Key Takeaways: Graduate students should start with Federal Direct Unsubsidized Loans due to lower costs and no credit requirements, but Federal Grad PLUS Loans or private student loans like College Ave’s graduate school loans can help cover remaining costs. With major federal changes ahead, understanding your options now is critical to avoid funding gaps later.
If you’re feeling stressed trying to make sense of all the new federal student loan changesyou’re not alone. Between rising costs and major federal changes, figuring out how to pay for graduate school in 2026 can feel like a full-time job. Graduate school is an exciting endeavorbut for many students, federal aid alone doesn’t quite cover the bill.
This guide will help you understand your options and feel confident in your loan choices by giving you a clear sidebyside breakdown, insights on when to use each option, and how private lenders like College Ave may fit into your plan.
What Is a Direct Unsubsidized Loan?
A Direct Unsubsidized Loan is a federal student loan available to both undergraduate and graduate/professional students. There’s no credit check required, making it an easy first step in covering your education costs. As a graduate student, you can borrow up to $20,500 per academic year, subject to federal borrowing limits.
For loans disbursed between July 1, 2025, and June 30, 2026, the fixed interest rate for graduate/professional students is 7.94%, with an origination fee of 1.057%.
Interest accrues while you’re in school, and you’re responsible for itif unpaid, it’s added to your loan balance (capitalized). You’ll be eligible for standard federal repayment plans and income-driven repayment, as well as Public Service Loan Forgiveness (PSLF), provided you meet the qualifications.
What Is a Grad PLUS Loan?
The Grad PLUS Loan is a federal loan designed for graduate and professional students who need to borrow beyond the Direct Unsubsidized limit. It requires a credit check and allows borrowing up to the full cost of attendance, including tuition, housing, and other academic expenses.
For the 2025-2026 academic year, the fixed interest rate is 8.94%, with an origination fee of 4.228% significantly higher than the unsubsidized loan.
Grad PLUS Loans offer similar deferment options while you’re enrolled in school and provide access to the same federal repayment programs as unsubsidized loans.
Important Update: Grad PLUS PhaseOut
Big changes are coming to federal student loans. Under the “One Big Beautiful Bill Act” signed into law in July 2025, Grad PLUS loans will be eliminated for new borrowers starting July 1, 2026. However, if you have already taken out a Grad PLUS loan before that date, you’re grandfathered in, meaning you may continue borrowing under current rules for up to three (3) additional academic years.
After July 1, 2026, new graduate students will be limited to Direct Unsubsidized Loans only, which will be subject to newly imposed borrowing caps: $20,500 annually and $100,000 total for most programs, and $50,000 annually and $200,000 total for professional degrees like law or medicine.
Should You Apply for a Grad PLUS Loan Before It’s Gone?
If you currently enrolled in grad school or expect to be starting a graduate program prior to July 1, 2026 and are concerned that the Grad PLUS Loan changes will affect you, it may be helpful to review the following questions to help you decide which borrowing option is best for you.
- Will I need more than $20,500/year to cover grad school costs?
Grad PLUS lets you borrow beyond the unsubsidized limit, including up to the full cost of attendance. - Will I still be in school after July 1, 2026?
If yes taking out a Grad PLUS loan before July 1, 2026 will allow you to have access to the Grad PLUS loan for three
years or until you complete your degree, whichever is sooner. - Would losing access to Grad PLUS limit my ability to finish my degree?
If you anticipate private loans won’t be an option (due to poor credit and/or lack of a creditworthy cosigner), taking out a Grad PLUS loan can ensure you have access to the funding you need to complete your degree.
Taking out a Grad PLUS Loan now to pay for graduate school (if it is disbursed before July 1, 2026), ensures your access to Grad PLUS loans for the remainder of your program or up to three years.
What Happens If You Wait Until After July 2026?
If applying for a Grad PLUS loan isn’t right for you now, know that you still have options to help with paying for grad school. This can include scholarships, Direct Unsubsidized loans, and private student loans from providers like College Ave that might offer lower interest rates than Grad PLUS loans.
Grad PLUS Loan vs Unsubsidized Loan: Key Differences
Interest Rate:
One of the most significant differences between Grad PLUS Loans and Unsubsidized Loans is the interest rate. Historically, Grad PLUS Loans have come with a higher interest rate compared to Direct Unsubsidized Loans. This means that borrowing through a Grad PLUS Loan will result in higher interest costs over the life of the loan compared to Unsubsidized Loans, making it a more expensive option for borrowers who can stick to the borrowing limits of Direct Unsubsidized Loans.
Fees:
The fees associated with each loan also differ. Grad PLUS loans generally have higher origination fees than Direct Unsubsidized Loans. These fees are deducted from the loan amount, which means you will actually receive less money than you borrow. Over time, these fees add up, making Grad PLUS Loans even more expensive in the long run.
Borrowing Limits:
In terms of borrowing limits, Grad PLUS Loans allow students to borrow up to the full cost of attendanceincluding tuition, fees, and living expenses. This flexibility is particularly useful for students attending programs with high costs. On the other hand, Direct Unsubsidized Loans have a $20,500 per year borrowing cap, which might not be enough to cover the total cost of attendance, especially at private or high-cost graduate programs.
Credit Check:
When applying for a Grad PLUS Loan, you will need to undergo a credit check. This requirement means that students with poor credit histories may face challenges qualifying, or they may need a cosigner or endorser to secure the loan. In contrast, Unsubsidized Loans do not require a credit check, making them more accessible to a broader range of students, regardless of their credit.
Loan Forgiveness Eligibility:
Both Grad PLUS Loans and Direct Unsubsidized Loans are eligible for federal loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF), for those who qualify. This means that if you work in a qualifying public service job, you may be able to have your remaining loan balance forgiven after meeting the requirements of the forgiveness program. This makes both loan options attractive for students pursuing careers in government or nonprofit sectors.
Grad Plus Loan vs Direct Unsubsidized Loan
| Grad Plus Loans | Direct Unsubsidized Loans |
|---|---|
| Higher interest rate | Lower interest rate |
| Higher origination fee | Lower origination fee |
| Unlimited borrowing (up to cost of attendance) | Limited borrowing ($20,500/year max) |
| Requires a credit check | No credit check |
| Eligible for loan forgiveness | Eligible for loan forgiveness |
| Being phase out as of July 1, 2026 | Still available to graduate borrowers |
Use Direct Unsubsidized Loans First for Grad School
When it comes to funding your graduate education, experts overwhelmingly agree on one key point: you should always exhaust your Direct Unsubsidized Loan eligibility before considering other loan options – including Grad PLUS or private student loans. There are a few reasons you should do this including:
- Lower interest rates and fees make them more affordable in the long run.
- No credit check means easier access.
- Federal repayment protections are the same as other federal loans, including income-based repayment plans and more.
When Grad PLUS Loans Make Sense
While Direct Unsubsidized Loans should always be your first option, Grad PLUS Loans can be a financial resource when federal unsubsidized funding falls short. Designed specifically for graduate and professional students, Grad PLUS Loans offer access to additional funding that makes them a valuable tool in certain scenarios. Here’s when they might be the right choice for you:
- Your cost of attendance exceeds $20,500 each year, and Direct Unsubsidized Loans aren’t enough.
- You need additional repayment flexibility not offered by private loans.
- You’ve maxed out your lifetime unsubsidized eligibility and need more aid to bridge the gap.
According to a recent survey by College Ave, 67% of students using student loans were unsure of their future monthly payments. This underscores the importance of fully understanding each loan’s long-term impact before committing.
Private Loans vs Grad PLUS Loans
Though Grad PLUS loans are still available for a short time, that doesn’t necessarily mean they are the right option for you. Depending on your unique circumstances and needs, you may benefit from choosing a private student loan for graduate school over a Grad PLUS loan.
When Private Loans Might Be a Better Option
One of the biggest advantages of private loans, particularly for borrowers with excellent credit or a qualified cosigner, is the potential to secure a lower interest rate than what’s available through the federal Grad PLUS Loan. As of the 2025-2026 academic year, Grad PLUS Loans have a fixed interest rate of 8.94%. Grad PLUS loans also incur a 4.228% origination fees. In contrast, private lenders like College Ave often offer competitive fixed or variable interest rates, with no origination fees.
If you’re a financially responsible borrower or you have someone willing to cosign who has a strong credit history, you could qualify for lower rates that reduce the total cost of borrowing over the life of your loan. This makes private loans a compelling option for students who:
- Have good credit and want to minimize interest costs
- Likely don’t need federal repayment protections
- Plan to repay quickly or refinance shortly after graduation
With the right credit profile, choosing a private student loan could potentially result in thousands of dollars in savings, both in interest and fees.
What You Give Up with Private Loans
Despite the potential cost savings, it’s important to understand what’s not included with private student loans. Unlike federal loans, private loans do not come with some of the benefits of federal student loans like:
- Income based repayment plans
- Public Service Loan Forgiveness
- Federal forbearance and deferment programs
While private loans can offer savings, they may not be the best option if you intend to take advantage of some of these benefits.
Why Choosing the Right Loan Matters More Than Ever
According to a College Ave survey, nearly 50% of students say financial concerns have impacted their academic performance, and the average graduate student borrows about $43,946. Picking the wrong loan can add up in costs and long-term stress, while making an informed decision early can provide financial peace of mind. Though parents often assist with education planning, 62% of students report they’ll be responsible for repaying their own loans. That means understanding each loan’s terms, costs, and protections is essential, not just for peace of mind now, but for financial freedom later.
Grad school is a major investment, and picking the right loan strategy will help you graduate with confidence, not financial regret. It’s likely you will need a combination of a few different options to pay for your education and that’s okay! Many students will pay for their education with several different options. Choose what is best for you and know that College Ave is here to help guide you through the process.
Whether you’re attending business school, medical school, law school, or another graduate program, College Ave offers the tools and flexibility to make financing your degree less stressful and more affordable. We’re committed to clear terms, fair rates, and real supportso you can borrow with confidence and focus on what matters most: your education and your future.
Take the next step toward your future. Apply for a student loan with College Ave today. Let us help you find a loan that fits your goals, your budget, and your future.
About the Survey
The College Ave survey was conducted by Barnes & Noble College InsightsTM. The national online survey of undergraduate students who attend a 4-year college or university at one of the campuses served by Barnes & Noble College had 1,060 respondents and was fielded in February – March 2025. Last year, Barnes & Noble College Insights conducted more than 50 research studies and 100+ survey polls of students, faculty and parents that interact with one of its more than 770+ campus bookstores across the nation.
