Undergraduate vs. Graduate: 8 Differences in Student Loans
If you are planning to take out a student loan for your sophomore degree, you may think you could draw on your student loan experience.
Unfortunately, it’s not that easy. Federal and private student loans are very different for undergraduate and graduate students.
Consider these eight differences between loan situations before taking out a student loan.
1. FAFSA forms
2. Need-based help
3. Federal loan types
4. Interest rates on federal loans
5. Federal credit limits
6. Eligibility to issue federal loans
7. Personal loan terms
8. Credit deferral at school
There are many differences between being dependent student and independent one. As a graduate or vocational student independent of your parents (and their finances) it should be easier for you to find that Free application for federal study grants (FAFSA) – the gateway to federal student aid, including loans.
You no longer have to attach mom or dad’s tax returns to your FAFSA papers. Filling out the online form should take less than an hour, so don’t hesitate.
Even if you don’t have to count your parents’ income and assets on your FAFSA form, what yours Expected family contribution or expenses, you probably won’t have as much on-demand help available to you as a college graduate.
Federal Pell Grants, for example, are usually only available to undergraduate students. Even if you received a Pell Scholarship for your undergraduate degree, you probably won’t be eligible for one for graduate school. (This rule does not apply to prospective teachers attending a postgraduate certificate program.)
Other needs-based grants and allowances may also be more difficult to find. Instead, you may have better luck with scholarships and grants. Other possibilities Pay for high school graduation without going into debt This includes finding jobs on campus, especially those with tuition reimbursement perks.
When borrowing for your next degree becomes necessary, the FAFSA opens the door to federal funding. But your options as a PhD student differ from those available to you in undergraduate studies.
|Directly Funded Loans||Yes||No|
|Direct unsubsidized loans||Yes||Yes|
|Direct PLUS loan||No||Yes|
When you’ve borrowed subsidized student loans for example, as a student, you were not charged interest on your loans while enrolling as a full-time student. This is not the case with graduates. Instead, your student loan options – direct, unsubsidized, and direct PLUS loans – would accrue interest immediately, whether or not you are a full-time student.
The longer it takes to graduate from graduate school, the more interest will be added to the main balance of your college loan. For example, if you borrow $ 10,000 at the start of school, the balance increases to about $ 11,200 two years later. That’s $ 1,200 more you would owe than if you were an undergraduate on a subsidized loan.
Although federal lending rates fell across the board for the 2019-2020 school year, that fact has remained unchanged: students pay higher interest rates than students.
Student loan interest rates are set by Congress and are tied to Federal Treasury Notes. Currently, the interest rates are 4.53% for student loans and range from 6.08% (direct unsubsidized loans) to 7.08% (direct PLUS loans) for PhD students.
Of course, the higher your interest rate, the more interest you will have to give up on repayment.
|Direct loan comparison||Bachelor||graduate|
|Interest rate for unsubsidized loans||4.53%||6.08%|
|Availability of subsidized loans||Yes||No|
|Possibility of postponing school||Yes||Yes|
|Annual credit limit||$ 5,500 to $ 12,500||$ 20,500|
|Total credit limit||$ 57,500||$ 138,500|
|Number of payments made to qualify for the REPAYE plan for a forgiveness||20 years||25 years|
As you’ve probably heard, student and college student loan balances can add up to a whole lot. But it may be easier to get student debt for the graduate school because it is higher maximum credit limits.
The current grants are $ 20,500 per year and $ 138,500 total for a college graduate or professional. The latter limit includes all loans that you have already taken out for your bachelor’s degree.
Students can get even more credit in direct, unsubsidized credit for medical schools and other health care degrees. The student loan limit is capped at $ 47,160 per year and $ 224,000 for these students.
In addition, there is no limit to PLUS loans other than your school’s participation cost. You could borrow the last cent with a PLUS loan.
While more credit may seem like good news, it can create problems. It is tempting for students to take on more than they need because student loans can be used for a living. Student loan money is not tracked or monitored so that it is easy for students to abuse it and use the money for negligible expenses.
Students and graduates are entitled to Student Loan Programs like public sector lending. However, under the Income-Oriented Repayment Plan (IDR) of REPAYE, graduates and professionals have a long path (25 years) to forgive. Undergrads could have their funds wiped out after just 20 years of qualifying payments.
In this sense, many Student loan repayment utility programs are only available for professions that require postgraduate studies. Doctors, lawyers, and teachers are among the professionals who have access to assistance programs offered by state governments, employers, and other agencies.
If federal student loans aren’t enough to cover your attendance costs, you can consider private student loans. But here, too, private loans for bachelor and master students are anything but identical.
For example, most reputable lenders require students to include a co-signer with their loan application. As a graduate student, you could get a lower price by piggybacking a creditworthy cosigner – but you can also qualify yourself.
In all likelihood, as a graduate student, you have a thicker credit record and could get a better deal on a personal loan than you could have gotten a wide-open student.
However, be aware that banks, credit unions, and online lenders vary their rates based on the deal you are seeking. For example, CommonBond promotes five different fixed and variable rates for undergraduate, graduate, and MBA students, as well as dental and medical program participants.
Also, keep in mind that it usually makes sense to prioritize federal loans over private debt options. Even the best private student loan companies listed on our website do not comply with federal credit protection regulations such as IDR, deferment and omission, and state avenues to forgiveness.
As a full-time graduate student, you are typically allowed to defer payments on your state and private student loans.
But be careful: interest will still be charged even during the deferral. If possible, you may want to keep paying off student loan interest while you are in school. If not, your bill will keep growing.
There’s good news: if you’ve subsidized federal student loans from your undergraduate program, you won’t be charged any further interest during the deferral. You can find out how high the interest rates are in our Student loan deferral calculator.
Student Loans Versus Student Loans: Understand the Differences Before Borrowing
There are a variety of ways your college or professional program differs from your undergraduate experience. For example, you might find yourself in smaller classes to study more specific material. You may even need to do research to defend a serious thesis.
As you now know, you will also have a new rental experience.
While you can prepare an undergraduate borrower for the graduate student process, it is important to understand the differences before making any further loans. In fact, you should have all of your all Possibilities of financial support for the high school before making a decision.
Andrew Pentis contributed to this report.
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