Can You Get a Subsidized Loan for Graduate School?

Navigating the financial aspects of graduate education involves understanding various aid programs designed to support students pursuing advanced degrees. Many prospective graduate students consider federal loan options to help finance their studies. These federal programs provide structured ways to cover educational expenses, including tuition, fees, and living costs.

Subsidized Loans and Graduate Study

Federal Direct Subsidized Loans are generally not available to graduate students. These loans are specifically designed for undergraduate students who demonstrate financial need, as determined by information submitted through the Free Application for Federal Student Aid (FAFSA). The U.S. Department of Education pays the interest that accrues while the student is enrolled at least half-time, during a six-month grace period after leaving school, and during any periods of deferment. Graduate and professional students became ineligible for Direct Subsidized Loans for loan periods beginning on or after July 1, 2012, due to legislative changes.

Federal Loan Options for Graduate Students

For graduate students, the primary federal loan types available are Direct Unsubsidized Loans and Grad PLUS Loans. Direct Unsubsidized Loans are offered regardless of financial need, with eligibility determined by the cost of attendance minus any other financial aid received. Graduate students can borrow up to $20,500 annually through the Direct Unsubsidized Loan program. There is also a lifetime aggregate limit of $138,500 for Direct Subsidized and Unsubsidized Loans, which includes any amounts borrowed during undergraduate studies.

Interest on Direct Unsubsidized Loans begins to accrue from the moment the loan is disbursed, even while the student is in school. These loans carry an origination fee, which is a percentage of the loan amount deducted before disbursement.

Beyond Direct Unsubsidized Loans, Grad PLUS Loans are another federal option for graduate and professional students who may need additional funding. These loans allow students to borrow up to the full cost of attendance, as certified by their school, minus any other financial aid received. Interest on Grad PLUS Loans also accrues from the date of disbursement, and the interest rate is fixed for the life of the loan. Like Unsubsidized Loans, Grad PLUS Loans also have an origination fee, which is a percentage of the loan amount.

Key Distinctions of Federal Graduate Loans

The primary distinction between Direct Unsubsidized Loans and Grad PLUS Loans lies in their credit requirements. Direct Unsubsidized Loans do not require a credit check, making them accessible to a broad range of students. In contrast, Grad PLUS Loans require a credit check. An adverse credit history can include significant delinquencies, defaults, bankruptcies, or tax liens within a certain timeframe.

The borrowing limits also differ significantly between these two federal loan types. Direct Unsubsidized Loans have set annual and aggregate limits, such as $20,500 per year for graduate students. However, Grad PLUS Loans do not have fixed annual or aggregate limits; instead, they allow borrowing up to the total cost of attendance. This flexibility can be particularly beneficial for programs with higher costs. Although both loan types accrue interest from disbursement, the interest rates for Grad PLUS Loans are higher than those for Direct Unsubsidized Loans.

Applying for Federal Graduate Loans

The process for applying for federal graduate loans begins with the Free Application for Federal Student Aid (FAFSA). Graduate students must complete and submit the FAFSA each year to be considered for federal student aid, including loans. For graduate students, the FAFSA considers them independent. After submitting the FAFSA, the student’s chosen school’s financial aid office will determine eligibility and prepare an aid package.

Students then receive an award letter detailing the federal loan amounts for which they qualify. To accept these loans, borrowers complete an online Master Promissory Note (MPN), which is a legal document promising to repay the loans and outlining the terms and conditions. Funds are disbursed directly to the school to cover tuition and fees, with any remaining amounts provided to the student for other educational expenses.