Unless the law is changed, the rates will became variable again after July 1, 2013. Any Stafford loans that are issued before that date will have interest rates that will remain the same until the loans are fully repaid.

Stafford loans can be divided into two types:

  • Subsidized loans--These Stafford loans are granted based on financial need. The federal government pays interest while the graduate student is in school, during the grace period and during authorized deferment. The interest rates will vary depending on the year. They are set at 4.50 percent for loans issued between July 2010 and June 2011, 3.40 percent for the ones issued between July 2011 and June 12 and 6.80 percent for loans issued between July 2012 and June 2013.
  • Unsubsidized loans--These Stafford loans are awarded to any eligible graduate students. With these loans, the interest always accumulates, regardless of the borrower's financial circumstances. All unsubsidized loans issued before July 1, 2013, will have an interest rate set at 6.8 percent.

Graduate students may borrow up to $20,500 per year. They may take up to $8,500 in subsidized Stafford loans and $12,000 in unsubsidized Stafford loans. They may borrow no more than $138,500 overall, up to $65,000 of which can be subsidized.

PLUS Loans

Originally designed to assist parents of undergraduate students, PLUS loans were opened to graduate students in 2006. They can be used to cover all the college costs that aren't covered by other forms of financial aid. The PLUS loans have a fixed rate of 7.9 percent for loans distributed through Federal Direct Student Loan Program and of 8.5 percent for loans issued through the Federal Family Education Loan Program. In both cases, the interest is tax-deductible. In order to qualify, the borrower must not have adverse credit history. This means that he or she can't be delinquent on any debt for 90 days or more. The borrower also can't have any default, discharge, foreclosure, repossession, tax lien or any other evidence of debt on his or her credit report for at least the last three years. However, the borrower can get around this requirement by getting a cosigner who does meet the above-mentioned requirements.


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