Hello Terry -
I need to take out a federal student loan for my graduate degree and I have been unable to find the answers to the following questions:
1) Is there a sample of the loan documents available for me to read before I sign up for the loan? The information I have found makes it seem like I sign up for a loan and then afterwards I find out who the lender is and what the terms and conditions of the loan are. This seems risky to me.
2) Do these loans allow the borrower to make interest payments before graduation? I would like to keep the interest current so that I will only have the principal to repay after graduation.
Thank you for your help!!
Good thing you asked before jumping into an expensive loan with onerous terms. Just as with undergrad loans there are federal loans and private loans — with big differences. Here is a link to the grad student loan section on Finaid.org.
You’ll probably want to check out the Federal GradPlus loans for grad students (you may need a co-signer) because they carry a fixed rate (currently 6.41%) and can subsequently offer protections and consolidation opportunities if you don’t immediately get a job that has a salary allowing you to make full payments. You must fill out FAFSA to apply for a GradPlus loan, and there is a 4.22% loan origination fee. Still it is likely to be a lower cost and less burdensome loan than a private grad school loan.
With private loans you really have to read the fine print. Do NOT sign any loan that doesn’t have clear terms — typically a variable interest rate, set to a certain “benchmark.” Remember those payments could rise as interest rates rise along the way until the loan is repaid. As for paying interest along the way, that depends on the terms of the loan if it is a private loan — so again, check the documents carefully.
You can borrow UP TO THE COST OF TUITION with a Federal grad loan — but be careful because the repayment burden could derail the career for which you have worked so hard! You can also use the loan repayment calculator on the Finaid.org website, to see just what kind of monthly burden you might be taking on when you graduate!