Douglas Olsen
When it comes to graduate student loans, there are a few options available to postpone payments until after graduation. For those enrolled at least half-time, federal student loan payments can be deferred, including parent PLUS loans. However, interest will accrue on graduate school loans during this time, increasing the amount owed. Alternatively, grad students can make payments towards their undergraduate loans during school or apply for a graduated or extended repayment plan, spreading monthly payments over a longer term. Another option is federally-sponsored income-driven repayment plans, which allow for small payments relative to income. While there are strategies to delay repayment, interest accrues from the outset, making it important to keep borrowing to a minimum and explore part-time work to offset expenses.
| Characteristics | Values |
|---|---|
| Do you have to pay student loans in graduate school? | You typically don't have to pay student loans in graduate school. |
| Can you defer payments on federal loans? | Yes, if you're enrolled at least half-time. |
| What about private student loans? | You can also defer most private student loans if you're enrolled at least half-time. |
| What happens to the interest on graduate school loans during a deferment? | Interest will accrue on all graduate school loans during a deferment, increasing the amount you owe. |
| Are there any subsidized loans for graduate school? | No. |
| Can grad students make payments toward their undergrad loans during school? | Yes. |
| Can grad students defer payments on their undergrad loans until after graduation? | Yes. |
| Can grad students apply for a graduated or extended repayment plan? | Yes, by spreading monthly payments beyond the standard 10-year plan to 20-25 years. |
| Can grad students apply for federally-sponsored income-driven repayment plans? | Yes, through programs such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income Contingent Repayment (ICR). |
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What You'll Learn
Deferring federal student loan payments
To be eligible for an in-school deferment, you must be enrolled at least half-time in a graduate program. If you are enrolled in an eligible full-time graduate fellowship, you may also qualify for a deferment. In the case of federal loans, all loan payments, including parent PLUS loans, can be deferred if you meet the half-time enrollment requirement.
For private student loans, the availability of a deferment option varies among lenders. It is advisable to contact your loan servicer as early as possible to explore this option and understand the associated terms and fees.
When applying for a deferment, you must continue making loan payments until you receive official notification of approval. You can request a deferment for a specified period, typically up to 48 months for graduate student loans, and you can reapply every 12 months until you reach the maximum allowed deferment period.
It is worth noting that deferment should be carefully considered, as the longer you delay payments, the larger your overall balance will become due to accruing interest.
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Interest accrual on graduate loans
You typically don't have to start paying off your student loans while you're in graduate school. Federal student loans and most private student loans can be deferred if you're enrolled at least half-time. However, interest will accrue on all graduate school loans during this period, increasing the amount you owe.
Interest accrues on graduate loans from the day the loan is disbursed to you or your school. It continues to accrue until the loan is paid off. The interest rate for your loan is listed in your disclosure documents and billing statement. Both federal and private student loans may be eligible for a tax deduction.
If you have chosen the interest repayment option for your student loans, your interest shouldn't capitalize, as you've paid it as it accrued throughout school. However, if you're making fixed payments or deferring payments until after graduation, your unpaid interest may capitalize at certain points in time, such as the end of your separation or grace period or the end of your graduate school deferment. Capitalization means that the unpaid interest is added to your loan's current principal, and from that point, your interest is calculated on this new amount, increasing your total loan cost.
To keep your total loan cost down, it's advisable to make small additional payments or pay all or some of your accrued interest before your separation or grace period ends and interest capitalizes. You can make these payments through auto-debit, online, by phone, mail, or third-party bill-pay services.
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Undergraduate loan refinancing
Typically, you do not have to pay student loans while in graduate school. You can defer payments on federal loans and most private student loans if you're enrolled at least half-time. However, interest will accrue on all graduate school loans and any unsubsidized undergraduate loans during a deferment, increasing the amount you owe. Therefore, it is important to consider your options before enrolling in graduate school.
Refinancing undergraduate loans can be a great way to save money and simplify your debt. When you refinance, you replace your existing loan with a new loan from a private lender, ideally at a lower interest rate. This can help you reduce your monthly payments and pay off your debt faster.
To qualify for refinancing, most lenders require a good credit score, typically in the high 600s, and a steady income. If your credit and income have improved since you originally borrowed, you may qualify for a lower interest rate, which can result in significant savings.
It's important to note that refinancing federal loans to private loans has some risks. You will lose access to federal loan benefits, such as income-driven repayment plans and loan forgiveness. Therefore, it is essential to consider your financial situation and goals before deciding to refinance.
There are several reputable companies that offer student loan refinancing, such as SoFi, Credible, and NerdWallet. These companies can help you compare interest rates, loan terms, and repayment options to find the best option for your financial needs.
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In-school deferment eligibility
In-school deferment allows you to temporarily postpone or reduce payments on your student loan while you are enrolled in school or during an internship, law clerkship, fellowship, or residency. This applies to both undergraduate and graduate student loans. To be eligible for in-school deferment, you must be enrolled at least half-time at an eligible college or vocational school. Your school can verify your enrollment automatically if it is listed at studentclearinghouse.org, or you can request a deferment period yourself by submitting an In-School Deferment Request Form. You can request a deferment of up to 48 months for a graduate student loan, in increments of up to 12 months at a time, and you can re-request a deferment every 12 months until you reach your maximum allowed months of deferment.
It is important to note that interest will continue to accrue on your loan during the deferment period, which will increase your Total Loan Cost. Once your request for deferment is approved, your loan will return to the repayment option you initially chose (interest, fixed, or deferred). This means that if you were paying interest-only or fixed payments while in school, you will continue to make those payments throughout the deferment period.
In-school deferment is also available for parents who take out PLUS loans to help their children with the cost of school. Parents can apply for deferment while their child is enrolled at least half-time at an eligible college or career school, as well as for six months after they graduate, leave school, or drop below half-time status. However, parent PLUS borrower deferment is not automatic, and parents must apply for it separately.
Additionally, if you are enrolled in an approved graduate fellowship program, you may qualify for deferment while you are in the program. This typically applies to doctoral students, but some master's degree students may also be eligible.
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Federal income-driven repayment plans
Generally, you don't have to pay student loans while in graduate school. You can defer payments on federal loans and most private student loans if you're enrolled at least half-time. However, interest will accrue on all graduate school loans and any unsubsidized undergraduate loans during this deferment period, increasing the amount you owe over time.
Now, let's focus on Federal income-driven repayment plans:
The Trump administration's budget reconciliation bill, enacted in 2025, significantly altered the income-driven repayment system. As per the bill, future borrowers taking out federal student loans after July 1, 2026, will not have access to any income-driven repayment plans.
Existing Income-Driven Repayment Plans:
There are currently four income-driven repayment plans available: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and Saving on a Valuable Education (SAVE). Each of these plans has specific features and eligibility requirements.
Similarities Among Plans:
All four plans share some similarities. They cap monthly payments between 10% and 20% of your discretionary income. Additionally, they offer loan forgiveness after consistent payments for 10 to 25 years. This means that if you make regular payments for the specified period, your remaining loan balance will be forgiven.
Income-Based Repayment (IBR) Plan:
The IBR plan is the only option that will remain available for existing borrowers after July 1, 2028. Borrowers enrolled in this plan will be allowed to stay until they pay off their loans.
Income-Contingent Repayment (ICR) Plan:
The ICR plan is the only income-driven repayment option available to borrowers with federal parent PLUS loans.
Saving on a Valuable Education (SAVE) Plan:
The SAVE plan replaced the REPAYE plan and is currently not accepting new enrolments due to ongoing litigation. As of March 27, 2025, no new borrowers can enrol in SAVE. Those who were enrolled before the court orders froze the plan have been in an interest-free forbearance period. Interest will start accruing for these borrowers from August 1, 2025.
Pay As You Earn (PAYE) Plan:
The PAYE plan is one of the income-driven repayment options available, along with IBR, ICR, and SAVE.
Considerations:
Income-driven plans can extend your repayment term, resulting in more accrued interest over time. While you may qualify for loan forgiveness, you might end up paying more under these plans. Additionally, you may have to pay taxes on the forgiven amount, depending on federal and state tax regulations.
To make an informed decision, it's recommended to use Federal Student Aid's Loan Simulator to understand your monthly bills, overall costs, and forgiveness amounts under each plan. Remember to recertify income-based repayment annually unless you've given consent to access your tax information during the application process.
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Frequently asked questions
No, you don't have to pay your undergraduate student loans while in graduate school. You can defer payments on federal loans and most private student loans if you're enrolled at least half-time. However, interest will accrue on all graduate school loans and any unsubsidized undergraduate loans during a deferment, increasing the amount you owe.
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, so be sure to check the terms of your loan.
You can apply for a graduated or extended repayment plan to continue paying down your loans at a minimal cost. You can also apply for federally-sponsored income-driven repayment plans, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income Contingent Repayment (ICR). These programs 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.
