SoFi

Subsidized loans, a type of loan offered by the federal government, used to be available to graduate students. Unfortunately, that is no longer the case. The program that allowed graduate students to receive subsidized loans ended in 2011 by the Budget Control Act.

For now, these loans are only available for undergraduate students. However, there are other loans available to help pay for grad school. Keep reading for more information on subsidized loans and the other options available to graduate students.

What Are Subsidized Loans?

Federal student loans are offered through the U.S. Department of Education to help students cover the cost of higher education. Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. The amount of the loan is determined by the school you are applying to.

The Department of Education pays all interest on subsidized loans while you are in school at least half-time, during the six-month grace period after you leave school, and during periods of deferment. Outside of these periods, the borrower is responsible for making all principal and interest payments.

Subsidized vs Unsubsidized Loans

Federal Direct Unsubsidized Loans, on the other hand, are available to undergraduate and graduate students. Students do not have to demonstrate financial need to qualify for these loans.

The loan amount is still determined by your school, and the interest starts accruing the moment the loan is disbursed.

For graduate students, the aggregate loan limit is $138,500, of which no more than $65,500 may be in subsidized loans. What’s more, the aggregate limit also includes whatever student loans you may have from your time as an undergraduate.

When you reach the aggregate loan limit, you will not be allowed to borrow any more money in federal student loans. However, if you are able to pay off some of your loans, you may be able to borrow again up to the aggregate loan limit.

Interest rates for both types of loans are set by the federal government each year. For the 2024-25 academic year, the interest rate for undergraduate borrowers is 6.53% for Direct Subsidized Loans and Direct Unsubsidized Loans. The interest rate for graduate borrowers for Direct Unsubsidized Loans is 8.08%. The interest rate is fixed over the life of the loan.

Alternatives to Subsidized Loans

In addition to unsubsidized loans, there are other loans available from the government, plus private sources that can help you pay for grad school.

Grad PLUS Student Loans

Grad PLUS student loans, also known as Direct PLUS Loans, are another federal loan available through the Department of Education. Grad PLUS Loan requirements include that you must be a graduate student enrolled at least half-time at an eligible school. Your program must lead to a graduate degree, a professional degree, or a certificate. You meet the basic eligibility requirements for federal student aid and must not have an adverse credit history.

Under the Grad PLUS program, you are allowed to borrow the cost of attendance less any other financial aid. You don’t have to repay the loan until six months after you leave school or drop below half-time enrollment.

Interest rates on the loan are fixed. Any Direct Plus Loans disbursed after July 1, 2024, carry an interest rate of 9.08%.

To apply for federal student loans, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA®). Your school will use the information on this form to determine how much aid you are eligible to receive and present it to you in an offer letter. The offer letter will also give you information about grants and work-study programs you may be eligible for.

Recommended: Guide to Grad Plus Loans

Private Loans

Private student loans are available through banks, credit unions, and other private institutions. The individual lender will determine the amount you can borrow, terms of the loan, and the interest rate based in large part on financial factors such as your income and your credit score.

Private loans may allow you to borrow beyond the federal limits imposed on federal loans, or help you pick up the slack if you didn’t qualify for enough federal funding. However, they may lack protections afforded to federal student loans, and as a result, are generally thought of as a last-resort option when paying for grad school.

Personal Loans

Personal loans are also available through private lenders. Borrowed funds can be used for practically any purpose, which means they could potentially be used to cover expenses beyond tuition. As with private loans, the amount you can borrow will depend on your financial history or that of a cosigner.

How Much Can You Borrow for Graduate School?

The amount you can borrow for graduate school will depend on the types of loans that you use.

Grad PLUS student loans potentially allow you to borrow up to the full cost of attending your program, less any other financial aid.

However, unsubsidized loans limit your aggregate borrowing to $138,500, and that’s including any federal loans that you took out as an undergraduate.

Borrowers who are enrolled in certain health profession programs may be subject to a higher aggregate limit for Direct Subsidized Loans, and should talk to their school’s financial aid office.

Private student loans may limit borrowers to the cost of attendance. Policies will likely vary by lender.

Personal loans may allow you to borrow as much as $100,000 with no limitations on how the money must be spent. Again, specific policies may vary by lender.

Recommended: Graduate Student Loan Limits

The Takeaway

Federal subsidized loans are no longer available to graduate students. In the meantime, graduate students have other options, including federal unsubsidized loans, Grad PLUS Loans, loans from private lenders, or a combination of the above to help pay for school.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Does the U.S. Department of Education offer subsidized loans for graduate students as part of financial aid packages?

No, the U.S. Department of Education does not offer subsidized loans for graduate students. Subsidized loans are only available to eligible undergraduate students. Graduate students may still qualify for federal financial aid through options like Direct Unsubsidized Loans and Grad PLUS Loans, which begin accruing interest immediately.

Are Grad PLUS Loans subsidized loans?

Grad PLUS Loans are not subsidized, which means that interest accrues while the student is in school.

Can you pay off subsidized loans before graduating?

You can pay off federal subsidized loans before you graduate without paying any penalty. Note that federal subsidized loans do not accrue interest while you are in school.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Photo credit: iStock/Kseniia Ivanova
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q225-029

Does living on a budget sound like a bummer, all about scrimping and saving? It shouldn’t! A budget is really just a way to evaluate and keep better track of what money you have coming in and going out each month.

Having insight into the big picture of your personal finances can make it much easier to figure out where you may need to make tweaks so you can reach your personal and financial goals.

Rather than feeling restrictive, living with a budget can actually make your life easier and less stressful, while also helping you prepare for the future.

Here are some ideas to help get you going.

1. Determining What’s Coming In

The first step for creating a budget is to figure out how much money you are earning after taxes every month.

This might be easy for salaried W2 workers who automatically get their taxes taken out of every paycheck. You can simply look at what is coming into your bank account each month. It can be a bit trickier for 1099 freelancers who only see how much they are taxed at the end of the year.

For freelancers, there is a simple solution though: Using how much you made the previous year and what taxes you paid, you can then pay estimated quarterly taxes to the IRS. This can help give you a more accurate picture of how much you are earning on a monthly basis.

2. Listing Spending Categories

Next, you’ll want to figure out how much you’re spending each month.

This involves going through one month’s worth of expenses and dividing everything up into categories, then figuring how much you spend on each. You can do this by hand, make a budget in Excel, or use a budgeting app (your financial institution may even offer a free one).

Spending categories typically include necessities, such as rent/mortgage, transportation (like car expenses or public transportation costs), food, cell phone, healthcare/insurance, life insurance, childcare, and any debts (credit cards/ loans).

You’ll also need to list nonessential spending, such as cable television, streaming services, concert and movie tickets, restaurants, clothing, etc.

It’s also important to include monthly contributions to a retirement plan and personal savings in your list of expense categories.

If you don’t currently have an emergency fund in place (that could cover at least three to six months of living expenses just in case), consider putting it on the spending list, so you can start putting some money towards it each month. (Putting it in a high-yield savings account can be a wise move to help it grow. You might even automate your finances and have a small sum deducted right after payday and put into the account)

3. Seeing Where You Stand

Once you have a sense of your monthly earnings and spending, it’s time to see how your numbers line up with general budgeting guidelines. One budgeting method to consider is the 50/30/20 model, which looks like this:

•   50% of money goes towards necessities such as a home, car, cell phone, and utility bills.

•   30% goes towards your wants, such as entertainment and dining out.

•   20% goes towards your savings goals, such as a retirement plan, a downpayment on a home, emergency fund, or investments.

By looking at your income versus your expenses, it will be easy to see what, if any, changes need to be made.

4. Making Adjustments

There are many ways to adjust how much you’re spending in order to reach certain personal finance goals.

The easiest way to change your spending habits is to trim some of your nonessential expenditures. For example, perhaps internet and cable television costs $120 a month, and if cable is cut out, it would result in a savings of $130 a month.

Sticking to a budget may also require looking at the bigger picture and finding places for more significant savings. “Along with reducing small indulgences, cutting your rent can be an effective way to free up more cash in your budget,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. This is especially true if your rent is eating up 50% or more of your monthly income. Or, you might want to consider trading in an expensive car lease for an older, pre-owned vehicle.

5. Negotiating With Credit Card Companies and Service Providers

If debt and bills are too high, then it’s going to be much harder to budget and save up money for the future.

One way to cut back is to negotiate with credit card companies and service providers. Credit card companies want their money back, so when cardholders call and say they can pay if some adjustments are made, they may be willing to help. You might ask if you can get your monthly payment or interest rate reduced, or if it’s possible to remove late fees.

Cardholders can ask for their monthly payment to be lowered, see if their interest rate can be lowered, and/or ask if it’s possible to remove late fees.

It may also be possible to lower monthly bills for internet, cable, streaming services, medical bills, and car insurance. For instance, if you see a promotion going on for cable and internet, you can always ask your cable company if they can apply that promotional rate to your account.

You can also use a car insurance quote comparison tool to find a lower car insurance rate, or call up a hospital to negotiate a medical bill.

6. Taking on a Side Gig

Once you set up a living budget, it may seem clear that additional income could be a big help. If you have the time and energy, you might take on a low-cost side hustle to bring in more money. Some ideas include:

•   Selling things on eBay, Craigslist, or Facebook Marketplace

•   Having a garage sale

•   Creating an Etsy store and selling homemade goods

•   Driving for a rideshare or food delivery service

•   Giving music lessons

•   Renting out a room on Airbnb

•   Walking dogs

•   Cleaning houses

•   Babysitting

•   Handling social media for small businesses

•   Selling writing, photography, or videography services to clients

Setting aside additional income for necessary expenses and future goals, and not spending all of the money on immediate wants, can be a big help when it comes to living on a budget.

Recommended: How to Make Money From Home

7. Using Cash Whenever You Can

It’s easy to spend money when only using credit cards and debit cards. Whenever possible, consider using cash, as it makes it easier to see the impact of your spending. You might be less likely to go into debt since money doesn’t seem invisible anymore. Taking out enough cash at the beginning of the week to cover your daily expenses could help you stick with your budget.

The Takeaway

Living on a budget doesn’t have to feel onerous and restrictive. In fact, the process of setting up a budget and sticking to it every month, can eventually free you from financial burdens and help you reach your life goals.

Getting started involves listing everything that is coming in and everything that is going out each month. The next step involves figuring out where you stand, and what you can do to get closer to your personal and financial goals. This may involve cutting back in some areas and also finding some ways to boost your income.

Keep at it and soon you will be in control of your finances, rather than the other way around. The right banking partner can also help you track your income and spending and stay on top of your budget.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the 50-30-20 budget rule?

The 50-30-20 budget rule is a simple financial guideline that divides your income into three categories: 50% for essential expenses (like rent and groceries), 30% for discretionary spending (like entertainment and dining out), and 20% for savings and debt repayment. This rule helps maintain a balanced budget, ensuring you cover necessities, enjoy life, and save for the future, promoting financial stability and peace of mind.

What are the 4 A’s of budgeting?

The 4 A’s of budgeting are: Accounting, Analysis, Allocation, and Adjustment.

•   Accounting: Track your income and expenses to understand your financial inflows and outflows.

•   Analysis: Review your financial data to identify patterns and areas for improvement.

•   Allocation: Distribute your funds to different categories based on your priorities and financial goals.

•   Adjustment: Regularly update your budget to reflect changes in your financial situation and ensure you stay on track.

These steps help you create and maintain a practical, effective budget.

How to survive on $1,000 a month?

Surviving on $1,000 a month requires strict budgeting and prioritizing needs over wants. Start by covering essential expenses like rent, utilities, and groceries. If necessary, look for ways to lower some of these fixed costs, like taking on a roommate or moving to a cheaper area. You may also need to reduce nonessential spending (like dining out and subscriptions), use public transportation, and shop secondhand whenever possible. Consider side gigs or freelance work to supplement your income.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

The opportunity cost of an investment refers to the potential gain or loss incurred by not choosing to go with a different investment. Opportunity cost is a term or concept that doesn’t just apply to investing, and can be applied to other economic areas as well.

Investors at all income levels have a limited amount of funds to work with. And while some people are more risk-tolerant than others, considering the opportunity cost of choosing one investment over another will always be necessary.

Opportunity Cost vs Risk

As noted, the concept of opportunity cost can be applied to almost any situation, not just those relating to financial matters. As it relates to investing, it’s especially important to consider applicable risks. But opportunity costs and risk are two different, albeit related, things.

Failing to consider the potential risks of an investment when trying to calculate opportunity cost could lead to an “apples-and-oranges” type of comparison.

Consider this: Someone wants to figure out the opportunity cost of investing in a penny stock rather than buying a U.S. Treasury bond. The latter are less risky investments, being 100% backed by the U.S. government.

Penny stocks, on the other hand, carry a high amount of risk, being volatile and having a real possibility of going to zero if the underlying company goes bankrupt.

If an investor thinks about opportunity cost in this example, without factoring in risk, they will choose the penny stock every single time. And without considering the risks involved, doing so would make sense.

Less risky investments, like Treasuries, tend to come with low returns. But, again, they’re low-risk assets, so investors should likely anticipate their expected returns to be low, as they don’t generate big returns. While a riskier investment like a penny stock might yield big gains, it comes with significant risk, and could also yield large losses.

In effect, there’s a tradeoff and inverse relationship between risk and potential reward or returns. Investing in the penny stock risks losing capital, while investing in Treasuries risks losing the larger gains.

What Is Opportunity Cost When Evaluating Investments?

There are two main types of opportunity cost as it relates to financial decisions: Explicit opportunity cost, and implicit opportunity cost.

The first type, explicit opportunity cost, is easy to calculate because it involves the objective value that an investor sacrifices when making one investment decision instead of another. The second type, implicit opportunity cost, can be harder to calculate because it’s more subjective.

Implicit opportunity costs tend to involve resources and a lost opportunity to generate additional income rather than a direct cost.

For example, say someone owns a second home in the Hamptons. This person loves vacationing in the Hamptons so much that they choose not to rent out the home, foregoing the significant revenue that doing so might bring in. That lost revenue represents the implicit opportunity cost of using the home as a luxurious vacation destination rather than a rental property.

How to Calculate Opportunity Cost

It’s important to remember that any attempt at this kind of calculation will be somewhat of an estimation because it’s impossible to predict with 100% certainty. But, for the purposes of trying to calculate opportunity cost, it becomes necessary to make some related assumptions as to risk and reward.

When a skilled financial professional wants to determine how to calculate opportunity cost, they might use a complex mathematical formula called the Net Present Value (NPV) formula. This formula can be calculated in a spreadsheet and includes specific business factors like free cash flow, interest rates, and the number of periods in the future in which free cash flow will happen.

For most individual investors, an all-out calculation using the NPV formula might be going a little overboard. The effort required could be unnecessary, and investors may not always have access to the required information.

However, some simple arithmetic can often work, too. The only required knowledge for such a calculation will be what an investor sacrifices by making one decision rather than another.

A Simple Opportunity Cost Formula

An opportunity cost example equation would look like this:

Opportunity Cost = FO – CO

Where FO is equivalent to the return on the best foregone option, and CO is equivalent to the return on the chosen option. In other words, subtracting the amount of money made on a chosen investment from the amount of money that would have been made on the other, not chosen, investment.

Beyond that, it can also be worthwhile to take into consideration the variables of time and sweat equity. Sweat equity refers to the work that might be required to maintain something. Likewise, time refers to the time a particular economic decision will require.

For example, investors who tend to be more self-directed and choose to do their own research will likely want to pick each specific security in their portfolios and how much capital they want to allocate to each position. That research requires sweat equity, but could lead to higher returns if done well.

Other investors may choose a more passive investment style and either put all of their available capital in a single ETF or use a robo-advisor that chooses security allocations for them. This method minimizes sweat equity but could potentially see lower returns.

When it comes to the simple math, let’s say an investor really likes Restaurant X. She typically eats three Restaurant X meals each week, costing about $10 each, for a total of about $120 per month.

Our Restaurant X fan could decide to cook her own meals three nights a week, with an approximate cost of $60 per month. She then invests the extra $60 she has now saved.

The opportunity cost in this random example is missing out on the Restaurant X experience. The gain would be having a little extra cash to invest each month.

The Takeaway

Opportunity costs in investing refer to the potential gains given up in exchange for choosing one thing over another. It’s theoretical and hypothetical, and can be tricky to grasp, but is an important concept in investing. In the long run, the opportunity cost of choosing to stay out of the market tends to be high. Would-be investors might miss out on potential gains.

Without having money work for itself and earn interest, dividends, or capital gains, it’s very difficult to build long-term wealth. That said, there are many factors to take into consideration when investing, and for some, it may be best to seek the advice of a financial professional for some guidance.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).