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When considering a Stafford Graduate Loan as a grad student, the first thing to remember is that with an unsubsidized loan you will have to pay interest, either during school or after graduation (but your interest will accrue with the latter choice). Just as you might have done in college as an undergraduate student, you’ll need to fill out the Free Application for Federal Financial Aid (FAFSA) form.

If you need a graduate school loan, how much should you borrow?

Here’s some good basic advice: Don’t borrow more than you need! Before you borrow a dime, think of a real-life situation based on your earnings potential after graduate school. For example, say you think you will need to borrow $20,500 a year. That may not sound like much to live on as a grad student. But at the end of a three-year graduate program, you’re looking at about $60,000 of debt and educational-debt payment of about $700 a month. If you expect to earn around $50,000 a year, you’ll be making roughly $4,200 a month. Subtract the $700 from that. (Don’t forget any additional payments you might still be making against your undergraduate education.) With those figures in front of you, you may want to reevaluate what you need to borrow.

Keeping in mind that financial experts advise that the total amount of your debt payment should not exceed 8 to 15 percent of your expected earnings after graduation (the numbers above represent about 15 percent), take the time to look at:

  • Your future income
  • The time it will take you to repay the loan
  • The interest rate you’ll be charged
  • The lifestyle you want after graduation

Be sure to take into account the unexpected things that might occur that could affect your ability to keep up on loan payments. You want those payments to be as low as possible so you can still make them when things are lean.

Other than graduate loans, what else is out there?

Don’t fall into the graduate school loan groove and fail to think about grants, scholarships, and assistantships that may be available to you. Take time to investigate what you qualify for. Those things could mean the difference between paying full price and getting half (or more!) of your tuition paid for. This is especially worth looking into if you’ve done well in your career or in college. Call the graduate program of your school and inquire about the scholarships and grants that may be available to you.

What’s driving your decision-making about grad school loans and other financial aid?

A fundamental mistake graduate students make all too often when looking at the cost of graduate school is to pick the cheapest program. Try not to make cost your primary decision-making factor when choosing a graduate program. In reality, the higher-priced out-of-state graduate programs at private institutions could offer more aid and grants for graduate school because they have more available.

Sidestep the grad school loan: Start early

You heard this advice when you applied to college and the same is true for graduate school. It cannot be overstated: If you wait until the last minute, as many busy people do, all that first-come, first-serve financial aid will be gone.

Even though you might be planning to enter graduate school in September, you should fill out the FAFSA and submit it as soon after January 1 of that year as you can. It is always to your advantage to make early calls to the graduate programs you are interested in. Researching financial aid in August when you want to enter graduate school in September won’t leave you with many options. You will have missed out on some good opportunities for scholarships, assistantships, and grants for graduate school.

Do you need motivation to avoid graduate school loans?

It can take months to fill out all the applications and information you’ll need to get financial aid. Financial aid planning a year ahead of when you intend to enroll is not unreasonable. Remember the old saying, “the early bird catches the worm.” Would you rather catch scholarships and grants or graduate loans? Consider all your hard work as time well spent!