How to Manage Student Loans While in Graduate School

By Dr. Zubair Khalid, DVM, MS, PhD · 2026-08-27

Quick Answer

• Existing federal undergraduate loans can be placed on deferment or forbearance while you are enrolled in graduate school, but interest may continue to accrue on unsubsidized loans.
• Income-driven repayment plans base your monthly payment on your income and family size, which can keep payments manageable on a graduate stipend.
• Public Service Loan Forgiveness requires 120 qualifying payments while working full time for a qualifying employer, so researchers at government agencies or nonprofits should verify eligibility early.

Understanding Your Federal Loan Portfolio Before Graduate School

Graduate school introduces a new financial layer on top of existing undergraduate debt. The first management step is knowing exactly which loans you hold and which repayment rules apply to each. Federal student loans fall into two broad categories: Direct Subsidized Loans and Direct Unsubsidized Loans. The distinction matters because subsidized loans do not accrue interest during periods of deferment, while unsubsidized loans continue to accrue interest that capitalizes, or gets added to your principal balance, when the deferment ends.

Your loan servicer, the company that handles billing and payment collection on behalf of the U.S. Department of Education, maintains your loan records. You can identify your servicer by logging into the Federal Student Aid website using your FSA ID. The National Student Loan Data System, also accessed through Federal Student Aid, provides a complete view of your federal loan history, including loan types, outstanding balances, and servicer assignments.

Private loans operate under different rules. The deferment and forgiveness options described in this article apply to federal loans only. Private lenders set their own deferment policies, interest rates, and repayment terms. If you hold private loans, contact each lender directly to ask about graduate school deferment options and whether interest continues to accrue during that period.

Deferment and Forbearance Options for Graduate Enrollment

In-School Deferment

In-school deferment suspends your federal loan payments while you are enrolled at least half time at an eligible institution. For graduate students, this typically means enrollment in a master's, doctoral, or professional degree program. Your school certifies your enrollment status to the Department of Education, and your servicer applies the deferment automatically in most cases.

The critical limitation of in-school deferment is interest accrual. If you hold Direct Unsubsidized Loans or Direct PLUS Loans, interest continues to accrue during the deferment period. When the deferment ends, unpaid interest capitalizes, increasing your total loan balance. For a student with a substantial undergraduate balance, this can add thousands of dollars to the principal over a five-year doctoral program.

You can choose to pay the accruing interest during deferment even though payments are not required. Making voluntary interest payments prevents capitalization and keeps your principal balance stable. This strategy requires a budget that accommodates interest payments on top of living expenses, which may not be feasible on a graduate stipend.

Forbearance as an Alternative

Forbearance also suspends or reduces your loan payments, but it is generally granted at the servicer's discretion instead of as an automatic enrollment benefit. The Department of Education offers discretionary forbearance for borrowers experiencing financial hardship, medical expenses, or other circumstances that make payments unaffordable.

Forbearance has the same interest accrual problem as deferment for unsubsidized loans, and interest also accrues on subsidized loans during forbearance. Because forbearance does not require enrollment verification, it may be appropriate for students who drop below half-time enrollment or who take a leave of absence from their program. However, forbearance should be a short-term tool instead of a long-term strategy, since interest capitalization can significantly increase your total debt.

Income-Driven Repayment Plans for Graduate Students

How Income-Driven Repayment Works

Income-driven repayment (IDR) plans calculate your monthly payment as a percentage of your discretionary income instead of as a fixed amount based on your total debt. For graduate students with modest stipends, IDR payments can be substantially lower than payments under the Standard Repayment Plan, which spreads your balance over ten years.

The Department of Education offers several IDR plans, including Income-Based Repayment, Income-Contingent Repayment, and the Saving on a Valuable Education (SAVE) Plan. Each plan uses a different formula to calculate discretionary income and a different percentage of that income for your payment. Your family size and state of residence affect the calculation because the poverty guideline amount used to determine discretionary income varies by household size and location.

Choosing Between Deferment and Income-Driven Repayment

The choice between deferment and IDR depends on your specific financial situation and career goals. Deferment provides immediate payment relief but does not count toward loan forgiveness under most programs. IDR payments count toward forgiveness, and for borrowers pursuing Public Service Loan Forgiveness, every month with a qualifying payment moves you closer to forgiveness after 120 payments.

For a graduate student with a low stipend, IDR may result in a monthly payment of zero dollars. A zero-dollar payment still counts as a qualifying payment for Public Service Loan Forgiveness purposes, provided you are employed full time by a qualifying employer and meet the other eligibility requirements. This makes IDR a powerful tool for graduate students who plan to work in government, nonprofit research, or public service after graduation.

The tradeoff is that IDR extends your repayment timeline. Any balance remaining after 20 or 25 years of qualifying payments is forgiven, but you may pay more total interest over that extended period compared to a standard ten-year repayment plan. For graduate students who expect high earnings after graduation, the standard plan or aggressive extra payments may be more cost-effective in the long run.

Public Service Loan Forgiveness for Researchers and Scientists

Qualifying Employment Requirements

Public Service Loan Forgiveness (PSLF) forgives the remaining balance on your Direct Loans after you make 120 qualifying monthly payments while working full time for a qualifying employer. Qualifying employers include government organizations at any level, tax-exempt nonprofit organizations, and certain other public service organizations.

For life science researchers, qualifying employment commonly includes positions at federal agencies such as the National Institutes of Health or the National Science Foundation, state and university research laboratories, and nonprofit research institutes. The Occupational Outlook Handbook describes the work of biological scientists in government and research settings, and the National Institutes of Health Office of Intramural Training and Education provides information about research training and career development within the NIH intramural program. The National Science Foundation careers page lists scientific and programmatic roles within that federal agency.

Your employment must be full time, defined as working at least 30 hours per week or meeting your employer's definition of full time, whichever is greater. For researchers, this typically means a salaried staff scientist position instead of a short-term fellowship or traineeship. Postdoctoral fellowships can be tricky because some fellowship arrangements do not count as employment with a qualifying employer. You must verify that your fellowship or position meets the PSLF employment definition before relying on it for forgiveness.

Certification and Documentation

The PSLF process requires annual certification of your employment using the Public Service Loan Forgiveness Employment Certification Form. This form documents your employer's qualifying status and your full-time employment dates. Submitting this form annually creates a record that the Department of Education uses to track your qualifying payments.

The importance of early and consistent certification cannot be overstated. Borrowers who wait until after making 120 payments to submit their first certification may discover that some payments did not qualify due to employer status, loan type, or repayment plan issues. Annual certification allows you to identify and correct problems early in the process.

PSLF for Graduate Students Still in School

You cannot count payments made while you are enrolled in graduate school toward PSLF unless you are simultaneously working full time for a qualifying employer. A graduate student who works as a research assistant at a university may qualify if the university is a qualifying employer and the position meets the full-time definition. However, many graduate assistantships are classified as student employment instead of full-time staff positions, which may not qualify.

The practical approach is to begin PSLF tracking when you start your first full-time qualifying position after graduate school. If you work full time for a qualifying employer while enrolled, submit the Employment Certification Form to establish your qualifying payment count. If your position does not qualify, focus on keeping your loans in good standing through deferment or IDR until you transition to qualifying employment.

Choosing a Repayment Strategy Based on Your Career Path

Career Paths in the Life Sciences

Your choice of repayment strategy should align with your expected career trajectory. The Occupational Outlook Handbook describes the education and training requirements for biological scientists, which typically include a doctoral degree for independent research positions. The American Society for Microbiology career resources describe professional roles in microbiology, including research, clinical, and applied settings. The Association of American Veterinary Medical Colleges provides information about veterinary education pathways for students considering that profession.

Graduate students in the life sciences pursue diverse career outcomes. Some enter academic research as faculty members or staff scientists at universities. Others work in government research agencies, nonprofit research organizations, or the biotechnology and pharmaceutical industry. Each path has different implications for loan repayment strategy.

Strategy for Public Service Careers

If you plan to work for a government agency, nonprofit research institute, or public university after graduation, PSLF should be a central part of your repayment strategy. Enroll in an income-driven repayment plan as soon as you have qualifying employment, and make 120 qualifying payments while working full time for qualifying employers.

The key decision is whether to use deferment during graduate school or to make IDR payments if you have qualifying employment while enrolled. For most graduate students without qualifying full-time employment, deferment during school followed by IDR and PSLF after graduation is the standard approach. The interest that accrues during deferment will be forgiven if you complete PSLF, so the capitalization concern is less relevant for PSLF-track borrowers.

Strategy for Industry Careers

If you plan to work in the biotechnology, pharmaceutical, or other private industry sectors, PSLF will not apply because for-profit companies are not qualifying employers. Your repayment strategy should focus on minimizing total interest costs over the life of your loans.

For industry-bound graduate students, making interest payments during deferment prevents capitalization and reduces your total repayment cost. After graduation, you may choose the Standard Repayment Plan or an IDR plan with the goal of paying off your loans aggressively once your income increases. The extended repayment timeline of IDR plans generally increases total interest paid, so industry professionals with strong earning potential often prefer standard or accelerated repayment.

At a Glance: Repayment Strategy Comparison

Practical Steps for Managing Loans During Graduate School

Step 1: Inventory Your Loans

Log into Federal Student Aid and review your complete loan portfolio. Record each loan's type, outstanding principal, interest rate, and servicer. Identify which loans are subsidized and which are unsubsidized, since this determines interest accrual during deferment. Note any private loans separately, since they follow different rules.

Step 2: Verify Your Enrollment Status

Confirm that your graduate program qualifies for in-school deferment. The Department of Education requires at least half-time enrollment for deferment eligibility. Your school's registrar or financial aid office certifies enrollment status to the Department of Education. If you are enrolled less than half time, in-school deferment does not apply and you must consider other options.

Step 3: Evaluate Your Employment Situation

Determine whether your current or planned employment qualifies for PSLF. Government agencies, tax-exempt nonprofits, and public universities are qualifying employers. For-profit companies, including most biotechnology and pharmaceutical firms, are not. If you hold a graduate assistantship, ask your employer whether the position meets the full-time definition for PSLF purposes.

Step 4: Choose Between Deferment and Income-Driven Repayment

If you do not have qualifying employment, in-school deferment is typically the simplest option. If you have qualifying employment, compare your IDR payment against your deferment interest accrual. A zero-dollar IDR payment that counts toward PSLF is usually better than deferment, since it builds your qualifying payment count without requiring cash outlay.

Step 5: Submit Required Forms

For deferment, your school's enrollment certification triggers the deferment automatically in most cases. For IDR, submit the income-driven repayment plan request through Federal Student Aid or your servicer. For PSLF, submit the Employment Certification Form annually to document qualifying employment and track your payment count.

Records and Measurements for Loan Management

Maintaining accurate records is essential for successful loan management, particularly for PSLF tracking. Create a dedicated file, either physical or digital, containing your loan documents, servicer correspondence, employment certification forms, and payment records.

Track the following measurements for each loan:

• Current principal balance and interest rate
• Interest accrual during deferment or forbearance periods
• Monthly payment amount under your current repayment plan
• Number of qualifying PSLF payments made
• Employment certification submission dates and approval status

Review your loan accounts at least quarterly. Check that deferment or forbearance status is correctly applied, that payments are being credited properly, and that interest capitalization events are reflected accurately in your balance. Discrepancies should be reported to your servicer in writing, and you should retain copies of all correspondence.

Common Failure Patterns in Graduate Student Loan Management

Missing Interest Capitalization Events

The most common mistake is ignoring interest accrual during deferment. A student with a $30,000 unsubsidized loan balance at 6% interest accrues approximately $1,800 in interest per year during deferment. Over a five-year doctoral program, that adds $9,000 to the loan balance through capitalization. Students who do not track this accrual are surprised by their post-graduation balance.

Assuming All Research Positions Qualify for PSLF

Not all research positions qualify for PSLF. Fellowship appointments, traineeships, and some postdoctoral positions are not classified as employment with a qualifying employer. The distinction depends on the employment arrangement, not the research content. A postdoctoral fellow paid through a university fellowship may not qualify, while a staff scientist at the same university may qualify. Verify your employment classification before relying on PSLF.

Delaying PSLF Certification

Borrowers who wait until after making 120 payments to submit their first Employment Certification Form risk discovering that some payments did not qualify. Payment counts can be lost due to employer status changes, loan consolidation, or repayment plan issues. Annual certification identifies problems early and preserves your qualifying payment history.

Consolidating Loans Without Understanding the Consequences

Loan consolidation can simplify repayment by combining multiple loans into a single Direct Consolidation Loan. However, consolidation resets your PSLF payment count to zero. If you have already made qualifying payments, consolidating before reaching 120 payments can delay forgiveness. Consolidation may also affect your eligibility for certain IDR plans or forgiveness programs.

Welfare and Safety Context for Borrowers

Student loan stress affects graduate student wellbeing. Financial strain can interfere with research productivity, academic progress, and personal health. The National Institutes of Health Office of Intramural Training and Education emphasizes the importance of professional development and career planning for research trainees, which includes understanding the financial implications of career choices.

If you are experiencing financial hardship that affects your ability to meet basic needs or continue your program, seek assistance from your institution's financial aid office, student affairs office, or employee assistance program. Loan servicers also offer hardship options, including deferment and forbearance, that can provide temporary relief while you address underlying financial challenges.

Professional Escalation Criteria

Contact your loan servicer directly if you encounter any of the following situations:

• Your deferment or forbearance is not applied correctly to your account
• Your payment amount under an IDR plan does not match the calculated amount
• You receive notices about missed payments when you believe your account is current
• Your servicer changes and your payment history is not transferred correctly
• You are considering loan consolidation and need to understand the impact on forgiveness eligibility

If your servicer does not resolve your issue, you can submit a complaint to the Federal Student Aid Ombudsman Group, which assists borrowers with unresolved disputes. For PSLF-specific issues, the PSLF reconsideration process allows borrowers to request review of denied forgiveness applications.

Frequently Asked Questions

Can I use deferment during graduate school and still qualify for Public Service Loan Forgiveness later?

Yes. Deferment during graduate school does not prevent you from qualifying for PSLF after graduation. Your qualifying payment count begins when you start making payments under a qualifying repayment plan while employed full time by a qualifying employer. Deferment periods do not count toward the 120 payments, but they do not disqualify you from the program.

Does interest accrue on my undergraduate loans during graduate school deferment?

Interest accrues on unsubsidized loans during deferment. Subsidized loans do not accrue interest during deferment periods. If you hold Direct Unsubsidized Loans or Direct PLUS Loans, interest will accrue and capitalize when the deferment ends. You can pay the accruing interest during deferment to prevent capitalization.

What is the difference between deferment and forbearance?

Deferment is available for specific situations, including enrollment in graduate school, and may be automatic based on your enrollment status. Forbearance is granted at the servicer's discretion for financial hardship or other circumstances. Interest accrues on all loans during forbearance, including subsidized loans, while subsidized loans do not accrue interest during deferment.

Can graduate research assistantships count toward Public Service Loan Forgiveness?

Graduate assistantships may count toward PSLF if the position meets the full-time employment definition and the employer qualifies. Many assistantships are classified as student employment instead of full-time staff positions, which may not qualify. Submit the Employment Certification Form to have your employer's status and your position evaluated.

Should I pay interest during deferment or invest that money elsewhere?

The decision depends on your interest rate and your financial situation. Paying interest during deferment prevents capitalization, which reduces your total loan balance and future interest charges. If your loan interest rate is higher than the return you expect from investing, paying interest during deferment is financially advantageous. If you are pursuing PSLF and expect forgiveness, the interest may be forgiven, making interest payments less urgent.

How do I know if my employer qualifies for Public Service Loan Forgiveness?

Qualifying employers include government organizations at the federal, state, local, or tribal level, tax-exempt nonprofit organizations, and certain other public service organizations. For-profit companies do not qualify. The Employment Certification Form includes a section for your employer to complete that documents their qualifying status. Submit this form annually to verify eligibility.

What happens to my loans if I leave graduate school before completing my degree?

If you drop below half-time enrollment, your in-school deferment ends and you enter your grace period. The grace period for most federal loans is six months, during which no payment is required. After the grace period ends, you must begin repayment under your repayment plan. You can apply for an IDR plan or forbearance if you need payment relief.

Can I change repayment plans after graduate school if my financial situation changes?

Yes. You can switch between federal repayment plans at any time. If your income increases after graduation, you may choose to leave an IDR plan and switch to the Standard Repayment Plan or make extra payments to accelerate repayment. If your income decreases, you can apply for an IDR plan to lower your monthly payment. Changing plans may affect your PSLF payment count if you switch to a non-qualifying plan.

Using the Evidence

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References and Further Reading

• Occupational Outlook Handbook. U.S. Bureau of Labor Statistics.
• O*NET OnLine. U.S. Department of Labor.
• Office of Intramural Training and Education. National Institutes of Health.
• Careers at NSF. U.S. National Science Foundation.
• Career Services. American Society for Microbiology.
• AAVMC Career Resources. Association of American Veterinary Medical Colleges.
• NCBI Literature Resources. National Center for Biotechnology Information.
• PubMed. National Library of Medicine.

This article is educational and does not replace institutional policy, professional advice, or applicable safety and regulatory requirements.