Grad school can be rewarding for you, both personally and professionally — but the high of graduation can wear off pretty quickly once that student loan bill comes in. There are many ways to help pay for your graduate school degree, including scholarships and grants, but you’re not alone if you plan to take out student loans to help finance your degree. In fact, over half of all graduate students take out loans, with the average loan burden standing at $71,000 — and that’s not even including any undergraduate loans you may have.
If you’re in the process of applying to grad school — or perhaps you’re struggling to keep track of all of the financial steps required to secure loans for your master’s degree — you need this guide. We’ve created the ultimate timeline to help you navigate the graduate student loan journey, from choosing your grad school to embarking on the student loan repayment process.
Student Loan Timeline: From School Choice to Payback
The graduate student loan process can feel complicated at first glance, especially for those who’ve never taken out student loans before. Breaking the process down into steps can make it all seem a little less daunting. Below is a timeline that provides a clear overview about when to apply for loans, how to select the best ones for you, and how to effectively repay your student loans.
12 Months Out: Decide on Schools/Programs
It’s never too early in your grad school journey to start thinking about how you will pay for school. But first thing’s first: You must decide where you’re going to graduate school before you can tackle funding. Many factors will impact the list of grad programs you’re considering. Not only should you bear in mind what you want to study as well as where you’ll meet the application and admissions requirements, but you’ll also want to consider some more practical concerns.
First of all, you will want to consider the overall cost of the program. How much is your master’s degree worth to you and how long will it take you to pay it back on your future projected salary? This is an important factor to consider so that you don’t get in over your head. Additionally, you’ll want to make sure your program is accredited, so that you don’t risk your master’s degree being obsolete when all is said and done.
10 Months Out: File the FAFSA
With the field of options narrowed down to a solid choice, now it’s time to complete the Free Application for Federal Student Aid (FAFSA), which is one of the most important documents to file as you’re considering student aid. As the name suggests, the FAFSA is free to file and will determine your eligibility for a wide variety of federal student aid programs — including grants, work study, and federal student loans.
You can begin filing the FAFSA on October 1. You will need information on your personal finances, as well as your families’ (if applicable). You’ll also need a Social Security Number (SSN), so make sure you’re aware of yours and enter it correctly.
9 Months Out: Apply for State, Institutional, and Private Funding
While the FAFSA determines your eligibility for funding, much of the funding you actually receive will come from your school, your state, or elsewhere. Check with your school for specific funding application procedures — particularly if you’re eligible for programs like work-study.
You should also be using this time to apply for financial assistance from private organizations. A wide variety of non-profit and corporate funds are available for graduate students, so spend some time researching these opportunities. Some of these will be specific to your field, your geographic location, or the demographic category you belong to — be sure to do your research and apply for any/all you can!
6 Months Out: Receive Acceptance Letters and Financial Aid Offers
Now’s the time to realize the fruits of all that hard work. With acceptance letters and offers in hand, you’ll need a thorough understanding of the different types of loans you’re considering before deciding which loans to take out and how much money to accept.
When it comes to financial aid offers, it’s important to first understand the different loan types. These include the following:
- Direct Subsidized: Direct Subsidized federal student loans are one of the most common types of undergraduate student loans. One reason for their popularity is that the Department of Education will pay any interest the loans accrue for as long as the borrower is still completing a degree program. However, graduate students, whether full- or- part time, are not eligible for Direct Subsidized loans, because they’re exclusive to undergraduate students.
- Direct Unsubsidized: Unlike Direct Subsidized loans, Unsubsidized federal student loans are available to both undergraduates and graduate students. With this type of loan, you’ll be responsible for paying interest accrued during your studies. However, you will not need to begin repayment until you have graduated. There is a limit on how much you can borrow from Direct Unsubsidized loans, which your school will help you determine on a case-by-case basis.
- Direct PLUS Loans: Direct PLUS loans are another type of federal student loans available to graduate students. PLUS loans will have significantly higher interest rates than Direct Unsubsidized loans, but they are still likely to have lower interest rates than a private loan. Moreover, the borrowing limit on PLUS loans is significantly higher than the limit on unsubsidized loans, which are generally limited based on tuition costs at a given school — meaning that students who require extra money for living expenses, or who support dependents, may benefit from the ability to take out more PLUS loans.
- Direct Consolidation Loans:Direct Consolidation Loans are a way to simplify your existing student loan portfolio. Applying for a Direct Consolidation Loan is not a way to take out more money, but instead, allows you to combine multiple federal student loans into a single loan with a single monthly payment. For students who have had to take out a variety of different loans, possibly for different degrees, a direct consolidation loan can make it much less complicated to make payments — and to ensure you don’t fall behind on payments for any given loan.
- Sallie Mae: Sallie Mae is a publicly traded, private financial institution that originated as the government entity responsible for student loans. Today it functions as a private lender and provider of student loans, as well as a resource for college planning advice. As one of the largest and oldest providers of private student loans, this resource provides insight into the process for a wide variety of degrees and programs. However, Sallie Mae will likely offer higher interest rates than federal loans, and their loans cannot be forgiven through federal programs like Public Service Loan Forgiveness (PSLF).
- Credit Unions and Banks: Major national financial institutions and your local credit union will also offer student loans. If you already have an account with a bank or credit union, you have historic knowledge that can provide insight on their trustworthiness, plus these institutions already have information about you that can impact their offer. However, banks and credit unions may limit how much they will lend you based on the loan’s assessed level of risk, and they often have high interest rates when it’s time to repay.
- Private Lenders: A variety of private businesses specialize in offering student loans. Because these companies are not tied to the government or a larger financial institution like a bank, they may have fewer restrictions about how much they can lend for different degree types. However, they may have their own restrictions about which schools and programs they will supply lending for, and moreover, they can have very high interest rates.
3 Months Out: Accept School Financial Aid Offer
With a big picture understanding of the different types of student loans, now it’s time to accept the offers that are most appealing. Keep in mind that when you’ve received an offer from your school, you do not have to accept every loan or program you’re eligible for. Here are a few key guidelines as you decide what parts of your offer to accept:
- Accept free money first (grants, scholarships, etc.). This is perhaps your easiest decision: Any money you are offered outright, such as need- or merit-based financial aid from your school, or scholarships from a private foundation, should be accepted first. There are no strings attached, so it’s always a good idea to accept these offers.
- Accept earned money second (work study, fellowships, etc.). While this money isn’t “free,” funds offered via work-study, fellowships, teaching assistant (TA) programs, and more should be the next thing you accept. The work involved here will need to be factored into your studies but won’t leave a financial burden after graduation.
- Accept borrowed money last. Finally, you’ll need to consider your student loan offers. Remember, you do not need to borrow the maximum amount offered if you don’t want to or don’t think you’ll need it. You can always borrow more down the road — the less time you carry a loan, the less interest you’ll accrue.
0 Months Out: School Starts & Aid is Dispersed
As you’re gearing up for the first day of grad school, you’ll want to know what to do with the aid you’ve received — both in scholarships/grant funding and in student loans.
Here are a couple of the most common questions asked about aid disbursement:
How are funds dispersed?
The funds will be dispersed according to the schedule and method outlined when you accepted the aid. Some aid, like scholarships from your school, will be directly applied to your tuition; while others, like student loans, will be deposited into your bank account for you to spend on your own. Check your dispersal schedule to find out when your aid or loans will be paid out, as well as if dispersals happen in a lump sum or throughout the year.
What can student loans be used for?
Student loans can be used for any financial expenses incurred as a result of attending school. Of course, this includes tuition and fees for your program; but it also includes living expenses such as rent, food, textbooks, medical expenses, and more. Generally speaking, student loans will not require you to provide an account of how you used the funds — but you should consider keeping one for tracking your own budget.
3-6 Months After School Begins: Re-file for Aid
Assuming your program is longer than a year, you will have to repeat the filing process. Because people’s financial circumstances can change year after year, you will need to file a FAFSA annually — beginning Oct. 1. This will allow your school and lender to update your aid package based on any changes in your finances and give you the chance to borrow more or less as needed.
Different schools may have different procedures related to filing and re-filing, renewable scholarships, and more, so be sure to check with your school before you begin the annual re-filing process.
0-9 Months After Graduation: Begin Paying Loans Back
Congratulations — you’re a grad school graduate! Now, depending on the type of loans you accepted, you’ll likely need to begin paying your loans back shortly after graduation. Keep in mind that student loan interest typically begins to accrue immediately, even if the terms of your loan meant it was not accruing during your studies.
You may have the following questions:
How much can I expect my student loan payments to be?
Your student loan payment amounts will depend on your repayment plan, the amount of money you borrowed, and — if you are on an income-based repayment plan — how much money you’re earning. This is one reason why it’s important to speak about your repayment options with a financial aid advisor from your school before graduating. In the case of federal loans, you may also get advice from your student loan servicer, who would have been assigned to you when your loan was dispersed.
What is loan deferment or forbearance?
Loan deferment and forbearance are both pauses in the payments of your student loans. The key difference is interest. In a period of deferment — such as the deferment on federal student loans that began in March 2020 because of the COVID-19 pandemic — your loans will not accrue any additional interest. In forbearance, while you will not be expected to make payments on your loans, you will be responsible for interest accrued. This is why deferment is generally considered a more favorable circumstance.
Should I consolidate my student loans?
Whether or not you should consolidate your loans, or if that’s even possible, will depend on your personal circumstances. For those with a large number of different federal student loans — such as those who took out loans for their undergraduate and graduate school education — consolidating your loans may make payment simpler and make it less likely you’ll accidentally miss a payment. However, whether you should consolidate private loans, or if this is even an option for you, will depend on your private loan provider.
What happens if I cannot afford the repayment plan?
If you cannot afford your repayment plan, you have a few options. You might be eligible to switch to a different repayment plan — such as one where your payment amount is determined by your income. You may be eligible for some form of loan forgiveness or a deferment. You may be eligible to enter a period of forbearance. Because personal financial circumstances and student loan packages can vary so much between individuals, it is best to speak to a financial advisor or other qualified professional about which option is right for you.
What are the student loan forgiveness programs?
There are a variety of programs to forgive federal student loans. These include programs to forgive loans of students who become disabled to the point that they cannot seek regular employment, and students who attended fraudulent for-profit schools. The Public Service Loan Forgiveness (PSLF) program will forgive the remainder of the student loans of anyone who works in public service for a given number of years while making regular payments on their student loans. Private loans may be forgiven through private programs, but this is uncommon.
20 Student Loan Resources You Should Know About
You’re not alone if your head is spinning a bit right now, because student loans can be confusing. But the good news: There are many resources available online to help you figure out a financial plan for grad school that works for you, or to help you manage your existing student loans. Here are some helpful places to start:
- CFPB Student Loan Advice: The Consumer Financial Protection Bureau is a government agency that offers student loan advice to ensure you’re being treated fairly within the law when it comes to your loans.
- Credible: Considering a private student loan? Look no further than Credible’s search. Credible allows you to compare different private student loans and their terms to find the one that’s right for you.
- FAFSA: The official website for the Free Application for Federal Student Aid, this will be your first stop when applying for financial aid.
- Federal Student Loan Simulator: Essentially a calculator for federal student loans only, the federal student loan simulator allows you to walk yourself through the process of taking out federal loans, providing insight into what monthly payments will look like after graduating.
- EdFinancial Services: EdFinancial is a large student loan servicing company based in Tennessee. If they are servicing your loans, you can log in to their site to make and track payments, view your balance, and more.
- H&R Block: Not sure how your student loans will impact your taxes? H&R Block is one of the most experienced accountancy firms, and their accountants can help you figure out how your loans — and repayments — impact your taxes.
- Investopedia: This is a go-to resource for all things finance. Look here if you’re confused about interest, consolidation, forbearance, or other financial concepts you may encounter relating to your loans.
- LendingTree Student Loan Hero: Student Loan Hero is the student loan blog of LendingTree and has a wide range of articles on student loans, repayment, the financial side of education, and more.
- Millennial Money Man: A blog dedicated to money management with a particular focus on “side hustles,” this site also offers more general advice on finances, including managing money during your studies.
- MOHELA: One of the largest student loan servicing companies in the U.S., the Missouri Higher Education Loan Authority (MOHELA) will have information about your loans, payment history, and more through your online account if they are servicing your loans.
- Nelnet: This Nebraska-based company is another student loan servicing corporation, and if they’re servicing your loans, you can log in to manage them, review past payments, and more.
- QuickBooks: For those looking to manage their earnings, particularly if you’re self-employed, QuickBooks is a subscription-based site that helps you track earnings, expenses, and more.
- Sallie Mae: Formerly a federal student loan agency but now a private company, Sallie Mae is one of the largest and most experienced private student loan providers in the U.S., and its website provides a full overview of services.
- SmartAsset Student Loan Calculator: This website allows you to calculate your various student loans, how interest will grow over time, and more, all before you’ve even qualified for a loan.
- The College Investor: The College Investor is a blog that offers advice and introductions to all things financial for students and young people — including a wide variety of pieces on student loans and student debt.
- The Financial Diet: A popular website offering lighthearted financial advice and budgeting tips aimed at a young audience. Look here for tips about money management and setting — and sticking to — a budget.
- TISLA: The Institute of Student Loan Advisors is a non-profit that offers a variety of free services to help advise students and those looking to repay their student loans, as well as advocating for loan fairness.
- U.S. Department of Education–Student Loans: The website of the U.S. Department of Education has a section devoted entirely to student loans, including federal loan types, loan forgiveness programs, and more.
- Wells Fargo: Not only does Wells Fargo offer private student loans, its website is full of information about education and finance more generally, even for those not looking to borrow from them.
- Your School’s Financial Aid Department: Like this link to Yale University’s office of financial aid, your school will have a financial aid department, with advisors on staff who can answer questions about your specific circumstances. Be sure to seek out this department at your school when you need help navigating the student loan process.
A Grad Student Weighs in on Student Loans
We spoke with Kat Mitchell, who holds a Master’s degree in publishing that she received from Oxford University in the UK. We asked her about the financial aspects of funding her graduate education as it pertains to an American studying abroad, and what she would advise aspiring grad students concerned about the financial impact of their studies. Here are her thoughts and experiences:
1. Where did you attend grad school, and how did you finance your degree?
I completed an MA in Publishing at Oxford Brookes University in England. Although it’s an MA, it’s effectively a business degree. I obtained financial aid through student loans to pay for my master’s degree.
2. What information did you get from your school about finances?
As a foreign student, I didn’t get much in the way of support from the university, although there were some grant options to apply for. These were discussed during applicant meetings, but I was essentially left to my own devices in procuring the funds for my degree. If I had been in the US, I would have had more options, specifically through filing the FAFSA and taking advantage of federal aid options.
3. Did take out student loans for undergrad? How did that impact your grad school plans?
I didn’t take out loans for undergrad, thankfully, although it was a purposeful choice not to. As a Georgia resident, I chose specifically to maintain in-state status and completed my undergrad degree at the University of Georgia and cash-flowing that degree. Having no debt ultimately allowed me a bit more freedom of choice when applying to graduate schools.
4. What was the best advice you got about grad school finances, either during your studies or before?
Get a loan for more than just your tuition, if you can. Consider what expenses you’ll have in addition to tuition that you’ll need help paying for. In the US, you can often look for assistantships or work-study opportunities, or hold a job during graduate school. Working while studying isn’t usually possible in the UK, depending on the limits of your visa. But even in the US, you need to consider the benefits vs costs of the various avenues to finance not only your studies but also your lifestyle and external requirements and demands.
5. What financial advice would you give to someone applying for grad school?
Before going into debt like this, really consider the sources of your loans and your repayment strategy. I’m a firm believer in the benefits of education and further study, but I’m also very aware of how poor the interest rates are and how unforgiving the loans system can be. Loans or sources for loans are definitely not created equal, and without a clear strategy for repayment, you could end up having this debt for an unfortunate amount of time. In short, do your research and only borrow what you are comfortable paying back.