2 Major Decisions Involved in Paying for Grad School + 3 Tips
How does paying for grad school work?
If you’re considering graduate school, the cost may be a factor that’s holding you back from committing. That’s understandable—graduate degrees can cost tens (or even hundreds) of thousands of dollars to obtain.
This monetary risk is why it’s essential to ask yourself two main questions before you begin paying for grad school…
First: What is the cost/benefit analysis of getting a graduate degree?
Are you trying to avoid joining the “real world” by going to grad school, or do you really think it will help you learn something and get a job with a higher salary?
That may seem like a harsh judgment, but there are some students who simply continue to go to college because they aren’t sure what else they would do. This is not a good reason to get (and pay for) a graduate degree.
On the other hand, earning more money and acquiring essential career skills are definitely good reasons to go to graduate school. According to the U.S. Bureau of Labor Statistics, the median income of those with a master’s degree is $12,948 more annually than those with a bachelor’s degree.
Do the math. With a larger salary, would the cost of your degree be worth it? Or would you be stuck in debt for longer than you’d prefer?
You also need to consider the type of degree you want to get. Some degrees earn more than others.
In 2021, the top-paying master’s degrees are:
- Master of Business Administration (MBA)
- Master of Science in Nursing
- Master of Engineering Management
- Master of Science in Petroleum Engineering
- Master of Science in Finance
- Master of Arts in Political Science
- Master of Science in Computer Science
- Master of Science in Healthcare Management
Most jobs related to these degrees have a median salary of over $100,000. Would this salary bump outweigh what you’d pay for grad school?
Second: Will you attend graduate school with or without loans?
Student debt isn’t something to take lightly. You could spend the next 20 or more years repaying what you owe, PLUS interest. Interest rates add thousands and thousands to your principal over time.
The average amount of cumulative student debt for a master’s degree is $71,318. For all graduate programs—not just master’s degrees—the average student debt amount is $82,800.
Seeing those numbers may make you want to pay as you go, but that’s also tough. It can be a strain on your budget and make it difficult to save for other things, like emergencies and retirement funds.
After you answer these two questions…
If the cost/benefit analysis shows you that grad school would be worth it, then your answer to the second question will determine your next steps.
Below are some ways you can pay for graduate school without and with student loans. Then, there are a few general tips that will help you no matter how you’re paying.
Paying Grad School Without Loans
Paying out-of-pocket with personal savings is the most obvious way to avoid debt. Here are some other ways to pay for grad school without loans.
Academic merit scholarships are available through both universities and outside institutions. The schools you apply for will explain their various scholarships on the financial aid section of their websites.
Sites such as Bold.org, GRAPES, and Scholarship America can help you find scholarships from outside institutions.
Many of these scholarships may seem very small—perhaps only between $500 and $1000—but these amounts add up. Which is why it’s best to cast a wide net, so apply, apply, apply!
Keep in mind that every scholarship you’re eligible for won’t necessarily have “scholarship for graduate students” in the name. But as long as the rules don’t exclude grad students, you can apply to win.
As opposed to loans, grants don’t have to be repaid. They’re basically free money (just like scholarships).
The only catch?
They’re very difficult to qualify for. Many are need-based or only related to specific fields of study.
Grants are offered at both the state and federal level (for example, the TEACH Grant), as well as by private organizations (such as AAUW and GSA) and graduate schools themselves.
Depending on your financial need, you may qualify for the federal work-study program. This means you are matched with an on-campus or off-campus part-time job that helps you pay for your education.
You can be a full-time or a part-time student to take advantage of the work-study program. Just make sure to fill out the Free Application for Federal Student Aid. Even if you don’t take out loans, FAFSA is the only way you can qualify for work-study.
In addition, your school likely runs it’s own work-study or assistantship program. But unlike a federal work-study, they’re usually only available to full-time students.
With an assistantship, you’re essentially a university employee. Teaching and research assistant duties are commonly exchanged for tuition remission and even a living stipend.
Graduate fellowships are similar to assistantships. Fellowship programs vary widely, but typically they cover all costs (tuition, food, housing, etc.) associated with getting your degree and don’t require teaching or research responsibilities.
External fellowships are awarded by professional organizations and groups, while internal fellowships are funded by the school or by donations made to the school. They’re merit-based and competitive, yet highly-rewarding if you can make the cut.
Employer Tuition Reimbursement
Some companies pay for grad school by offering their employees tuition reimbursement. This benefit means your company could reimburse you for the full or partial cost of obtaining a graduate degree related to your job.
For example, Intel reimburses employees up to $50,000 per program and Procter & Gamble will pay for up to 80% of tuition costs and fees.
Ask your human resources department if your company offers this benefit and, if so, how you can take advantage of it. If your current employer doesn’t offer tuition reimbursement, it may be worth switching jobs for a graduate degree you really want.
Paying for Grad School With Loans
Once you’ve exhausted ways to pay for graduate school without loans, you may still have a financial gap to close.
Paying for grad school with loans may seem like a good solution but it’s a double-edged sword. More costly tuition is to be expected, but are you aware of the increased costs and less favorable terms associated with graduate loans?
Different Types of Loans
If you’re considering borrowing money to pay for your graduate degree, start by learning about the different types of loans.
As you may know, there are two main types of student loans: private and federal.
Federal loans are funded by the government. StudentAid.gov explains all of the different kinds of federal loans, how they work, and how they can be repaid.
Undergraduate loans and graduate loans are not made equal. Here are some key differences during the 2020/2021 academic year..
- Higher interest: the average interest rate on graduate loans and Grad PLUS loans is 2.05 points higher than undergraduate loans.
- More fees: the loan fee for a Grad PLUS loan is over 4% while direct subsidized and loans is 1.059%.
Private student loans are available from private lenders. Depending on your credit score, you may be able to get a better interest rate on private loans than you could on federal loans. But one big downside is that you won’t be eligible for any of the federal student loan repayment programs.
Private loans are usually much riskier than federal student loans. However, you should do your own research. Compare the pros and cons, then come to your own conclusions on what works best for your situation.
Know Your Repayment Options
Federal student loan repayment programs help grads pay back their debt more easily through extended loan terms and/or lower monthly payments.
Income-driven repayment plans are the most popular because your monthly payment depends on your income level. But there are other options, learn more about repayment plans here.
You can also consider refinancing your federal student loans. Good credit could mean getting a lower interest rate.
Unfortunately, since refinancing loans are borrowed through private lenders, you will no longer be eligible for any federal repayment programs if you refinance. While refinancing can be helpful for some, it’s not always the best solution. Be sure to get all the facts and weigh all your options.
Don’t Count on Forgiveness Programs
Loan forgiveness programs are difficult to qualify for, but unbeatable if you can use them.
Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness are some of the more sought after programs. The student loan forgiveness section of StudentAid.gov lists the various programs and their qualifications.
If you want to make loan forgiveness part of your long-term gameplan, it’s important to learn about these programs before you even enroll in a graduate program.
However at this point in time, student loan cancelation isn’t feasible for the large majority of students. Full or partial student loan forgiveness isn’t completely impossible, but the odds aren’t good either. According to Eduationdata.org, only an abysmal 0.3% of student loan debt is eventually forgiven.
Top 3 Paying for Grad School Tips
1. Always Fill Out FAFSA
It doesn’t matter if you take out federal student loans or not. You should fill out the Free Application for Federal Student Aid (FAFSA) for every year you are in graduate school, just in case.
It’s also the only way you can qualify for programs like work-study. It can be a pain to fill out, but it doesn’t take too long and it’s definitely worth it.
2. Choose a School that Suits Your Budget
When searching for the right graduate program, make sure that tuition is a big factor in your decision.
It’s tempting to choose a prestigious school despite the expense. However, what matters most is that you do the work and get the degree, not how well-known the university is.
3. Go as Slow as You Need to
As long as you maintain part-time student status, you can still qualify for federal loans. And if you’re paying out of pocket, only taking a couple of classes per semester is a good way to keep costs down.
Don’t feel pressured to finish your degree quickly and “keep up” with everyone else. Working at your own pace can be better for your stress levels and your wallet anyway. Do what’s best for you.
Final thoughts on paying for a graduate degree
Don’t forget to answer those first two questions before you enroll in any sort of graduate degree program. The cost/benefit analysis can help you decide if grad school is worth it for you in the first place; how you are going to pay will determine your next steps.
This is a bare-bones guide to the more common ways of paying for grad school, but it’s best to do more research before making your final decision. And remember, StudentAid.gov is an invaluable resource!
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About Guest Author, Kira Rosemarie
Kira is a writer and illustrator specializing in personal finance. She holds a degree in studio art from Indiana University and is finishing up her MBA from Nova Southeastern University. She’s worked with Debt.com since 2018 and is a certified debt management professional.