The Student Loan Timeline for Master’s Students

It’s never too early in your grad school journey to start thinking about how you will pay for school. But first thing’s first: You must decide where you’re going to graduate school before you can tackle funding. Many factors will impact the list of grad programs you’re considering. Not only should you bear in mind what you want to study as well as where you’ll meet the application and admissions requirements, but you’ll also want to consider some more practical concerns.

First of all, you will want to consider the overall cost of the program. How much is your master’s degree worth to you and how long will it take you to pay it back on your future projected salary? This is an important factor to consider so that you don’t get in over your head. Additionally, you’ll want to make sure your program is accredited, so that you don’t risk your master’s degree being obsolete when all is said and done.

With the field of options narrowed down to a solid choice, now it’s time to complete the Free Application for Federal Student Aid (FAFSA), which is one of the most important documents to file as you’re considering student aid. As the name suggests, the FAFSA is free to file and will determine your eligibility for a wide variety of federal student aid programs — including grants, work study, and federal student loans.

You can begin filing the FAFSA on October 1. You will need information on your personal finances, as well as your families’ (if applicable). You’ll also need a Social Security Number (SSN), so make sure you’re aware of yours and enter it correctly.

While the FAFSA determines your eligibility for funding, much of the funding you actually receive will come from your school, your state, or elsewhere. Check with your school for specific funding application procedures — particularly if you’re eligible for programs like work-study.

You should also be using this time to apply for financial assistance from private organizations. A wide variety of non-profit and corporate funds are available for graduate students, so spend some time researching these opportunities. Some of these will be specific to your field, your geographic location, or the demographic category you belong to — be sure to do your research and apply for any/all you can!

Now’s the time to realize the fruits of all that hard work. With acceptance letters and offers in hand, you’ll need a thorough understanding of the different types of loans you’re considering before deciding which loans to take out and how much money to accept.

When it comes to financial aid offers, it’s important to first understand the different loan types. These include the following:

Federal Loans

• Direct Subsidized: Direct Subsidized federal student loans are one of the most common types of undergraduate student loans. One reason for their popularity is that the Department of Education will pay any interest the loans accrue for as long as the borrower is still completing a degree program. However, graduate students, whether full- or- part time, are not eligible for Direct Subsidized loans, because they’re exclusive to undergraduate students.
• Direct Unsubsidized: Unlike Direct Subsidized loans, Unsubsidized federal student loans are available to both undergraduates and graduate students. With this type of loan, you’ll be responsible for paying interest accrued during your studies. However, you will not need to begin repayment until you have graduated. There is a limit on how much you can borrow from Direct Unsubsidized loans, which your school will help you determine on a case-by-case basis.
• Direct PLUS Loans: Direct PLUS loans are another type of federal student loans available to graduate students. PLUS loans will have significantly higher interest rates than Direct Unsubsidized loans, but they are still likely to have lower interest rates than a private loan. Moreover, the borrowing limit on PLUS loans is significantly higher than the limit on unsubsidized loans, which are generally limited based on tuition costs at a given school — meaning that students who require extra money for living expenses, or who support dependents, may benefit from the ability to take out more PLUS loans.
• Direct Consolidation Loans:Direct Consolidation Loans are a way to simplify your existing student loan portfolio. Applying for a Direct Consolidation Loan is not a way to take out more money, but instead, allows you to combine multiple federal student loans into a single loan with a single monthly payment. For students who have had to take out a variety of different loans, possibly for different degrees, a direct consolidation loan can make it much less complicated to make payments — and to ensure you don’t fall behind on payments for any given loan.

Private Loans

• Sallie Mae: Sallie Mae is a publicly traded, private financial institution that originated as the government entity responsible for student loans. Today it functions as a private lender and provider of student loans, as well as a resource for college planning advice. As one of the largest and oldest providers of private student loans, this resource provides insight into the process for a wide variety of degrees and programs. However, Sallie Mae will likely offer higher interest rates than federal loans, and their loans cannot be forgiven through federal programs like Public Service Loan Forgiveness (PSLF).
• Credit Unions and Banks: Major national financial institutions and your local credit union will also offer student loans. If you already have an account with a bank or credit union, you have historic knowledge that can provide insight on their trustworthiness, plus these institutions already have information about you that can impact their offer. However, banks and credit unions may limit how much they will lend you based on the loan’s assessed level of risk, and they often have high interest rates when it’s time to repay.
• Private Lenders: A variety of private businesses specialize in offering student loans. Because these companies are not tied to the government or a larger financial institution like a bank, they may have fewer restrictions about how much they can lend for different degree types. However, they may have their own restrictions about which schools and programs they will supply lending for, and moreover, they can have very high interest rates.

With a big picture understanding of the different types of student loans, now it’s time to accept the offers that are most appealing. Keep in mind that when you’ve received an offer from your school, you do not have to accept every loan or program you’re eligible for. Here are a few key guidelines as you decide what parts of your offer to accept:

• Accept free money first (grants, scholarships, etc.). This is perhaps your easiest decision: Any money you are offered outright, such as need- or merit-based financial aid from your school, or scholarships from a private foundation, should be accepted first. There are no strings attached, so it’s always a good idea to accept these offers.
• Accept earned money second (work study, fellowships, etc.). While this money isn’t “free,” funds offered via work-study, fellowships, teaching assistant (TA) programs, and more should be the next thing you accept. The work involved here will need to be factored into your studies but won’t leave a financial burden after graduation.
• Accept borrowed money last. Finally, you’ll need to consider your student loan offers. Remember, you do not need to borrow the maximum amount offered if you don’t want to or don’t think you’ll need it. You can always borrow more down the road — the less time you carry a loan, the less interest you’ll accrue.

As you’re gearing up for the first day of grad school, you’ll want to know what to do with the aid you’ve received — both in scholarships/grant funding and in student loans.

Here are a couple of the most common questions asked about aid disbursement:

How are funds dispersed?

The funds will be dispersed according to the schedule and method outlined when you accepted the aid. Some aid, like scholarships from your school, will be directly applied to your tuition; while others, like student loans, will be deposited into your bank account for you to spend on your own. Check your dispersal schedule to find out when your aid or loans will be paid out, as well as if dispersals happen in a lump sum or throughout the year.

What can student loans be used for?

Student loans can be used for any financial expenses incurred as a result of attending school. Of course, this includes tuition and fees for your program; but it also includes living expenses such as rent, food, textbooks, medical expenses, and more. Generally speaking, student loans will not require you to provide an account of how you used the funds — but you should consider keeping one for tracking your own budget.

Assuming your program is longer than a year, you will have to repeat the filing process. Because people’s financial circumstances can change year after year, you will need to file a FAFSA annually — beginning Oct. 1. This will allow your school and lender to update your aid package based on any changes in your finances and give you the chance to borrow more or less as needed.

Different schools may have different procedures related to filing and re-filing, renewable scholarships, and more, so be sure to check with your school before you begin the annual re-filing process.

Congratulations — you’re a grad school graduate! Now, depending on the type of loans you accepted, you’ll likely need to begin paying your loans back shortly after graduation. Keep in mind that student loan interest typically begins to accrue immediately, even if the terms of your loan meant it was not accruing during your studies.

You may have the following questions:

How much can I expect my student loan payments to be?

Your student loan payment amounts will depend on your repayment plan, the amount of money you borrowed, and — if you are on an income-based repayment plan — how much money you’re earning. This is one reason why it’s important to speak about your repayment options with a financial aid advisor from your school before graduating. In the case of federal loans, you may also get advice from your student loan servicer, who would have been assigned to you when your loan was dispersed.

What is loan deferment or forbearance?

Loan deferment and forbearance are both pauses in the payments of your student loans. The key difference is interest. In a period of deferment — such as the deferment on federal student loans that began in March 2020 because of the COVID-19 pandemic — your loans will not accrue any additional interest. In forbearance, while you will not be expected to make payments on your loans, you will be responsible for interest accrued. This is why deferment is generally considered a more favorable circumstance.

Should I consolidate my student loans?

Whether or not you should consolidate your loans, or if that’s even possible, will depend on your personal circumstances. For those with a large number of different federal student loans — such as those who took out loans for their undergraduate and graduate school education — consolidating your loans may make payment simpler and make it less likely you’ll accidentally miss a payment. However, whether you should consolidate private loans, or if this is even an option for you, will depend on your private loan provider.

What happens if I cannot afford the repayment plan?

If you cannot afford your repayment plan, you have a few options. You might be eligible to switch to a different repayment plan — such as one where your payment amount is determined by your income. You may be eligible for some form of loan forgiveness or a deferment. You may be eligible to enter a period of forbearance. Because personal financial circumstances and student loan packages can vary so much between individuals, it is best to speak to a financial advisor or other qualified professional about which option is right for you.

What are the student loan forgiveness programs?

There are a variety of programs to forgive federal student loans. These include programs to forgive loans of students who become disabled to the point that they cannot seek regular employment, and students who attended fraudulent for-profit schools. The Public Service Loan Forgiveness (PSLF) program will forgive the remainder of the student loans of anyone who works in public service for a given number of years while making regular payments on their student loans. Private loans may be forgiven through private programs, but this is uncommon.