Subsidized loans, a type of loan offered by the federal government, used to be available to graduate students. Unfortunately, that is no longer the case. The program that allowed graduate students to receive subsidized loans ended in 2011 by the Budget Control Act.
For now, these loans are only available for undergraduate students. However, there are other loans available to help pay for grad school. Keep reading for more information on subsidized loans and the other options available to graduate students.
Key Points
• Since the enactment of the Budget Control Act in 2011, graduate students are no longer eligible for federal Direct Subsidized Loans.
• Graduate students may still qualify for federal Direct Unsubsidized Loans, which do not require proof of financial need but accrue interest during all periods.
• Grad PLUS Loans are also an option, allowing students to borrow up to the full cost of attendance minus other financial aid, subject to a credit check.
• Graduate and professional students have an aggregate federal loan limit of $138,500, which includes any federal loans borrowed during undergraduate studies.
• Beyond federal loans, graduate students can consider private student loans from banks or credit unions, which often require a credit check and may offer varying terms.
What Are Subsidized Loans?
Federal student loans are offered through the U.S. Department of Education to help students cover the cost of higher education. Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. The amount of the loan is determined by the school you are applying to.
The Department of Education pays all interest on subsidized loans while you are in school at least half-time, during the six-month grace period after you leave school, and during periods of deferment. Outside of these periods, the borrower is responsible for making all principal and interest payments.
Subsidized vs Unsubsidized Loans
Federal Direct Unsubsidized Loans, on the other hand, are available to undergraduate and graduate students. Students do not have to demonstrate financial need to qualify for these loans.
The loan amount is still determined by your school, and the interest starts accruing the moment the loan is disbursed.
For graduate students, the aggregate loan limit is $138,500, of which no more than $65,500 may be in subsidized loans. What’s more, the aggregate limit also includes whatever student loans you may have from your time as an undergraduate.
When you reach the aggregate loan limit, you will not be allowed to borrow any more money in federal student loans. However, if you are able to pay off some of your loans, you may be able to borrow again up to the aggregate loan limit.
Interest rates for both types of loans are set by the federal government each year. For the 2024-25 academic year, the interest rate for undergraduate borrowers is 6.53% for Direct Subsidized Loans and Direct Unsubsidized Loans. The interest rate for graduate borrowers for Direct Unsubsidized Loans is 8.08%. The interest rate is fixed over the life of the loan.
Alternatives to Subsidized Loans
In addition to unsubsidized loans, there are other loans available from the government, plus private sources that can help you pay for grad school.
Grad PLUS Student Loans
Grad PLUS student loans, also known as Direct PLUS Loans, are another federal loan available through the Department of Education. Grad PLUS Loan requirements include that you must be a graduate student enrolled at least half-time at an eligible school. Your program must lead to a graduate degree, a professional degree, or a certificate. You meet the basic eligibility requirements for federal student aid and must not have an adverse credit history.
Under the Grad PLUS program, you are allowed to borrow the cost of attendance less any other financial aid. You don’t have to repay the loan until six months after you leave school or drop below half-time enrollment.
Interest rates on the loan are fixed. Any Direct Plus Loans disbursed after July 1, 2024, carry an interest rate of 9.08%.
To apply for federal student loans, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA®). Your school will use the information on this form to determine how much aid you are eligible to receive and present it to you in an offer letter. The offer letter will also give you information about grants and work-study programs you may be eligible for.
Recommended: Guide to Grad Plus Loans
Private Loans
Private student loans are available through banks, credit unions, and other private institutions. The individual lender will determine the amount you can borrow, terms of the loan, and the interest rate based in large part on financial factors such as your income and your credit score.
Private loans may allow you to borrow beyond the federal limits imposed on federal loans, or help you pick up the slack if you didn’t qualify for enough federal funding. However, they may lack protections afforded to federal student loans, and as a result, are generally thought of as a last-resort option when paying for grad school.
Personal Loans
Personal loans are also available through private lenders. Borrowed funds can be used for practically any purpose, which means they could potentially be used to cover expenses beyond tuition. As with private loans, the amount you can borrow will depend on your financial history or that of a cosigner.
How Much Can You Borrow for Graduate School?
The amount you can borrow for graduate school will depend on the types of loans that you use.
Grad PLUS student loans potentially allow you to borrow up to the full cost of attending your program, less any other financial aid.
However, unsubsidized loans limit your aggregate borrowing to $138,500, and that’s including any federal loans that you took out as an undergraduate.
Borrowers who are enrolled in certain health profession programs may be subject to a higher aggregate limit for Direct Subsidized Loans, and should talk to their school’s financial aid office.
Private student loans may limit borrowers to the cost of attendance. Policies will likely vary by lender.
Personal loans may allow you to borrow as much as $100,000 with no limitations on how the money must be spent. Again, specific policies may vary by lender.
Recommended: Graduate Student Loan Limits
The Takeaway
Federal subsidized loans are no longer available to graduate students. In the meantime, graduate students have other options, including federal unsubsidized loans, Grad PLUS Loans, loans from private lenders, or a combination of the above to help pay for school.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
FAQ
Does the U.S. Department of Education offer subsidized loans for graduate students as part of financial aid packages?
No, the U.S. Department of Education does not offer subsidized loans for graduate students. Subsidized loans are only available to eligible undergraduate students. Graduate students may still qualify for federal financial aid through options like Direct Unsubsidized Loans and Grad PLUS Loans, which begin accruing interest immediately.
Are Grad PLUS Loans subsidized loans?
Grad PLUS Loans are not subsidized, which means that interest accrues while the student is in school.
Can you pay off subsidized loans before graduating?
You can pay off federal subsidized loans before you graduate without paying any penalty. Note that federal subsidized loans do not accrue interest while you are in school.
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SoFi Private Student Loans
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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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