grad school debt

Grad School Debt: Everything You Need to Know

Graduate study is an exciting yet challenging endeavor. 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 graduate school debt! Use these jump pages to navigate this article’s sections:

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

Take a look at these interesting topics: How to Prepare for the GRE, How to Survive Grad School, & don’t forget… 10 Campus Resources That Every Grad Student Should Utilize

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Average College Debt

A significant increase in university admissions has been the primary factor in the growth of national student debt. In 2019, the student loan debt was at a record-breaking $1.5T.

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:

Business School

According to Bloomberg, a 2018 survey of more than 10,000 MBA graduates indicated that graduate students borrowed a minimum of $100,000 to finance their MBA programs. Roughly 40% of them reported accumulating six-figure debt after completing their MBA program. These participants include graduates are from Cornell University, Dartmouth College, Duke University, University of Chicago, and the University of Michigan.

Post-Baccalaureate Humanities Program

The U.S. Department of Education states that the average student debt for master’s degree program holders—particularly in the areas of Education, Master of Science, and Master of Arts—is $66,000. This amount is significantly lower than the debt accumulated by students of specialized professional programs such as Medicine, Law, and Business.

Medical School

For the academic year 2019-2020, medical schools across the United States enrolled 92,000 students. An annual survey conducted by the Association of American Medical Colleges reports that most medical students accumulated less than $300,000 in student debt, with one in five of them taking out bigger loans.

Law School

In the fall of 2019, the total J.D. enrollment was 112,882. Graduates of the said program accumulated student debt ranging from $51,000 to $213,000. J.D. students loaned $130,900 in 2018.

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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.

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Dealing with Grad School Debt After Graduation

GSC_Grad Loans

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:

Stay Organized

Create a complete list of all your grad 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.

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.

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

  • 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.
  • 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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