Private student loans for engineering graduate students

Private student loans bridge the funding gap for engineering graduate degrees when federal limits fall short. You’ll learn when private lenders offer lower rates than federal Grad PLUS loans, which lenders specialize in STEM fields, and how to protect family credit while securing necessary funds.

Quick context: Engineering graduate program costs and funding gaps

Before comparing loan products, it is essential to understand the financial landscape of an advanced engineering degree. While engineering programs offer high potential returns on investment, the upfront costs are substantial. According to the College Board, average tuition and fees for graduate programs in 2024–2025 range widely, but top-tier engineering master’s programs frequently cost between $30,000 and $60,000 per year in tuition alone.

The challenge arises because the standard federal Direct Unsubsidized Loan has a strict annual limit. According to StudentAid.gov, as of the 2024–2025 academic year, graduate students can borrow only up to $20,500 annually in these loans. For many engineering students living in high-cost tech hubs like the Bay Area, Boston, or New York, this creates a significant funding gap.

To visualize the financial reality, consider the following breakdown for a typical private university engineering master’s program:

• Total Cost of Attendance (Tuition + Living): ~$75,000
• Minus Federal Direct Unsubsidized Loan: -$20,500
• Remaining Funding Gap: ~$54,500

This remaining gap must be filled through savings, scholarships, assistantships, or additional borrowing. While PhD candidates often receive full funding, Master’s students are typically responsible for the bulk of these costs. This is where the choice between federal Grad PLUS loans and private student loans becomes the critical financial decision for families and students.

Grad PLUS vs private loans: Quick decision framework

Once the $20,500 federal Direct Unsubsidized Loan limit is reached, families generally face two options to cover the remaining balance: the federal Grad PLUS loan or a private student loan. The right choice depends heavily on the borrower’s credit profile and career trajectory. While Grad PLUS loans offer federal protections, they come with high origination fees and interest rates that do not adjust based on creditworthiness.

According to Betsy Mayotte, president of The Institute of Student Loan Advisors, “In general, federal loans should be your first stop, but private loans can be appropriate when you’ve maxed out your federal eligibility.” This is particularly relevant for engineering students who often graduate into high-paying roles that make private loan repayment more manageable.

Source: StudentAid.gov (rates/fees effective July 1, 2024–June 30, 2025) and general private lender market data as of January 2025.

A private loan is likely the better financial tool if:

• Credit is strong: The borrower or cosigner has a credit score of 740+ and can qualify for rates lower than the Grad PLUS rate of 9.08% for 2024–2025.
• High income is expected: The student is entering a private sector engineering role with a high starting salary, reducing the need for income-driven repayment options.
• Cost avoidance is a priority: According to StudentAid.gov, you want to avoid the 4.228% federal origination fee, which adds over $1,600 to the cost of a $40,000 loan immediately.

Conversely, stick with Grad PLUS if the student plans to work in government or non-profit sectors (eligible for Public Service Loan Forgiveness) or if the borrower has a thin credit history without a cosigner.

For a deeper dive into federal options, review our comprehensive guide to Grad PLUS loans.

Top private lenders for engineering graduate students

Not all private lenders are created equal. For engineering students, the ideal lender offers competitive interest rates, flexible repayment terms during the job search, and specific benefits that align with STEM career paths. Several major lenders have tailored their products to serve graduate students with high earning potential.

When evaluating lenders, look beyond the interest rate. Engineering programs can be intense, leaving little time for part-time work, so flexible repayment during school is vital. Additionally, some lenders offer “grace period extensions” if a student secures a fellowship or internship immediately after graduation.

Sallie Mae often provides specialized loans for graduate students with variable and fixed rate options. They offer a “Graduated Repayment Period” feature, allowing borrowers to make interest-only payments for a year after the grace period ends—helpful for engineers transitioning into their first major role.

College Ave is known for its customization. Borrowers can choose their loan term (5, 8, 10, or 15 years) to balance monthly payments against total interest costs. This is useful for engineering students who may want to pay debt down aggressively once they start earning a tech salary.

SoFi and Earnest are strong contenders for borrowers with excellent credit profiles. They often compete for borrowers with high future income potential, such as engineers. Both lenders typically offer unemployment protection, which can pause payments temporarily if a graduate is between contracts or jobs.

As of January 2025, private student loan rates for graduate students generally fall into the following ranges:

• Fixed Rates: 4.50% – 14.50% APR
• Variable Rates: 5.00% – 15.00% APR

Note: The lowest rates are almost exclusively reserved for borrowers (or cosigners) with credit scores above 780 and low debt-to-income ratios.

Source: Lender websites and terms as of January 2025.

For a full list of vetted partners, visit our private student loan marketplace.

How assistantships and employer support affect private loans

Engineering graduate students have access to unique funding sources that can significantly alter their borrowing needs. Unlike many other disciplines, engineering departments frequently offer Research Assistantships (RAs) and Teaching Assistantships (TAs), and many students receive support from current or future employers.

RAs and TAs typically provide a tuition waiver and a monthly stipend. However, it is crucial to understand how this income affects private loan eligibility. Private lenders certify the loan amount with the university. The total financial aid package (including loans, scholarships, and assistantship waivers) cannot exceed the school’s official Cost of Attendance (COA).

If a student secures an assistantship after a private loan has been disbursed, the school may be required to return a portion of the loan funds to the lender to prevent an “over-award.” Students should coordinate closely with their financial aid office to time their loan applications correctly, ensuring they borrow only the net amount needed after the assistantship is applied.

Many engineering students pursue master’s degrees while working or with a job offer in hand. According to IRS Section 127, employers can provide up to $5,250 per year in tax-free educational assistance to employees. Many major tech and engineering firms offer reimbursement well above this limit, though the excess may be taxed as income.

Some private lenders will consider verified future income or employer tuition reimbursement when calculating debt-to-income ratios. If an employer has agreed to pay for a portion of the degree, providing this documentation during the application process can sometimes improve approval odds or interest rates. Students should ask lenders specifically if they factor “employer sponsorship” into their underwriting criteria.

International engineering graduate students: Private loan options

Engineering programs in the United States attract a massive number of international talent. However, international students generally do not qualify for federal student loans (Direct Unsubsidized or Grad PLUS). This makes private loans the primary option for bridging the gap between personal savings and the cost of attendance.

Most traditional U.S. banks and lenders (such as Citizens Bank, Sallie Mae, and SoFi) will lend to international students only if they have a creditworthy U.S. citizen or permanent resident cosigner. Because the cosigner assumes full legal responsibility for the debt, this allows the international student to access competitive interest rates similar to domestic borrowers. This is often the cheapest way for an international student to borrow.

Recognizing that many international students lack U.S. connections, specialized lenders have emerged to serve this demographic. Lenders like MPOWER Financing and Prodigy Finance assess borrowers based on their future earning potential—a metric where engineering students score highly—rather than U.S. credit history.

While these loans provide vital access, they often come with higher interest rates than cosigned loans and may have origination fees. Students should compare the total cost of these loans against the potential return on investment of their U.S. degree.

Engineering salary outcomes and loan affordability

The primary justification for taking on private debt for an engineering degree is the Return on Investment (ROI). Engineering remains one of the most lucrative fields for new graduates, which lowers the risk profile for taking on private loans compared to other disciplines.

According to Beth Akers, a senior fellow at the American Enterprise Institute, “Student loans are an invaluable tool for students to finance investments they would not have been able to afford otherwise.” This is especially true for engineering degrees, where the asset being purchased (the degree) has substantial market value.

When determining how much private debt is safe to take on, a common rule of thumb is to keep total student loan debt below the expected first-year salary. According to data from the National Association of Colleges and Employers (NACE) and the Bureau of Labor Statistics (BLS), engineering starting salaries highlight the strong financial position for engineers.

Source: NACE Salary Survey and BLS Occupational Outlook Handbook data (2024 projections).

For an electrical engineer expecting a $100,000 starting salary, a monthly loan payment of $800–$1,000 is typically manageable, representing roughly 10–15% of gross monthly income. However, students should be cautious about borrowing significantly above these thresholds, as private loans generally lack the income-driven repayment safety nets found in federal loans.

Application requirements and approval strategies

Applying for private loans requires more preparation than federal financial aid. Lenders act as investors; they want assurance that the borrower will be able to repay the debt. Engineering students are attractive borrowers, but approval is not automatic.

To qualify for a private loan, the primary borrower or cosigner typically needs a credit score of at least 670. However, to beat the federal Grad PLUS interest rate of 9.08% as of July 2024, a score of 740 or higher is usually necessary. Lenders look for a history of on-time payments and a low debt-to-income (DTI) ratio.

Even if a graduate student can qualify alone, adding a creditworthy cosigner often results in a lower interest rate. For parents concerned about long-term liability, look for lenders offering cosigner release. This feature allows the cosigner to be removed from the loan after the student graduates and makes a specific number of on-time full principal and interest payments (usually 12 to 48 months), provided the graduate meets income and credit requirements on their own.

To speed up the approval process, have the following documents ready:

• Proof of enrollment in an accredited engineering program.
• Financial aid award letter (showing the funding gap).
• Proof of income (pay stubs or tax returns) for the borrower and cosigner.
• For international students: Visa documents (F-1, J-1) and I-20 forms.

Frequently asked questions

Yes, graduate students are more likely to qualify for non-cosigned loans than undergraduates, provided they have an established credit history (usually a score of 680+) and verifiable income. However, applying with a creditworthy cosigner typically yields significantly lower interest rates.

According to StudentAid.gov, as of the 2024–2025 academic year, Grad PLUS loans have a fixed rate of 9.08% and a 4.228% fee. Borrowers with excellent credit (740+) can often find private fixed rates with zero origination fees, offering substantial savings.

Unlike federal loans, which may offer more lenient discharge options or income-driven plans if you drop out, private loans must still be repaid according to the contract terms. You will be responsible for the full balance immediately after the grace period ends, regardless of whether you completed the degree.

Yes. Engineering graduates with high incomes and strong credit scores are prime candidates for refinancing. You can often refinance both private and federal loans into a new private loan with a lower interest rate once you have started working. Note that refinancing federal loans converts them to private, forfeiting federal protections.

While lenders do not typically advertise “STEM-only” rates, the underwriting models used by some lenders (like Earnest or specialized international lenders) factor in the potential ROI of the degree. Because engineering degrees have low default rates and high starting salaries, these majors may help borderline applicants get approved or secure better terms.

Making the right funding choice is about balancing cost against flexibility. Here is how to proceed:

• Maximize Federal Unsubsidized Loans First: According to StudentAid.gov, always take the full $20,500 in Direct Unsubsidized Loans before looking elsewhere, as they offer lower fixed rates and protections.
• Compare Private vs. PLUS: If you have credit scores above 740, private loans will likely be cheaper than Grad PLUS loans due to the absence of origination fees and lower interest rates.
• Leverage Future Earnings: Use your high earning potential as an engineer to pay down private debt aggressively in the first 3-5 years post-graduation.
• Protect the Cosigner: If using a cosigner, prioritize lenders with a clear, short-term cosigner release policy (e.g., 12-24 months).

Don’t leave money on the table. Checking rates takes minutes and gives you the leverage to choose the best financing for your future.

References and resources

• StudentAid.gov – Official source for federal loan rates, fees, and Grad PLUS information.
• Bureau of Labor Statistics (BLS) – Architecture and Engineering Occupations outlook and salary data.
• National Association of Colleges and Employers (NACE) – Salary projections for new graduates.
• College Finance FAFSA Guide – Step-by-step help for filing your federal aid application.
• College Finance Scholarship Search – Find free money for engineering school before borrowing.