Grad School Debt: Everything You Need to Know

grad school debt

Graduate study is an exciting yet challenging endeavor, but grad school debt… not so much! However, it is a worthwhile investment that will lead to the realization of your personal and professional aspirations.

But let’s face it; grad school isn’t exactly cheap.

Let’s explore grad school debt! Use these jump pages to navigate this article’s sections:

Average Grad School Debt
Types of Loans for Graduate School Students
Student Loan FAQs
Dealing with Grad School Debt After Graduation
Key Takeaways

Graduate Student Debt - fact

Take a look at these interesting topics:

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Average Grad School Debt

A significant increase in university admissions has been the primary factor in the growth of national student debt. The more graduate students enrolled, the higher the national student debt will be considering that they owe an estimated 50% of all student debts! 

Such is the enormous scale of the national student loan debts that its growth is six times faster than the national economy. Per current records, student loan debts total $1.75 trillion

For this reason, if you are planning to pursue a graduate program, you should know how much debt you can expect to pay in the future. Finding out how much it will take to complete a graduate program can give you a headstart in managing your educational finances along with other obligations.

Here are the average student loans for some of the most popular graduate school programs offered by universities across the United States:

grad school debt

Here are the average student loans for some of the most popular graduate school programs offered by universities across the United States:

Business School

Earning an MBA is among the most expensive endeavors among business professionals seeking career advancement. With the rising cost of attendance among business schools, it isn’t unusual to hear of individual six-figure student debts! This is true even with some schools freezing their tuition during the COVID-19 pandemic, a move to attract more students as well. 

Dartmouth Tuck has the highest tuition in 2020 at $77,520 followed by the likes of Columbia, MIT and Stanford. Keep in mind, however, that the amount doesn’t include incidental expenses, room and board, and books. 

Over two years of full-time study. MBA students can accumulate thousands of dollars in student loans. In a 2021 US News & World Report detailing the business schools with graduates having the highest debts, the lowest was $5,655 at Auburn University Montgomery. The highest was Long Island University Post at $$487,797 (average) followed by Duke University ($115,538), Yale University ($112,353) and Vanderbilt University ($99,386). 

Tip: If you want to earn an MBA degree with zero student loan, you may want to consider Le Moyne College in Syracuse, New York.

Post-Baccalaureate Humanities Program

Professionals with master’s and doctorate degrees in arts, humanities and liberal arts have respectable annual incomes. The wide range of job opportunities, from proposal managers to middle school teachers, also make earning a graduate degree more attractive. 

But, again, there’s the issue of student loan debt with the average among federal borrowers being $91,148 with 14.3% (or $13,000) from their undergraduate study. Master’s degree holders have an average debt less than half of their PhD counterparts – $71,287 and $159, 625 respectively. 

Medical School

Physicians spend at least eight years on didactic coursework and clinical internships, a period covering pre-med and medical school. Due to the extended period and expensive tuition, the average debt among medical school graduates is the highest at $215,900 – and it doesn’t include other educational debts like undergraduate loans, to boot! This is six times as much as the student debt loans of the average college graduate. 

If you’re an ordinary person without trust funds and other stable financial resources, you’re likely to incur $241,600 in total student loans by your graduation. If it’s any consolation, between 76% and 89% of medical school graduates have education-related debts in varying amounts. 

Scholarships, grants and other forms of financial aid result in significant reductions in student debt loans. This is true for both public and private institutions where a $100,000+ scholarship can reduce the average student loans to $115,000 for public schools and $130,000 for private schools. 

Note, however, that these figures don’t include the interest! The estimated total payments made by an average physician range between $365,000 and $440,000 (principal + interest). But there’s a good reason why a medical degree is still popular despite the debts – doctors are among the highest-paid professionals in the country! With $208,000 in median annual salaries, most doctors find it easier than most professionals to pay their student loans. Physicians can also look into several loan forgiveness programs that make repayment easier and faster.

Law School

Lawyers earn a median annual salary of $126,930 and generally enjoy the respect and prestige that comes with their profession. Their average student debt, however, can be a cause for concern at $164,742 (2020, ABA survey). Majority, or 95%, of law school graduates took out student loans to finance their education. 

Black and Hispanic graduates, furthermore, have the highest rates of student loans. About 35% of people of color reported incurring over $200,000 in loans by their graduation. In comparison, only 25% of white people reported loans of $200,000+. 

There are also significant differences in the average indebtedness depending on where you earned your law degree. In the US News & World Report on Law Schools Where Graduates Have the Most Debt, 92% of students at Ave Maria School of Law incurred $133,393 in average loans. In contrast, only 66% of students at Brigham Young University Clark took have $51,048 in average indebtedness. 

grad school debt

Types of Loans for Graduate School Students

Just like undergraduate students, graduate students can apply for student loans through the U.S. Department of Education. However, there are specific adjustments to federal loan alternatives for graduates:

  • Students enrolled in graduate programs aren’t qualified for Direct Subsidized Loans.
  • Students enrolled in graduate programs have a new loan option in Direct PLUS Loans. This type of loan isn’t available for undergraduates. Also, there is a credit check validation to qualify for this loan type.

Federal student loans offer a fixed interest rate. Upon disbursement of your loan, an origination fee is taken from your loan amount. These loans provide income-based repayment options, forbearance, and loan forgiveness:

  • Direct Unsubsidized Loans do not consider your financial status for approval. Once your Direct Unsubsidized Loans are disbursed, your accrued interest begins. You do not have to make payments until after the grace period expires; however, it will result in owing more and paying a higher amount because of the charged interest.
  • Direct PLUS Loans are open to graduate or professional students and qualified parents who seek to finance their children’s education. Similar to the unsubsidized loans, your interest accrues as soon as you take out the loan. You only start repaying your Direct PLUS Loan six months after you leave school.

If you have an unfavorable credit history, you may not be eligible for Direct PLUS Loans. The following factors indicate an unfavorable credit history:

  1. Credit Accounts with total outstanding balances more than $2,085 and are delinquent by three months or more, or accounts that were reported in collections.
  2. Any repossession, default determination, foreclosure, bankruptcy, wage garnishment, or charge-off of a federal student aid debt.

If you want to pursue your application for the Direct PLUS Loan, you are required to do one of the following:

  1. Find an endorser with good credit history to make loan repayments on your behalf,
  2. Explain to the U.S. Department of Education any justifying circumstances for your bad credit history.
  • Direct Consolidation Loans enable you to bundle all your federal student loans into a single new credit, so you get only a single monthly settlement. Combining your accumulated loans would typically be something you’ll prioritize after completing your graduate studies.
  • Private Student Loans take into account your financial status, credit score, and income. Your credit standing also determines your interest rate. To raise their chances of approval and get lower interest rates, some graduate students apply for private loans with cosignatories who will also be required to disclose their financial information.

Private loans do not offer loan forgiveness and income-based repayment options. Borrowers do not get the opportunity of loan forbearance or deferment, although a few lenders offer this to graduates. Private moneylenders may waive the origination fee, allowing you to save money.

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Student Loan FAQs

How Do I Apply for Private Student Loans?

To obtain a private student loan for graduate studies, you need to evaluate your lender alternatives. Narrow down your choices by comparing loan terms and interest rates. There are several sources online in which you can find available private loan lenders such as U.S. News & World Report.

How Do I Apply for Federal Student Loans?

The first step in obtaining federal student loans is accomplishing the Free Application for Federal Student Aid or FAFSA. If you want to pursue a Direct PLUS Loan, complete the online application form. Your chosen graduate school will assess your qualifications and provide you with the award letter. You can claim the assistance through your graduate school’s financial aid office.

How Much Can I Borrow with Federal Student Loans As A Graduate Student?

The limit for the loan amount for graduate students is $20,500 per year. The total loan allowable is $138,500, which should include your undergraduate loans. Some health professional programs offer higher yearly and overall loan limits for graduate students. If you enrolled in one of these programs, ask your school’s financial aid office about your loan limits.

What Is the Student Loan Payment Pause? 

The Biden administration announced that the federal government will put on hold – or pause – its garnishment of wages, Social Security checks and tax refunds against defaulted student loan debts. While it was originally designed to end on January 31, 2022, the US Department of Education extended it until May 1, 2022

The payment pause covers suspension of loan garnishments/payments for eligible loans, the interest on these loans, and the collections on defaulted loans. Federal loans under the Direct program will have zero interest but private loans and Federal Family Education Loans will still incur interest. 

Keep in mind, however, that payments will resume in the future! You must then be ready for it by following these steps: 

  • Update your contact information on the websites of StudentAid.gov and your loan servicer.  
  • Sign up or review your auto-debit profile on the website of your loan servicer. 
  • Consider your options via the Loan Simulator and ask for advice, if necessary. Perhaps an income-driven repayment plan is your best fit since it can result in more affordable payments. 

Be ready with your payment, too, since your will receive a notice (e.g., billing statement) at least 21 days before it’s due once the payment pause will end. 

What Happens If You Default on Your Student Loans? 

Since federal student loans are guaranteed by the federal government, the consequences of defaulting on payments are a significant cause of concern. 

First, you will be officially declared deliquent if even a single loan payment isn’t paid within 90 days of its due date. Since your loan delinquency will be reported to the major credit bureaus, your credit score will be adversely affected. Your new applications for credit will likely be disapproved, and even if it’s approved, your interest rates will be higher due to your bad credit. 

Even your job applications will be jeopardized since employers check credit scores as a measure of character including reliability. Landlords may not approve your rent application or demand higher security deposits. 

At the 270-day mark of non-payment from due date, the student loan will be declared in default. Your loan account will be referred to a collection agency that not only uses more aggressive tactics but also tack on higher charges. 

Let’s say that the collection agency was unable to collect your loan balance. The federal government will become involved – and it’s something you will want to avoid considering its powerful reach. Tax refunds, salary garnishment and Social Security check deductions are common actions for repayment. 

What Can You Do to Avoid These Consequences? 

You must pay your student loans before these are declared in default! You should also look into federal programs designed to ease the burden of repayment including Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), and Income-Based Repayment (IBR). 

Tip: Communicate with your lender and work on a revised repayment plan as soon as it’s likely that you’re in a financial bind. 

What’s the Silver Lining in Student Loan Debts? 

If your loan payments are in order, your credit score will likely improve. Again, student loan debts are credit that must be paid and, thus, keeping up with payments means that you’re a good debtor. 

On average, individuals with updated student loan debt payments tend to have a higher credit score than those without student loan debts! A solid credit score means being the recipient of credit approvals, from a car to a mortgage.

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Dealing with Grad School Debt After Graduation

Indeed, graduate school debt is inevitable when pursuing graduate studies. After obtaining your hard-earned degree, these essential tips will assist you in dealing with your graduate student debt:

Create a Plan and Stay Organized

You must first decide the what, when and where of your repayment plan – what loans to pay as well as when to pay them and where to get the money to achieve your goal. 

You should create a complete list of all your graduate school debts with the lender’s contact information and due dates. If you have outstanding undergraduate loans, make a list of them too. Even without a statement or acknowledgment from your lender, you need to meet your loan payment deadlines. If you have outstanding undergraduate loans that were put on hold when you pursued graduate school, expect to be notified of their repayment schedules.

Your list of student loan debts must include vital information including: 

  • Principal balance 
  • Interest rate 
  • Period of payment (in years) 
  • Monthly amortization 
  • Fees and penalties 
  • Grace periods 

This way, you have a clearer idea of the entirety of your student loans and prioritize their payments.

Ask Help from Other People

Are you qualified for income-based repayment options for your federal student loans? Does your employer provide tuition reimbursement? Do you qualify for loan forgiveness? Perhaps you have a family member who can help you with your loan repayments. Consider some ways to crowdfund to help you settle your student debt.

Enroll in Auto-Debit

One way to save money is through enrolling or signing up for an auto-debit option for repaying your grad school debt. Automatic payment transfers help you avoid late repayments. You can enjoy discounts, perks, and rewards for prompt repayments and auto-debit enrollment.

Manage Your Money Wisely

Managing your financial resources responsibly entails prompt loan repayment that will translate to a favorable credit score. Create a budget that will help you keep track of your finances.

Here are tips that will make use of your money in a better manner: 

  • Prioritize the loans with the highest interest rates and/or the strictest repayment terms. Consider applying the debt avalanche technique
  • Pay more for the principal that will, in turn, reduce the total interest amount paid over the life of the loan. 

Claim Your Student Loan Interest Deduction

You can enjoy up to $2,500 in interest deduction on your private or federal student loan. The deducted amount is an adjustment to your taxable income.

Speed up Loan Repayments

If you earn extra money, accelerate repayment on your loans with the highest interest rate. The excess payment should be applied to the principal balance; it should not be considered an early installment for the next repayment schedule.

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Key Takeaways About Grad School Debt

  • Minding your graduate study loans diligently will positively impact your financial state when you have completed the program.
  • Start early. Prepare today your FAFSA application for the next academic year.
  • Take advantage of opportunities for loan deferment or reductions, and keep your eyes and ears open for them. Your university’s financial aid office will have more information about these opportunities. 
  • Graduate students have access to grants and scholarship programs, as well as private student and federal loans. Federal loans have fixed interest rates and various repayment plans. Private loans provide additional ways to save money, such as waived origination fees and lower interest rates.
  • Consider Public Service Loan Forgiveness and income-driven repayment options. Under the PSLF program, non-profit and government employees are eligible for forgiveness on individual loans to finance their graduate studies.
  • Regardless of the type of loan you took out, it is best to begin repayment while you’re still in graduate school.

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Dr. Jared Goff
Chief Editor