Key Takeaways
- On average, each year of graduate school costs $20,513, according to the National Center for Education Statistics.
- Federal graduate student loans have higher rates than undergraduate loans.
- Private student loans don’t have origination or disbursement fees, and may have more competitive rates.
Whether your desired career path requires an advanced degree or you’re hoping a master’s degree could help boost your earning potential, graduate school may be in your future. While it can be a worthwhile investment, graduate programs can be expensive.
While there are some forms of financial aid available, many students end up taking out student loans. In fact, 42% of graduate students borrowed money for school, according to the Institute of Education Sciences. As a graduate student, you can use federal student loans or private loans to pay for your education. Which is better for you depends on your program and finances.
Federal Graduate Student Loans
Federal student loans are often the first starting point for graduate students who need to take out loans. Federal loans have fixed interest rates and fees, and they don’t have minimum credit score or income requirements. Until recently, there were two types of loans for graduate students: Direct Unsubsidized and Grad PLUS.
Direct Unsubsidized
Direct Unsubsidized Loans have lower interest rates than Grad PLUS Loans, but there are annual and aggregate borrowing limits that apply to these loans. As of the 2025-2026 academic year, students could borrow up to $20,500 per year, and an aggregate limit of $138,500 applied (that amount included all debt borrowed for undergraduate degrees, too).
However, President Trump’s One Big Beautiful Bill (OBBB) established new limits for graduate and professional students. The new limits apply to loans taken out on or after July 1, 2026:
- Graduate: Students may borrow up to $20,500 per year, with an aggregate maximum of $100,000
- Professional: Students may borrow up to $50,000 per year, with an aggregate limit of $200,000
The new limits will particularly impact students entering medical school or law school, as those programs often exceed the new borrowing limits for Direct Unsubsidized Loans.
Note: Graduate students aren’t eligible for Direct Subsidized Loans
Grad PLUS
Through the 2025-2026 academic year, graduate students could take out Grad PLUS Loans. These loans have higher rates than Direct Unsubsidized Loans, but they don’t have loan maximums, so students could borrow up to the total cost of attendance.
The lack of a borrowing limit made PLUS Loans popular. On average, graduate students took out $25,059 per year in Direct PLUS Loans for their education, according to the National Association of Student Financial Aid Administrators.
Grad PLUS Loans will no longer be available to students due to the OBBB. For students taking out loans on or after July 1, 2026, the only option will be Direct Unsubsidized Loans.
Important: Federal student loan borrowers are eligible for special protections and repayment plans, but those plans are changing. Learn more about the new payment options and other changes to the financial aid system.
Private Graduate Student Loans
With the new borrowing limits on federal student loans, graduate and professional students may need to take out private student loans to cover the remaining balance. Private student loans can have fixed or variable rates, and repayment terms can range between five and 15 years.
There are two loan options:
Private Graduate Loans
A student can take out a private graduate student loan in their own name, and they can borrow up to the total cost of attendance. Private lenders base their lending decisions on the borrower’s credit and income, so many students will need a co-signer to qualify for a loan.
Private Parent Loans
Unlike federal Parent PLUS Loans, which are only for parents of undergraduate students, private parent loans are also available to parents of students pursuing graduate or professional degrees. These loans are solely in the parent’s name — not the student’s — and loan approval is based on the parent’s income and credit.
Federal vs. Private Graduate Students: 5 Key Differences
If you’re not sure whether federal loans or private loans are better for you, there are some key differences to keep in mind:
| Federal vs. Private Graduate Student Loans for the 2025-2026 Academic Year | ||||
| Federal | Private | |||
| Direct Unsubsidized | Grad PLUS** | Graduate Student Loan | Parent Student Loan | |
| Interest Rate | 7.94% | 8.94% | As low as 2.99% (Fixed) As low as 6.75% (Variable) | As low as 2.99% (Fixed) As low as 6.75% (Variable) |
| Disbursement/ Origination Fee | 1.057% | 4.228% | $0 | $0 |
| Repayment Term | 10 years | 10 years | 5-15 years | 5-10 years |
| Annual Borrowing Limit | $20,500 per year | Up to 100% of the total cost of attendance | Up to 100% of the total cost of attendance | Up to 100% of the total cost of attendance |
| Lifetime Borrowing Limit | $138,500* | Up to 100% of the total cost of attendance | Up to 100% of the total cost of attendance | Up to 100% of the total cost of attendance |
| *Direct Unsubsidized borrowing limits will change for the 2026-2027 academic year **Grad PLUS Loans will not be available to borrowers taking out new loans on or after July 1, 2026 Source: Federal Student Aid | ||||
1. Eligibility
For federal graduate student loans, the borrower must also be the student, and the borrower must complete the Free Application for Federal Student Aid (FAFSA).
For private loans, parents can borrow on behalf of a child in graduate school, or the student can take out a loan in their own name. Whatever the case may be, the borrower must complete an application with the lender and undergo a credit check.
2. Loan Maximums
Private student loans tend to have higher loan maximums than federal loans; borrowers can borrow up to 100% of the school-certified cost of attendance.
3. Terms
By default, federal student loans currently have a 10-year repayment term. With private loans, you can choose a term between five and 15 years. With a longer term, you could reduce your monthly payments.
4. Rates and Fees
Graduate loans tend to have higher interest rates than undergraduate loans. And with federal loans, the rate can be quite high; the rate on Grad PLUS Loans is currently 8.94%, the highest it’s been in years. If you have excellent credit (or a cosigner), you could qualify for significantly lower rates with a private loan. Rates are as low as 2.99% for graduate loans.
5. Loan forgiveness
Only federal student loans are eligible for forgiveness programs like Public Service Loan Forgiveness (PSLF). If you plan on pursuing loan forgiveness by working for a non-profit or government agency, federal loans may be a better choice.
Paying for Graduate School
FeFederal vs. private student loans, which is best for you? Although federal student loans have more borrower protections and benefits, they tend to have higher rates and fees. And some forms of federal loans have strict borrowing limits. If you have reached the federal borrowing maximum or have excellent credit and want to look for a loan with a lower rate, private graduate student loans can be a helpful alternative.
With ELFI, repayment terms range from five to 15 years, and you can borrow up to 100% of the school-certified cost of attendance. You can get an estimated rate quote online without impacting your credit score.
FAQs
Are federal or private student loans better for grad school?
No one loan option is better for all students. Federal loans can make sense if you need to borrow less than $20,500 per year and want the option of applying for loan forgiveness later, while private loans may be a better fit if you need to borrow more money.
Do private graduate school loans require a cosigner?
Unless the borrower has established a good credit history and has a reliable source of income, they will likely need a cosigner to qualify for a private graduate student loan.
Can private graduate student loans be forgiven?
Private graduate student loans aren’t eligible for federal loan forgiveness programs, but you may qualify for loan forgiveness through other programs, such as state loan repayment assistance programs.
Do federal graduate student loans have borrowing limits?
For borrowers taking out loans on or after July 1, 2026, the new annual limit is $20,500 per year for graduate students ($50,000 for professional students).
