How to Manage Undergraduate Student Loans Before Grad School
Last Updated: May 14, 2026
BIG Ideas:
- If you enroll in a graduate program at least half-time, your undergraduate federal loans will automatically be placed into in-school deferment.
- During deferment, interest will continue to accrue unless you have federal subsidized loans.
- To help pay for graduate school, complete the FAFSA to explore federal financial aid options first.
Thinking about attending graduate school? You’re not alone. According to the National Center for Education Statistics1, there were over 3 million graduate students in U.S. colleges in Spring 2025.
And it’s easy to understand why.
A graduate degree can help increase your earning potential, expand your specialized knowledge and training, and create new career advancement opportunities.
But graduate school can come with a significant price tag. The average cost of a master’s degree is $62,8202, and in 2025, it was reported that the average federal student loan borrower graduates with about $39,075 in undergraduate student loan debt.3 Managing existing undergrad loans while taking on new graduate school debt can become a major financial commitment.
So, how does graduate school affect your undergraduate student loans? Here’s what you should know.
Managing Existing Undergrad Debt
If you have federal undergraduate student loans and enroll in graduate school at least half-time, your student loan payments will be automatically deferred. This means you won’t have to make payments on your undergraduate loans while in grad school at least half-time.
There is one important catch, though. Unless you have subsidized federal loans (loans where the government pays the interest while in school), interest will continue accruing during the deferment period. Over time, that can increase the total amount you pay.
You may still choose to make payments while in grad school. Even making interest-only payments can help reduce the overall cost of your loan.
Private student loans work differently. If you have loans through a private lender (like a bank, credit union, or nonprofit, like Brazos), deferment is not guaranteed. It will depend entirely on the lender’s policies.
Also remember: when unpaid interest is added to your loan balance after deferment ends, it capitalizes. That means future interest is charged on a higher principal balance, increasing the total cost of repayment.
Borrowing Additional Money for Graduate School
Once you understand how graduate school may impact your current loans, the next step is figuring out how to pay for your degree.
Federal student loans are the best place to start as they often provide more flexible repayment and borrower protections. It is recommended that you exhaust all federal loans before considering a private student loan. Graduate students generally have two primary federal loan options:
Direct Unsubsidized Loans
Direct Unsubsidized Loans typically offer lower interest rates than PLUS or private loans. However, borrowing limits apply:
- Up to $20,500 per academic year
- A combined undergraduate and graduate aggregate limit of $138,500
- No more than $65,500 of that total can be subsidized loans from undergraduate study
Some health profession programs may qualify for higher borrowing limits.
Direct PLUS Loans
If you reach your unsubsidized loan limits, you may qualify for a Direct PLUS Loan through the federal government. With this type of loan, you can borrow up to your school’s cost of attendance, minus other financial aid received.
However, Direct PLUS Loans require a credit check and typically carry higher interest rates and fees.
Private Student Loans
You may also consider private student loans through a private lender, like banks, credit unions, or nonprofit organizations like Brazos. Approval is generally based on your income and credit profile, and rates and terms vary by lender.
Before borrowing privately, compare lenders carefully to find the best rates, repayment options, and borrower benefits.
Steps to Take Before You Enroll in Grad School
If you’re seriously considering grad school, here are a few important things you need to know:
- Review all your current student loans and understand how much you owe.
- Determine whether your federal loans are subsidized or unsubsidized.
- If you have private loans, contact your private lender to ask if they offer in-school deferment.
- Complete the Free Application for Federal Student Aid (FAFSA) to maximize federal financial aid opportunities first.
- Compare financial aid packages carefully before choosing a school.
Choose Wisely
There’s no question, a graduate degree can open doors to new career opportunities and potentially increase your income, but it’s still a major financial investment.
Before borrowing, consider your future earning potential, expected monthly payments, and long-term financial goals. Taking on too much debt could affect other life goals later on, like buying a home, saving for retirement, or starting a family.
Brazos is Here to Make Your Graduate Degree Possible
For more than 40 years, Brazos Higher Education has helped make education more affordable for students. As a Texas non-profit, Brazos offers competitive rates and no fees on private student loans to help students pay for graduate school.
Contact us to learn more about graduate student loan options and see how Brazos can help finance your next step.
1 Bryant, J., & Welding, L. (2025, August 1). U.S. college enrollment: Trends and statistics: Bestcolleges. Bestcolleges.com. https://www.bestcolleges.com/research/college-enrollment-statistics/
2 Hanson, Melanie. “Average Cost of a Master’s Degree” EducationData.org, 2026-05-12, https://educationdata.org/average-cost-of-a-masters-degree
3 Hanson, Melanie. “Average Student Loan Debt” EducationData.org, 2025-08-15, https://educationdata.org/average-student-loan-debt
