Using Graduate Student Loans to Pay for Your Master's and Higher Ed Degrees

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Tips for Paying for Graduate School

Graduate students come from diverse backgrounds, ranging from those entering directly after undergrad to those returning to school later in life with families and other financial responsibilities.

Even with financial aid, scholarships, grants, and fellowships, it can be difficult for grad students to make ends meet. Graduate student loans are available to help bridge the gap between other financial aid and the cost of attendance.

How to Apply for Graduate Loans

The process of securing graduate student loans involves several key steps to maximize your aid and understand your options:

Step 1: Complete the FAFSA and Determine Residency

Just as you did as an undergrad, you must complete the Free Application for Federal Student Aid (FAFSA) to qualify for federal aid. If attending an NC school, complete the NC Residency Determination Service (RDS) to qualify for less expensive in-state tuition. After completion, you will receive a letter from accepted schools detailing the cost of attendance and available financial aid (scholarships, work-study, federal loan options).

Step 2: Choose and Apply for a Loan

If federal aid is insufficient, you may decide to apply for a Graduate PLUS Loan or an NC Assist Loan. These loans require a credit check. If you have limited or adverse credit, a co-signer may increase your chances of qualifying.

Step 3: School Certification and Signing Documents

School Certification: Your school confirms your enrollment status and certifies the loan amount. The amount you may borrow is limited to your school’s cost of attendance minus any other aid you are receiving.

1. Sign Documents: Once approved, review all documents thoroughly. After you sign them, funds will be disbursed directly to the school.

Types of Graduate Student Loans

As with undergraduate degrees, you have multiple federal and private loan options. While federal loans often provide the best value for undergrads, that isn’t necessarily the case for graduate school financing. It’s important to shop carefully for the best loan for you, as loan terms may change. Make sure you understand all the "fine print" before you borrow money from any lender.

Here is what you can expect from some common graduate loan options:

1. Federal Direct Unsubsidized Loans are the primary source of federal student aid for graduate and professional students, offering government-backed financing with specific limits and repayment terms.

• Eligibility: These loans are available to all eligible graduate students, regardless of financial need. Eligibility requires completing the FAFSA form and being enrolled at least half-time in a degree program.
• Interest Rates: The interest rate is a fixed rate set annually by Congress. For loans first disbursed between July 1, 2025, and June 30, 2026, the rate is 7.94%.
• Interest Accrual: Interest starts accruing the moment the loan is disbursed to the school. While borrowers can choose to pay the interest while in school, during the grace period, or during deferment, any unpaid interest will be capitalized (added to the principal balance) when repayment begins.
• Loan Limits:
  • Annual Limit: Graduate students can borrow up to $20,500 per academic year. 
  • Aggregate (Lifetime) Limit: The total maximum debt allowed from combined undergraduate and graduate Direct Subsidized and Unsubsidized Loans is $138,500.
• Fees: A loan origination fee is deducted from each disbursement before the funds reach the school. For loans first disbursed on or after October 1, 2020, this fee is 1.057%.
• Repayment: Repayment of principal and interest begins six months after the student graduates, leaves school, or drops below half-time enrollment. Borrowers have access to various repayment plans, including Standard, Graduated, Extended, and Income-Driven Repayment (IDR) plans.

2. Federal Direct Graduate PLUS Loans (Grad PLUS) are federal loans the U.S. Department of Education makes to eligible graduate or professional students to cover education expenses not covered by other financial aid. They are essentially supplemental funding after a student has exhausted their Federal Direct Unsubsidized Loan eligibility.

• Borrowing Limit: Students can borrow up to their school's total cost of attendance, minus any other financial assistance received. Unlike unsubsidized loans, there is no annual or aggregate (lifetime) dollar limit for current borrowers.
• Credit Check: Eligibility requires a credit check to ensure the borrower does not have an "adverse credit history". If a borrower is denied due to adverse credit, they may still be able to receive the loan by obtaining an endorser (a co-signer) or documenting extenuating circumstances.
• Interest Rates & Fees: Grad PLUS loans have a fixed interest rate, but it is typically higher than for Direct Unsubsidized Loans.
  • Interest Rate (for 2025-2026): 8.94%.
  • Origination Fee: A fee of 4.228% (for loans first disbursed on or after Oct 1, 2020) is deducted from the loan amount before it is disbursed to the school.
• Interest Accrual: Interest starts accruing immediately upon loan disbursement and continues during periods of enrollment, deferment, and the grace period.
• Repayment: Repayment generally begins six months after the student graduates, leaves school, or drops below half-time enrollment. Borrowers can choose from a variety of repayment plans, including income-driven options.

Important Upcoming Change: Program Elimination

Due to federal legislation, the Federal Direct Graduate PLUS Loan program will be eliminated on July 1, 2026, for new borrowers.

• Current borrowers who receive a loan before July 1, 2026, for their current program may continue borrowing under existing rules for a limited time (up to three additional academic years or program completion).
• New students entering graduate school for the 2026-2027 academic year and later will not have access to this loan program and will face new, lower aggregate limits on federal unsubsidized loans.

Current students should check their "legacy" eligibility with their financial aid office. Prospective students starting after July 1, 2026, must plan financing carefully, exploring scholarships and private loans.

3. The NC Assist Graduate Student Loan is a private education loan offered by College Foundation, Inc. (CFI), a non-profit lender. It is designed to help students bridge the funding gap after exhausting federal aid options.

Key Features and Terms

• Lender Type: Non-profit organization.
• Purpose: To cover the total cost of attendance (tuition, housing, books, etc.) minus any other financial aid received. 
• Interest Rate: A fixed interest rate is offered, which is 7.75% for qualified borrowers, with a 0.25% interest rate discount (resulting in 7.5%) if you enroll in auto-draft payments during repayment.
• Fees: There are no application, origination, or prepayment fees.
• Borrowing Limit: Graduate students can borrow up to a $200,000 aggregate (lifetime) limit.
• Eligibility:
  • The loan is available to North Carolina residents attending an eligible in-state or out-of-state school, as well as out-of-state students attending an eligible North Carolina college or university. o Must be enrolled at least half-time in a degree-seeking program.
  • Requires a credit check. A credit-worthy co-signer can be used if the student doesn't meet credit requirements.
• Repayment:
  • Repayment begins six months after the student graduates or drops below half-time enrollment.
  • The standard repayment term is 10 years (120 months).
  • Interest accrues while the student is in school and during the grace period; unpaid interest is capitalized (added to the loan balance) at the end of the grace period.