Alternative Graduate Loans

Graduate students must carefully consider all of their financial aid options before using alternative graduate loans. Grad schools often carry hefty price tags; how you decide to finance your graduate costs can have a great impact on your financial future. Some examples of loan information included in our graduate section include:

Before using alternative graduate loans, maximize these forms of financial aid first:

  1. Graduate Scholarships – Besides scholarship money given to you by the school, look for graduate scholarships in your field of study or at your workplace.
  2. Grants – You may receive state or federal grants that don’t have to be paid back. Graduate students can also apply for grants involving study abroad, academic achievement, or your college major.
  3. Direct Stafford Loan – This federal student loan is a low-cost option for eligible graduate students, with increased borrowing amounts compared to undergraduate limits. You can borrow up to $20,500 per year in Direct Stafford Loans; $40,500 for certain medical professionals, like doctors. The interest rate on unsubsidized Direct Stafford loans is fixed at 6.8% and the origination fee is 1%. For more information on federal student loans, check out our Student Loan Guide.

Once you have maximized free money and Direct Stafford loans, and you are still in need of money, consider the Direct Grad PLUS loan (available through the Department of Education) and alternative graduate loans (available through various lenders). Direct Grad PLUS loans require that you do not have adverse (damaged) credit; alternative graduate loans require a more comprehensive review of your credit-worthiness.

Are alternative graduate loans better than Grad PLUS loans?

Alternative graduate loans may have a lower interest rate and fees if you have a good credit history and documentable income. The Direct Grad PLUS interest rate is fixed at 7.9%. You can always apply for alternative graduate loans and see if you can get a better interest rate than the Direct Grad PLUS rate. Remember, that the interest rate on alternative graduate loans is generally variable, so it can change over time.

Another way to increase your chances of getting approved for alternative graduate loans and lowering your interest rate is to apply with a credit-worthy alternative student loan co-signer. Although many graduate students do not want to burden parents or family members with their graduate school debt, it has become much more difficult in this financial environment to get approved for alternative graduate loans. If you cannot find a qualified co-signer or you do not currently have sufficient income, the Direct Grad PLUS loan is probably your best option.

What types of graduate or professional students might need alternative graduate loans?

Any program where the cost of attendance exceeds the Graduate Stafford Loan limit will need additional funding and this would be where the Grad PLUS or alternative graduate loans could be used to cover the additional costs. Dental, business, medical, and law schools are some potential examples.

What happens if you can’t get a job after graduate school?

There have been an increased number of stories lately about graduate students who are having difficulty paying back federal and alternative graduate loans because they can’t find a job in their field of study. Before you attend graduate school, you need to carefully consider the job market in both your field of study and the area in which you live or go to school. Realize that if you choose to attend graduate school, you are going to have to pay your school bills in order to remain enrolled in your course. If you or your family don’t have cash to pay for your tuition and expenses, you may have to borrow student loans. Here are some tips to help you manage your federal and alternative graduate loans:

  • If you haven’t started school yet, apply to as many schools as possible so that you can compare costs. Try to obtain as many college scholarships and grants as you can.
  • Even though graduate school is very demanding, you should try to network in your field as much as possible. Join organizations and clubs, find a college internship, and meet professionals in your area through your professors and school events.
  • If you are applying for positions and are not having any success, ask someone (like a colleague or professor) to review your resume and cover letter. Few people are actually hired from internet job postings, so you need to add networking and working with your school to your internet job search.
  • There are plenty of techniques to help you manage your federal and alternative graduate loans, such as consolidation, repayment plans, and deferment/forbearance. Check out our Repayment section for more information.