How to Pay for Graduate School

The cheapest way to pay for graduate school is money you never repay: funded assistantships, fellowships and tuition waivers. Federal loans fill the gap after that. Knowing how to pay for graduate school now also means knowing that the federal rules changed on July 1, 2026. Grad PLUS loans are closed to new borrowers, and there are new annual and lifetime caps on what you can borrow.

This guide works through the options in the order a financial aid counselor would: free money first, earned money second, federal loans third. It closes with what the 2026 changes mean for your budget.

How to pay for graduate school: start with funding that is not a loan

Graduate aid works differently from undergraduate aid. Most grad money does not come from the FAFSA. It comes from your department, your university’s graduate school and outside fellowship sponsors. That means the first place to ask is the program itself, before you accept an offer of admission.

Assistantships and tuition waivers

A teaching or research assistantship usually pays a stipend in exchange for work, and many programs add a full or partial tuition waiver. Ask every program three things in writing. What does the stipend pay? Is tuition waived in full? Are mandatory fees and health insurance covered?

Taxes matter here. Under IRS Publication 970, a tuition reduction for graduate education is tax-free when an eligible school provides it and you are a graduate student doing teaching or research for that school. The stipend itself is different. The part of any award that pays you for teaching, research or other required services is generally taxable, so budget for it.

Fellowships

Fellowships pay you to study or do research, without a work requirement. Some are run by universities and some by federal agencies, foundations and professional associations. One well-known federal example is the National Science Foundation’s Graduate Research Fellowship Program. According to NSF’s program page, each fellowship gives three years of support over a five-year period. Each year of support includes a $37,000 stipend and a $16,000 cost-of-education allowance paid to the school in place of tuition and fees. It is for graduate students in NSF-supported STEM fields pursuing research-based master’s or doctoral degrees.

The same IRS rules apply to fellowships. A scholarship or fellowship is tax-free only if you are a degree candidate, and only the part spent on tuition, required fees and required course materials. Money spent on room and board is taxable, according to Publication 970.

Outside scholarships and employer benefits

Professional associations, community foundations and employers fund graduate students too. If you work now, ask HR whether your employer offers tuition assistance before you resign. To search, use your program’s funding page, the sponsor’s own website, and the US Department of Labor’s free CareerOneStop Scholarship Finder. Our guide on how to find scholarships explains how to filter for awards you can realistically win.

Federal loans for graduate students after July 1, 2026

Graduate students can still file the FAFSA and borrow Direct Unsubsidized Loans. They are not eligible for Direct Subsidized Loans, according to the FSA Handbook. What changed is how much you can borrow, and whether PLUS loans are available at all.

Grad PLUS has ended for new borrowers

Public Law 119-21, the July 2025 reconciliation law, removed the Department of Education’s authority to make new Graduate PLUS Loans. The Department’s final regulations, published May 1, 2026, took effect July 1, 2026. Federal Student Aid told schools in Electronic Announcement LOANS-26-05 that graduate and professional borrowers who do not qualify for an exception are no longer eligible for Direct PLUS Loans as of July 1, 2026.

The new caps

For periods of enrollment beginning on or after July 1, 2026, the final rule sets these Direct Unsubsidized limits:

Whether you are a “professional” student decides which column applies. The Department says students in one of the 10 programs listed in its regulations at 34 CFR 668.2 qualify for the $50,000 annual limit. Other programs may qualify in certain circumstances, so ask your school which category your program is in. The $257,500 lifetime cap counts undergraduate, graduate and professional loans together, and leaves out Parent PLUS loans, according to LOANS-26-05.

Part-time students get less. The law requires annual loan amounts to be reduced for students enrolled less than full-time, in proportion to how far below full-time they are. That rule is described in Dear Colleague Letter GEN-25-04.

The interim exception for students already enrolled

If you were already in a program, you may keep the old limits for a while. The final rule sets two conditions. You were enrolled in a program of study as of June 30, 2026, and a Direct Loan was made to you for that program before July 1, 2026. The old limits then apply for your “expected time to credential.” That is the lesser of three academic years or the time left in your program as of July 1, 2026. If you start a new program, you lose the exception.

Interest rates for graduate loans

Federal rates are fixed for the life of each loan and reset each July 1 for new loans. The figures below come from Federal Student Aid’s announcements GENERAL-26-33 and DL-25-03.

Repayment: the new plans for new loans

The 2025 law also changed repayment. The final rule gives future borrowers two main plans. The Tiered Standard plan has fixed payments over 10 to 25 years, depending on how much you owe. The Repayment Assistance Plan (RAP) sets payments as a share of your adjusted gross income, minus $50 for each dependent.

Under RAP, unpaid interest is waived when an on-time payment does not cover the interest that has built up. Any remaining balance is forgiven after 360 qualifying monthly payments made over at least 30 years. GEN-25-04 says RAP payments count toward Public Service Loan Forgiveness. That matters if you plan to work for a government or nonprofit employer.

A funding checklist before you accept an offer

• Get the full cost of attendance for each year of the program, not just tuition.
• Ask whether funding is guaranteed for every year, or renewed one year at a time.
• Confirm which fees and insurance the tuition waiver covers.
• Ask whether your program counts as “graduate” or “professional” for federal loan limits.
• If you have been enrolled before, ask the aid office whether you meet the interim exception.
• Multiply your expected federal borrowing by the number of years and compare it with the $100,000 or $200,000 aggregate cap.
• Set aside money for tax on any stipend paid for teaching or research.

If the numbers still do not work, a financial aid appeal can sometimes change cost of attendance when your circumstances are unusual. Our guides on federal vs private student loans and subsidized vs unsubsidized loans explain what to borrow first. A useful first step this week: email each program’s graduate coordinator and ask for its funding package in writing, including stipend, tuition waiver and the years guaranteed.

Sources

• Federal Register (US Department of Education): Reimagining and Improving Student Education, Federal Student Loan Program Final Regulations (May 1, 2026)
• Federal Student Aid: LOANS-26-05, One Big Beautiful Bill Act NSLDS Eligibility Processing Updates
• Federal Student Aid: Dear Colleague Letter GEN-25-04
• Federal Student Aid: GENERAL-26-33, Interest Rates for Loans First Disbursed July 1, 2026 to June 30, 2027
• Federal Student Aid: DL-25-03, Interest Rates for Loans First Disbursed July 1, 2025 to June 30, 2026
• Federal Student Aid Handbook: Annual and Aggregate Loan Limits
• IRS: Publication 970, Tax Benefits for Education
• National Science Foundation: Graduate Research Fellowship Program