Best Types of Graduate Student Loans

When it comes to graduate student loans, the rules for graduate school are similar to the ones for college. Federal loans are your best option because you will get a better rate than you would with private loans. Here are the steps you need to take to get the best graduate school financial aid package possible:

Fill out the Free Application for Federal Student Aid (FAFSA): Send off the form at the beginning of the year when you plan to attend school. Even if your taxes are incomplete, fill the FAFSA out based on estimates because loans are given on a first-come, first-serve basis, and competition for graduate school funding is tighter than for undergrad programs, especially when economic times are tough.

Consider your federal loan options: You may be eligible for a government-sponsored Perkins Loan, in which you can borrow up to $8,000 a year at 5 percent interest. If you are eligible for a Stafford Loan, also from the government, you can borrow up to $20,500 a year, but only $8,500 of that can be subsidized, meaning the government pays your interest until you graduate and six months afterward. PLUS loans for graduate students are also an option.

Look into private loans to make up the difference: Private loans might offer good rates to match good credit. They are not government-backed, but you can turn to them if a Stafford or Perkins loan won't help you meet all your expenses. However, they will be more expensive over the long run.

Furthermore, if you are looking at private loans, start thinking about the potential return on your investment following graduate school. If your graduate program will make you a better job candidate and enable you to earn a higher salary, then a private loan might be worth it. But it might not be worth it if you are going to graduate school for in fields that don't pay as much, such as the humanities.