The average student loan debt has continued to rise over the past decade and for some, the financial strain of repayments may limit their plans after undergraduate education.
With many people carrying tens of thousands of dollars in undergraduate loan debt, enrolling in a graduate program becomes an even more weighty financial decision. It may cost as much, if not more, than their undergraduate education.
Accrued student debt can discourage some from pursuing graduate studies, but many grad students still enroll with existing undergraduate loan debt.
Here are some things to consider as you weigh student loan debt and your decision to go to graduate school.
[Read: Best Student Loans for Graduate School]
In-School Deferment
Students who have federal loans going into graduate school will not have to worry about repayment plans because those loans enter in-school deferment. This deferment extends to students enrolled at least half-time in a graduate program, according to Federal Student Aid.
“A school’s registrar’s office reports to the National Student Clearinghouse once somebody is enrolled,” says Ellie Bruecker, director of research at The Institute for College Access & Success. “So once you are enrolled in graduate school, your undergraduate loans are placed in deferment automatically.”
Automatic deferment only extends to federal student loans. Deferment options vary for private student loans, taken from a bank or financial institution.
“Those terms (for private loans) would depend on where you borrowed from and you have to check with those institutions,” Bruecker says, adding, “private student loans are much less likely to offer in-school deferments.”
[Read: Best Private Student Loans.]
Borrowing Limits And Interest Rates in Graduate School
It’s important to be aware of borrowing limits on federal loans. There are major changes coming to the federal student loan program on July 1, especially for new graduate students.
While graduate students used to be able to take out Graduate PLUS loans up to the cost of attendance for their particular program, Grad PLUS loans have been eliminated for new borrowers and that option is off the table.
Instead, graduate students are limited to direct unsubsidized loans, though at a higher interest rate than what they might have paid as an undergraduate. For the 2025-2026 school year, graduate or professional borrowers had an interest rate of 7.94% for direct loans (compared to 6.39% for undergraduate borrowers). Rates for the 2026-2027 school year will be announced later in 2026.
For most graduate students there is an annual cap of $20,500 for direct unsubsidized loans, and a graduate aggregate limit of $100,000. Professional students in careers like medicine and law have higher caps: $50,000 annually and $200,000 in aggregate.
When you finish grad school and your undergraduate federal loan deferment ends, “you are put back into that same repayment, or apply for a different repayment plan,” Bruecker explains. “Now you are working with the grand total in debt you borrowed and graduate school is thrown on top of that.”
[Read: Best Student Loan Refinance Lenders.]
Loan-Free Alternatives
Loans aren’t the only way to pay for your graduate degree.
“Many (grad students) may use personal savings they have earned between undergraduate and graduate studies, so that’s always an option,” says Alex Ricci, vice president of government affairs and communications at the national trade association Education Finance Council.
Other options include scholarships, fellowships and assistantships, which are usually merit-based, Ricci says.
Federal work-study is another option; under this type of need-based financial aid, students earn money working eligible part-time jobs, helping to reduce potential loan debt.
Additionally, some employers offer tuition assistance or reimbursement programs.
Consider graduate schools that offer programs to reduce student loan debt. Ashley Herndon, a graduate personnel and finance coordinator at the University of Oklahoma Graduate College, chose a school that would help reduce her loan burden.
“The (undergraduate) student loan debt I incurred was more because I went out of state, even if I had some tuition help,” Herndon explains. “It was this dark cloud looming over me after I graduated college.”
Today, she is a doctoral student in OU’s school of education, using OU’s staff tuition waiver program, which offers full-time employees tuition benefits for classes taken at the university.
The waiver covers half her tuition for up to six credits a semester. The rest is paid through federal student loans, Herndon says.
However you pay for graduate school, be aware that your undergraduate debt can creep up on you if you’re not careful. Deferment is only guaranteed for federal student loans; other loans may still require payment regardless of enrollment.
Like many other students, Herndon believes grad school is worth it despite the burden of additional student loan debt.
“Graduate school is not something you take lightly,” she says. “It is born out of passion. It is born out of need. It is born out of wanting to contribute to the public good. Education and college is a public good.”
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How Existing Student Loan Debt Affects Graduate School Prospects originally appeared on usnews.com
Update 02/27/26: This article was published at an earlier date and has been updated with new information.