4 Student Loan Questions to Ask Before Grad School

Any decision to pursue a post-graduate degree is packed with considerations — financial and otherwise. Will the degree improve your career outlook? Will it be worth the money? Should you enroll in a full- or part-time program?

These are important questions to mull over, especially for those with existing student debt. The average graduate of the Class of 2019 has $29,900 in student loan debt — a hefty burden on its own, even before factoring in an advanced degree.

If you have undergraduate loans and you’re thinking of applying to grad school, there are options available to help manage your existing debt. The following questions can help you make the right financial decisions for you.

1. Should I repay my undergrad loans while I’m in grad school?

Perhaps you want to do something to start repaying your undergrad loans but can’t afford to make the full payments. That’s OK, you have three options.

First, you could make interest-only payments. These are more affordable and keep your principal balance steady. However, paying only interest will inevitably lengthen the life of your loan.

Second, you can apply for a graduated or extended repayment plan to continue paying down your loans at a minimal cost. By spreading your monthly payments beyond the standard 10-year plan to 20-25 years, you’re paying at least something toward your loans while you finish grad school, but these payments are smaller since the loan is spread over a longer term.

Third, grad students can also apply for federally-sponsored income-driven repayment plans. These programs — such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income Contingent Repayment (ICR) — let you pay a small percentage of your income on your federal student loans for 20-25 years before the remaining loan balances are forgiven. Remember, even if you are approved for an income-driven plan, your payments can increase or decrease from year to year based on changes in income and/or family size.

2. Should I defer my student loans?

You may decide you want to put off paying back your undergrad loans until after grad school. If that’s the case, full-time grad students may be able to defer repayment. To qualify for deferment, you must apply while you’re enrolled in an approved graduate program. For federal loans, the federal government may pay interest on your loans if you have Direct Subsidized Loans, FFEL Loans, or Perkins Loans.

However, not all loans qualify for subsidized deferment. If you don’t qualify, your loans will continue to accrue interest throughout deferment, and those charges could be costly. For example, if you have $35,000 in student loans with a 5.7% APR and you defer for just 12 months, you’ll rack up $1,995 in interest charges during that time.

3. Is student loan refinancing the right answer?

You also have the option to refinance all or a portion of your student loans. This option could combine all your loans into one, which could even result in a better interest rate and more generous loan terms.

Before you consider this option, compare interest rates and total loan costs, and get to know the differences between private and federal loans.

4. Am I borrowing too much?

Take a look at your undergrad loans to get an idea of what your monthly payment might be like during grad school. An important thing to remember is that interest on your grad school loan starts accruing right away — even while you're still in school. So the longer you’re in grad school, the more interest charges you’ll have waiting for you when you start repayment.

This is as good a reason as any to keep borrowing at a minimum during grad school. It might even be a good idea to work a part-time job to pay a portion of your grad school expenses as you go.

What to remember

While debt is a major factor, it should not be the only factor influencing your decision to pursue an advanced degree. It’s just as important to think about the impact on your career, potential earnings, your family, and other areas of your personal life.

But for those who decide to pursue grad studies in spite of student debt, there are options that can lessen the burden and help reach repayment sooner. It all comes down to picking the right game plan.

Ready to take the next step?

Citizens is here to help you navigate your student lending options for today and the future. Make sure to visit our Student Lending page — we’re on chat.