Attending graduate school can significantly enhance your career prospects, but it often comes with a hefty price tag. According to the most recent data from the National Center of Education Statistics, the average student debt for those who completed a graduate-level degree in 2020 was approximately $88,220.
Even government-backed graduate school loans can present challenges when it comes to repayment. Federal grad PLUS loans, designed for graduate and professional students to cover education expenses not met by other financial aid, carry a high interest rate of 9.08% for the 2024-25 academic year, compared to 6.53% for direct loans for undergraduates.
Managing these loans can be overwhelming, with monthly payments quickly becoming unmanageable. For instance, a hypothetical borrower with $88,220 in graduate school debt at a 9.08% interest rate would owe over $1,100 each month on a standard 10-year repayment plan.
Fortunately, there are options available for loan relief and forgiveness, particularly for those working in certain professions. Additionally, with interest rates expected to decrease, refinancing with a private lender could help expedite debt repayment or reduce monthly payments. If you’re struggling to meet your monthly graduate school loan obligations, consider implementing the following five strategies.
1. Adjust Your Repayment Plan
Federal loan borrowers are automatically enrolled in the standard 10-year repayment plan, which divides all debt—both undergraduate and graduate—into 120 equal payments, plus interest.
Alternative repayment plans could potentially reduce your monthly payments, especially if you have substantial debt relative to your income. Income-driven repayment (IDR) plans limit your monthly payments to 10% to 20% of your income for graduate loans. After 20 or 25 years, any remaining graduate school debt is forgiven. Currently, there are two primary IDR plans available to most graduate school borrowers:
Apart from the IDR program, the government offers two other alternative repayment plans that could lower your monthly payments:
-
Extended Repayment: This plan allows you to extend your repayment period up to 25 years if you owe at least $30,000. Payments can be fixed or gradually increase, resulting in potentially higher total interest but smaller monthly bills.
-
Graduated Repayment: With this plan, your monthly payments start low and increase every two years over a 10-year period.
If you’re unsure about which plan to select, contact your federal student loan servicer. They can guide you through the available options and help you choose a plan that reduces your monthly bills. To explore your repayment options, you can also utilize the loan simulator on studentaid.gov.
Unlike the government, private lenders offer fewer flexible repayment plans. To explore options for private graduate school debt, refer to your loan origination documents and reach out to your lender for clarification.
2. Enable Automatic Payments
One simple method to reduce your monthly payment is to enroll in automatic student loan payments. For federal student loans, autopay results in a 0.25 percentage point interest rate reduction. This means that a 9.08% interest rate would decrease to 8.83%. By enrolling in autopay for $88,220 worth of loans over a 10-year repayment period at the 9.08% rate, you could save approximately $1,430.
To set up autopay, log into your online federal student loan servicer account.
Some private lenders also offer autopay discounts. Refer to your loan origination documents for specific details.
3. Investigate Other Student Loan Forgiveness Programs
While IDR is a popular method for debt relief, there are numerous student loan forgiveness programs available to borrowers. If you have graduate debt, consider exploring these alternatives:
-
Public Service Loan Forgiveness: By working for the government or a nonprofit organization, you may qualify for loan forgiveness after 10 years. Various professions such as teachers, firefighters, nurses, and social workers are among those eligible. Under the Biden administration, the average PSLF recipient had approximately $73,150 in student debt forgiven, according to data from the Department of Education.
-
State and Local Student Loan Forgiveness Programs: Depending on your location and profession, your state or community might offer to forgive a portion of your student loan debt. For instance, Vermont provides up to $5,000 in student loan repayment assistance for recent graduates who work for a Vermont-based employer for at least two years. Many states also offer student loan repayment benefits for medical practitioners, ranging from therapists to dentists.
4. Seek Employment with Student Loan Benefits
An increasing number of employers offer student loan benefits to their employees. According to the Society of Human Resource Management’s 2024 Employee Benefits Survey, nearly half of organizations provide tuition assistance, and 9% offer student loan repayment benefits.
These benefits can vary, so it’s advisable to contact the HR department of your current or prospective employer to inquire about available options.
5. Evaluate Refinancing Opportunities
If you have a solid income and a credit score of at least in the high 600s, refinancing your graduate school loans could lead to a lower interest rate. A reduced rate can result in lower monthly payments and overall savings. However, refinancing federal student loans carries risks, as it may entail forfeiting flexible repayment options, potential loan forgiveness, and essential borrower protections.
Only consider refinancing federal graduate loans if you are certain that you won’t require these repayment features. For example, if you have a stable, well-paying job in the private sector and do not qualify for PSLF, refinancing to secure a lower interest rate may be the most effective approach to managing your monthly payments and fully paying off your debt.
In contrast, if you possess private graduate school loans, refinancing carries fewer risks since you do not have federal protections to lose. In such cases, refinancing for a lower rate is often a straightforward decision.
With the recent reduction in interest rates by the Federal Reserve, lenders may further decrease their student loan refinance rates. There is no limit to the number of times you can refinance, so if you already have private student loans, consider refinancing whenever you can secure a lower rate.
To begin the refinancing process, compare rates and terms offered by various lenders and utilize a student loan refinance calculator. Prioritize lenders that provide rate estimates with a soft credit check to avoid impacting your credit score.