Loans 101: funding your doctoral degree

October 25, 2019

What should you know about taking out loans to finance a doctoral degree?

Alana John, Capella University Graduate Financial Aid Counselor, provides an overview of the core considerations.


The first step is filling out a Free Application for Federal Student Aid (FAFSA) form. The results are provided to your school, which uses them to draw up a financial aid plan that may include loans.

Once the FAFSA is done, there are several types of loans with differing eligibility thresholds. Some loans require a credit check, while others don’t. Some require you to be at least a half-time student, while others don’t specify. There are loans that look specifically at individual financial needs and other loans that don’t. What you’re eligible for will depend on these factors.

What can you afford?

Understand that once a university has received your FAFSA information and put together a financial aid offer, the university is required by the Department of Education to offer the maximum possible loan amount. That doesn’t mean you should automatically accept it. If you’re working part-time or have other sources of funds that you don’t have to pay back, only accept as much of a loan as you actually need for that quarter. Many loans are capped on a lifetime basis, so if your degree takes longer than you think it will, you might run out of loans to use. Using current income or savings will reduce the amount you need to borrow (and have to pay back once you’ve graduated).

Non-loan funding options vs. loan-funding options

Before committing to any loan, look for any and all possible funding options that don’t require repayment. That includes, but is not limited to, scholarships, employer-paid tuition assistance programs, Veterans Administration funding for current and past military and some of their family members, affiliate programs, and work-study. Any of these could possibly reduce your overall tuition burden without contributing to debt you’ll have to pay back later.

Doctoral loan types: federal, grad PLUS, and private

Federal loans are unsubsidized and don’t involve demonstrating financial need. You have the option of paying the interest during all periods of the loan (including while attending school). But if you choose not to do so, the interest will be added to the principal of your loan and accrue additional interest, so paying the interest as you go along will save you money in the long run. (If you’ve heard of federal subsidized loans for demonstrated financial need, be aware that those are only for undergraduates.)

Grad PLUS loans are offered to graduate students, but be aware that the lender (the U.S. Department of Education) requires a credit check, and the interest rate is higher than on unsubsidized federal loans.

Private loans are available from banks, credit unions, state agencies, schools, and other organizations. Most will require a credit check, and interest rates are variable and, in some cases, lower than federal loans. Unlike unsubsidized federal loans and Grad PLUS loans, private loans will require you to make payments while you’re in school rather than deferring until the degree is complete.

Do your homework

Because there are multiple options for graduate school loans, each with its own set of requirements, it’s important that you research before committing to a loan program. Look at interest rates, deferral, repayment schedule, and the general terms and conditions before signing on the dotted line.

Learn more about options for funding your doctorate.


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