Does the FAFSA cover higher education and how does it work?
- The FAFSA is used to provide financial aid for graduate studies as well as undergraduate studies.
- The interest rates on graduate student loans are higher than those for undergraduate students.
- Graduate students can take out unsubsidized loans and Direct PLUS loans, but not subsidized loans.
- Learn more about Insider’s student loan coverage here.
If you applied for financial aid as an undergraduate student, you may already be familiar with the free Federal Student Aid app. This form, commonly referred to as FAFSA, is used to determine your eligibility for financial aid that includes scholarships, work-study, and loans. The FAFSA covers financial aid for graduate studies as well as for undergraduate studies.
Filing the FAFSA as a graduate student is similar to completing it as an undergraduate student. You will need tax returns, your bank account information, and details of all investments. It will take you about 30 minutes and you can select up to 10 schools to send your FAFSA to.
You can find a more in-depth review of how to apply for the FAFSA here.
How is graduate financial aid different from undergraduate aid?
Graduate students are considered independent, compared to most undergraduates who are considered dependents of their parents. Even if you still live with your parents, you are considered an independent student if you are working towards a graduate degree or a professional degree. This means that you are going to file the FAFSA using only your financial information, not your parents’ information.
The interest rates on graduate loans are higher than on undergraduate loans. Unsubsidized loans for graduate students have an interest rate of 5.28%, while undergraduates get a rate of 3.73% on unsubsidized and subsidized loans.
Graduate students are also not eligible for Pell Grants, which are freebies given to undergraduates with significant financial need. Students who obtain their post-baccalaureate teacher certification are the exception to this rule and may sometimes be eligible for a Pell Grant.
Graduate students may be eligible for Federal Fulbright Grants, Iraq and Afghanistan Service Grants, and the College and Higher Education Teacher Training Assistance Grant (TEACH). Graduate students are also eligible for the federal work-study program, a program that offers part-time positions to students in financial need to earn money for their academic expenses.
You may want to pay off the interest on the loans while you are in school to keep it from capitalizing at the end of your grace period. Interest is capitalized when your unpaid interest is added to the principal of your loan at the end of a non-payment period.
What types of loans can graduate students take out?
Graduate students cannot take out subsidized loans like undergraduates can, only unsubsidized loans and Direct PLUS loans. Interest starts accruing on these loans as soon as they are disbursed. Here is a quick overview of the two types of loans:
- Direct unsubsidized loans: Eligibility does not depend on financial need. Interest will accrue on unsubsidized direct loans while you are in school, during your grace period, or during a deferral period, but you will not be required to pay this interest until your repayment period begins. Graduate and professional students can borrow up to $ 20,500 in direct unsubsidized loans per year.
- Direct PLUS loans: You can obtain a Direct PLUS Loan to pay for expenses not covered by other financial aid offered by your school. These loans require a credit check. The interest rate for the 2021-22 school year is fixed at 6.28%, and the maximum loan amount is based on the cost of attendance minus any other financial assistance you get.
You can take out more loans as a graduate student than as an undergraduate, which can make it easier to attend a more expensive school. That said, be careful how much you borrow and make sure you have a plan in place to pay off your loans.
The financial aid process is very similar for graduate and undergraduate students. Both types of students are required to complete the FAFSA to qualify for financial aid, although undergraduates are eligible for loan options at lower rates.