How Does Financial Aid Work for Grad School?

Financial aid for graduate school operates differently from undergraduate funding, primarily involving less grant-based support and a greater reliance on loans. Understanding these distinctions is important for prospective graduate students navigating the costs associated with advanced degrees. The financial landscape for graduate education requires careful planning, as funding mechanisms reflect the specialized nature of post-baccalaureate studies. This often means a shift towards self-funded options and various forms of institutional support.

Sources of Graduate School Funding

Federal Direct Unsubsidized Loans are a primary federal loan option for graduate students, not based on financial need. Borrowers are responsible for all interest that accumulates. There are annual and aggregate borrowing limits, with graduate students able to borrow up to $20,500 annually.

Federal Direct PLUS Loans for graduate and professional students, often called Grad PLUS Loans, allow borrowing up to the full cost of attendance, minus any other financial aid received. These loans require a credit check and have higher interest rates and fees compared to Direct Unsubsidized Loans. While there is no specific annual or aggregate borrowing limit, the “One Big Beautiful Bill” Act, signed into law on July 4, 2025, eliminates the Grad PLUS loan program for new graduate student borrowers after July 1, 2026.

Universities often provide institutional aid, such as assistantships, which involve working for the institution in exchange for financial support. Teaching Assistantships (TAs) typically involve grading, leading discussions, or teaching, while Research Assistantships (RAs) focus on supporting faculty research projects. These positions commonly offer tuition waivers or reductions, a stipend, and sometimes health benefits. They also provide valuable professional experience and networking opportunities within the academic field.

Fellowships are another form of institutional aid, generally awarded based on merit rather than a work requirement. They provide financial support, often including a stipend, tuition waiver, and health insurance. Fellowships can be internal, offered by the university itself, or external, provided by outside organizations. These awards are competitive and recognize outstanding academic achievement and research potential.

Institutional grants and scholarships are also available, which do not require repayment. These awards are specific to the institution and can vary widely in amount and eligibility criteria. Students should check with their prospective university’s financial aid office for specific opportunities.

Private student loans are offered by banks and other private lenders, often requiring a credit check or a co-signer. These loans generally have variable interest rates, though fixed-rate options exist, and their terms can vary significantly between lenders. While they can cover up to 100% of the school’s certified cost of attendance, private loans typically lack the flexible repayment options and borrower protections found with federal loans.

External scholarships and grants are offered by various outside organizations, including professional associations, foundations, and non-profits. These awards often have specific eligibility requirements related to academic major, demographics, or research interests, and necessitate separate application processes. Finding these opportunities often requires proactive searching through online databases or professional organizations.

Application Process for Financial Aid

The Free Application for Federal Student Aid (FAFSA) serves as the foundational document for federal aid programs. Graduate students complete the FAFSA by providing personal and financial data. Unlike undergraduate students, graduate students are generally considered independent, so parental income information is not required. The FAFSA form is available online through studentaid.gov.

Universities frequently have their own application processes for institutional aid, which supplement the FAFSA. These applications for assistantships, fellowships, and grants often require additional materials beyond standard admissions documents. Applicants may need to submit essays, letters of recommendation, and official academic transcripts. Specific requirements are typically outlined on the university’s or department’s website.

External scholarship applications vary widely, with each organization setting its own unique criteria and submission guidelines. These applications might necessitate essays, portfolios, or detailed proposals for research projects. Applicants should carefully review the requirements for each external award to ensure all necessary materials are submitted. Many external scholarships are merit-based, focusing on academic achievement, community involvement, or specific career aspirations.

The completed FAFSA is submitted online, after which the applicant receives a Student Aid Report (SAR), which summarizes the submitted data. This report allows applicants to review for accuracy and make any necessary corrections. For institutional aid, university-specific applications are typically submitted through the institution’s online admissions portal or directly to the relevant academic department.

External scholarship applications are submitted directly to the awarding organization, adhering to their specified submission methods, which may include online portals or mailed applications. Follow the precise instructions provided by each scholarship provider to ensure the application is considered. After submission, consistently monitor the status of all applications and promptly respond to any requests for additional information from financial aid offices or scholarship committees.

Understanding Graduate Student Loans

After approval, federal graduate student loan funds are typically disbursed directly to the educational institution. The school then applies the funds to tuition, fees, and other authorized charges, with any remaining balance distributed to the student for living expenses.

Interest on both Direct Unsubsidized Loans and Grad PLUS Loans begins accruing from the moment the funds are disbursed, not when the student enters repayment. Graduate students are responsible for all interest that accrues on these loans. While borrowers are not required to make payments while enrolled at least half-time, interest continues to accumulate during this period and during the grace period, which can lead to a larger principal balance if not paid.

A standard six-month grace period applies to federal student loans after a student graduates, leaves school, or drops below half-time enrollment. During this period, payments are not required, but interest continues to accrue.

Various federal repayment plans are available to graduate borrowers. The Standard Repayment Plan involves fixed monthly payments over a 10-year period. A Graduated Repayment Plan starts with lower payments that gradually increase over a 10-year term. For higher loan balances, an Extended Repayment Plan allows for payments over a longer term, up to 25 years, which can be fixed or graduated.

Income-Driven Repayment (IDR) plans, such as Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR), adjust monthly payments based on a borrower’s income and family size. These plans can significantly lower monthly obligations and may offer the possibility of loan forgiveness after a certain period of qualifying payments, typically 20 or 25 years, depending on the specific plan. Options like deferment and forbearance allow for temporary postponement of loan payments under specific circumstances, such as economic hardship or unemployment.