Paying for college often requires some form of student borrowing, but not all student loans work the same way. One of the biggest distinctions in the student loan system is between undergraduate and graduate borrowing. While both types of students may rely on federal and private loans, the rules, limits, and interest rates can vary significantly depending on your academic level.
Understanding these differences is especially important for student planning to move from an undergraduate program into graduate or professional school. Policy changes, borrowing caps, and eligibility requirements can dramatically alter how much aid you can access and how much debt you may be able to carry. With recent changes eliminating federal Grad PLUS loans starting in the 2026-27 academic year, graduate students will face a different borrowing landscape than in the past.
What follows is a comprehensive look at grad vs. undergrad loans and how students can plan strategically for higher education costs.
Table of Contents
Key Points
• Undergraduate and graduate student loans differ in interest rates, borrowing limits, and available loan types.
• Federal interest rates are lower for undergraduate students than for graduate students.
• Starting July 2026, federal Grad PLUS loans will be eliminated, significantly limiting graduate students’ federal borrowing options.
• Graduate students are always considered financially independent for federal aid purposes, unlike undergraduate students who may be dependent.
• Private student loans are an option for both groups, but undergraduates generally need a cosigner.
What Does Undergraduate Mean?
An undergraduate student is typically someone pursuing their first college degree beyond high school. This includes associate degrees (usually two years) and bachelor’s degrees (generally four years).
Undergraduates typically attend school full-time, though some choose to enroll part-time. Many are considered financially dependent on their parents, particularly for federal finance aid purposes. This dependency status influences how much aid they can receive and which loans are available to them.
đź’ˇ Quick Tip: Make no payments on SoFi private student loans for six months after graduation.
What Does Graduate Mean?
A graduate student is someone who has already earned a bachelor’s degree and is pursuing advanced education, such as a master’s degree, doctoral degree, or professional degree (such as law or medicine). Graduate programs are typically more specialized and academically demanding than undergraduate programs. They also tend to be more expensive, though scholarships and assistantships can offset costs.
Differences Between Undergraduate and Graduate Programs
Undergraduate and graduate programs not only differ academically, but also financially. Below are key differences between student loans for undergraduates and graduates.
1. Dependency Status
One of the biggest differences between undergraduate loans and loans for graduate students is dependency status. Undergraduate students may be classified as either dependent or independent, depending on factors such as age, marital status, and whether they have dependents of their own.
Dependent undergraduates must report parent income and assets on the Free Application for Federal Student Aid (FAFSA®), which can affect their eligibility for need-based aid. Independent undergraduates do not need to include parental financial information.
Graduate students, by contrast, are always considered independent students for federal aid purposes. This means they do not need to provide parents’ financial information, and only the student’s income and assets are considered when determining eligibility.
2. Interest Rates on Federal Student Loans
Federal student loan interest rates differ depending on whether the borrower is an undergraduate or graduate student. Undergraduate students qualify for lower interest rates on federal loans than graduate students. For loans disbursed between July 1, 2025 and July 1, 2026, undergraduates borrowers pay 6.39% on Direct Subsidized Loans and Direct Unsubsidized Loans, whereas graduate or professional students pay 7.94% for Direct Unsubsidized Loans (they don’t have access to Unsubsidized Loans).
Because graduate students no longer qualify for subsidized loans, interest begins accruing immediately upon disbursement, increasing the total cost of borrowing.
3. Loan Type
Undergraduate students have access to both Direct Subsidized and Direct Unsubsidized Loans. Subsidized loans are especially valuable because the federal government covers the interest while the student is enrolled at least half-time and for six months post graduation.
Graduate students, on the other hand, are only eligible for Direct Unsubsidized Loans. Starting July 1, 2026, federal Grad PLUS loans will no longer be available, removing a major borrowing option that previously allowed graduate students to cover remaining education costs beyond unsubsidized loans loan limits. Borrowers who already received a Grad PLUS loan before June 30, 2026, however, can continue borrowing under current terms through the 2028-29 academic year.
4. Borrowing Limits
Borrowing limits are another major difference between undergraduate vs. graduate school loans. Undergraduate students face relatively low annual lifetime loan caps, especially if they are classified as dependent students. These limits are designed to prevent excessive debt early in a student’s academic career.
Undergraduate students can borrow between $5,500 and $12,500 annually in federal Direct Subsidized/Unsubsidized Loans, depending on their year in school and dependency status, with total aggregate limits of $31,000 for dependent students and $57,500 for independent students.
Graduate students can access $20,500 per year in Unsubsidized Loans with an aggregate limit of $138,500 (including all federal loans received for undergraduate study). Effective July 1, 2026, students in graduate programs (master’s, PhD, etc.) will have the same annual borrowing limit ($20,500) but face an aggregate limit of $100,000 (not including loans borrowed as an undergraduate); students in professional programs (medical, dental, law, pharmacy, etc.) will have a $50,000 annual borrowing limit and a $200,000 lifetime borrowing limit (not including loans borrowed as an undergraduate).
Without access to Grad PLUS loans (which cover the full cost of attendance), new graduate student borrowers may find that federal loans alone are not sufficient to cover the full cost of attendance, particularly at more expensive private universities and professional schools.
Recommended: Student Loan Payment Calculator
5. Interest Rates on Private Student Loans
Private student loan interest rates are determined by the lender and are based on factors such as credit score, income, and debt-to-income ratio. Undergraduate students often need a cosigner — typically a parent — to qualify for competitive private loan rates due to limited credit history. Rates on private student loans can sometimes be lower than federal rates, but you generally need excellent credit to qualify for the lowest rates.
Graduate students may qualify for private graduate loans on their own, especially if they have established credit or stable income.
Interest starts accruing immediately after loan disbursement, and you may have to start making payments while you’re still in school (policies vary by lender). In addition, private student loans lack the same borrower protections that come with federal student loans, such as income-driven repayment and federal forgiveness programs.
6. Student Loan Refinancing
Student loan refinancing allows borrowers to replace one or more existing loans with a new loan, ideally at a lower interest rate. Both undergraduate and graduate borrowers can refinance. Eligibility and terms depend on lenders’ criteria, which may include credit, income, and loan details.
Undergraduates may choose to refinance after graduation once they have steady income and good credit. Graduate borrowers, who often accumulate larger balances, may refinance to reduce monthly payments or interest costs. However, refinancing federal loans into private loans eliminates access to federal benefits, which may be particularly risky for graduate student borrowers with high debt and uncertain income.
7. Federal Grants
Federal grants are far more accessible to undergraduate students than to graduate students. Programs like the Pell Grant are designed specifically for undergraduates with significant financial need and do not require repayment.
Graduate students generally do not qualify for federal grants, with limited exceptions for specific programs or fields of study. As a result, graduate funding relies more heavily on loans, assistantships, and employer support.
8. Eligibility for Income-Driven Repayment Plans
Both undergraduate and graduate federal student loan borrowers are eligible for income-driven repayment (IDR), which caps monthly payments based on income and family size. An income-driven plan also extends your loan term to 20 or 25 years. If your federal student loans aren’t fully repaid at the end of the repayment period, any remaining loan balance may be forgiven.
There are currently three IDR plans, but borrowers who take out loans on or after July 1, 2026 will only have access to one income-based repayment plan — the Repayment Assistance Plan (RAP). Under RAP, monthly payments will be calculated as a percentage of the borrower’s adjusted gross income minus $50 per month per dependent. RAP provides loan forgiveness after 30 years of qualifying payments.
While IDR plans can provide relief, they may result in higher total interest costs over time. Borrowers should carefully weigh the long-term implications, especially if they expect income growth after completing a graduate degree.
9. Availability of Parent PLUS vs. Grad PLUS Loans
Another important distinction is who can take out loans on a student’s behalf. Parents of dependent undergraduate students may access Parent PLUS loans to help cover education costs not met by other aid. Parent PLUS loans are not available to parents of dependent graduate students.
Graduate students previously had access to Grad PLUS loans, which allowed them to borrow up to the full cost of attendance. However, Grad PLUS loans will no longer be available starting on July 1, 2026. This policy change significantly limits federal borrowing options for graduate and professional students and increases the importance of alternative funding strategies.
đź’ˇ Quick Tip: Parents and sponsors with strong credit and income may find more-competitive rates on no-fees-required private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.
Thinking Outside the Box: Paying for Graduate School
With fewer federal loan options available, graduate students may need to be more creative in financing their education.
Becoming a Teaching or Research Assistant
Many graduate programs offer teaching assistantships (TAs) or research assistantships. These positions often provide an hourly or monthly salary, tuition waiver, and/or stipend. In exchange, students assist with teaching undergraduate courses or conducting research alongside faculty members.
Assistantships can significantly reduce the need for student loans while also providing valuable academic and professional experience.
Working Full-Time as a Grad Student
Some students choose to work full-time while pursuing graduate school part-time or through flexible programs. While demanding, this approach allows students to pay tuition as they go and minimize borrowing.
Online and evening programs have made this option more feasible, particularly for working professionals seeking career advancement rather than a complete career change.
Finding Scholarships
Scholarships are not just for undergraduates. Many organizations, professional associations, and universities offer scholarships specifically for graduate students. These awards may be merit-based, need-based, or tied to a specific field of study.
Although scholarships may not cover the full cost of graduate school, stacking multiple smaller awards can significantly reduce a student’s dependence on loans.
Utilizing Employer Tuition Assistance Programs
Employer tuition assistance is an often-overlooked benefit. Many employers offer tuition reimbursement or direct tuition payments for employees pursuing advanced degrees related to their job.
This benefit can significantly offset graduate school costs and may come with the added advantage of continued employment and income while studying.
Attending School Part-Time to Reduce Debt Load
Attending graduate school part-time can lower annual tuition costs and allow students to spread expenses over a longer period. While it may extend the time to degree completion, it can reduce reliance on loans and improve long-term financial stability.
The Takeaway
Undergraduate and graduate student loans differ in key ways, including loan types, interest rates, and borrowing limits. Undergraduate students generally benefit from lower interest rates, access to subsidized loans, and federal grants, while graduate students often face higher costs and fewer aid options.
With the elimination of federal Grad PLUS loans beginning in July 2026, graduate students will need to plan even more carefully. Understanding these differences — and exploring alternatives like assistantships, employer benefits, and scholarships — can help students make informed decisions and avoid unnecessary debt.
Whether you’re just starting college or considering graduate school, knowing how student loans change at each stage can help you plan more effectively for the years ahead.
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
Do graduate students borrow more money than undergraduate students?
Generally, yes. Graduate and professional students tend to borrow significantly more than undergraduates. This is due to several factors, including higher tuition costs for advanced degrees, the fact that graduate students typically have fewer grant options, and higher federal borrowing limits. While undergraduate federal aggregate limits are relatively low ($31,000 to $57,500), graduate students have much higher limits on federal Unsubsidized Loans, and previously had access to Grad PLUS loans to cover the full cost of attendance.
Do graduate student loans have higher interest rates?
Yes, federal graduate student loans have higher interest rates than federal undergraduate student loans. For loans disbursed between July 1, 2025 and July 1, 2026, the rate for federal Direct Unsubsidized Loans for graduate students is 7.94%, while the rate for undergraduates is 6.39% for both subsidized and unsubsidized loans. Private loan rates vary based on creditworthiness, but some lenders may charge higher rates for graduate-level borrowing.
What is considered an undergraduate loan?
Undergraduate federal loans are financial aid options available to students pursuing an associate’s or bachelor’s degree. They primarily consist of federal Direct Subsidized and Direct Unsubsidized Loans, which offer lower interest rates and lower annual and aggregate borrowing limits than graduate loans. Private student loans are also available for undergraduates, often requiring a cosigner due to the borrower’s limited credit history.
Can graduate students get federal grants?
Generally, no. Federal grants, like the Pell Grant, are largely reserved for undergraduate students who demonstrate significant financial need. Graduate students rarely qualify for federal grants, with some exceptions for specific fields of study (like education). Graduate students typically rely on federal and private loans, as well as institutional funding like scholarships, fellowships, and assistantships, to finance their advanced education.
Are graduate student loans eligible for forgiveness programs?
Yes, graduate student federal loans are eligible for forgiveness programs, primarily through Income-Driven Repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). IDR plans cap your monthly payments based on income and family size, with any remaining balance forgiven after 20, 25, or 30 years of qualifying payments. PSLF is an option for borrowers working full-time for a qualifying government or nonprofit organization, offering forgiveness after 10 years of payments. Refinancing federal loans into private loans, however, eliminates access to these federal forgiveness options.
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