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Ways to pay for graduate school: A full breakdown

At a glance:

Most people who go to graduate school do so to further their career potential.

They invest in those years in the hope of getting a positive return. Graduate school costs are higher than those of undergraduate school, which makes it all the more important to know how you're going to pay for it.

Graduate school costs are higher than those of undergraduate school, which makes it all the more important to know how you're going to pay for it. (Photo: REUTERS/Jonathan Drake)
Graduate school costs are higher than those of undergraduate school, which makes it all the more important to know how you're going to pay for it. (Photo: REUTERS/Jonathan Drake)

If you're like most grad students, you'll have a big mountain of bills to pay off – and your aim will be for the smallest mountain possible so that you can get to work building a good standard of living when you leave the halls of academia for the real world.

Otherwise, a lot of student debt could dampen your ability to afford other things in life, like a home, a family, and leisure pursuits.

Financial aid for graduate school: A quick overview

Financial aid is affected by trends in the economy. When times are bad, universities, endowment funds, and employers cut aid in order to save cash. However, there is still a lot of it out there – you just need to look, and look early.

Here are some other things that will help you:

  • A well-rounded resume with educational experience, volunteer activities, and work experience.

  • A good score on a graduate admissions test like the GRE or MCAT. Most graduate schools require that you pass a standardized test in order to get in. There are prep programs that will help you study for them.

  • Getting your FAFSA (Free Application for Federal Student Aid) in early so that you don't miss out on sources of funding. The FAFSA website can be found here.

  • Going for a PhD instead of a master's degree. PhD programs often come with stipends or teaching or research assistant positions.

Finally, it helps to be certain about what you want to study. If you drop out of school after a year or so and you have a large debt load, you may be financially compromised for years to come and an unfinished degree provides few or no job prospects.

Consider spending some time working, volunteering, or interning in the field you are interested in. Not only will it help clarify what you really want, but it can come in handy when you apply for financial aid.

Federal loan program

The federal government and colleges work together to provide many types of loans to graduate students. In order to get one, however, the school you attend must participate in these loan programs.

Here is a rundown of some common loans and loan types.

Stafford loans

Stafford loans are low-interest, need-based loans. With an unsubsidized loan, interest on them begins to accrue immediately (meaning that you must pay that interest).

With a subsidized loan, the interest is deferred (meaning that the government pays the interest as it accrues so that you don't have to).

Both types of loans have maximum limits on how much you can take out per year and over the course of your school career.

Perkins loans

Perkins loans are low-interest, need-based loans funded by the federal government and administered by educational institutions.

According to the U.S. Department of Education, around 1,700 postsecondary schools participate in them.

One advantage of the Perkins loan is that you might qualify to get it discharged if you enter certain public-sector careers.

PLUS loans

PLUS loans have fixed interest rates, which are relatively high but which can be an advantage if interest rates rise higher.

However, you need a good credit history to qualify for one, and there is no grace period when it comes to repayment. That means you must start paying it back immediately after you graduate.

As with some other loans, you can get a PLUS forgiven if you enter certain qualifying public-sector or non-profit careers. There is no limit on how much you can borrow with a PLUS loan.

Private loans

Private lenders, such as businesses and financial institutions, offer loans for higher education. But compared to federal loans, these private loans offer terms and interest rates that are likely not as favorable.

Loans from family and friends are also an option to consider. These may have more advantageous repayment terms and interest rates, but be sure to get the terms down in writing.

Do you own your home? You might qualify to borrow against the equity in it and use the proceeds for tuition. Some advantages of a home equity loan are that the interest rate may be lower. However, as of 2018, the interest on home equity loans used in this manner is no longer tax deductible.

Grants, scholarships, and fellowships for graduate school

Grants

Grants are awards of money that do not need to be paid back, they can be awarded in a variety of amounts. Therefore, it is in your interest to apply for as many as possible. Schools offer them, and so do state and federal governments.

Private sources also offer some. Grants may be based upon need or merit. Among the most well-known of them is the Pell Grant. Grants are also awarded by foundations and associations that advance particular fields of study.

Grants in your field

Graduate fields that are in demand are the most likely to land free money for tuition. Trade associations and professional associations often have lists of scholarships and fellowships for students to apply for.

Scholarships

Scholarships may be need-based, merit-based, or a combination of the two. They may also be based on your chosen field or on certain specifics, such as your ancestry or where you live.

Some scholarships cover your entire academic career, while others are limited to certain years or get capped at a certain amount. For many of them, you must reapply each year or keep up a high grade level.

Fellowships

Fellowships are based on merit and in some cases need, and are often tied to a particular program. Like scholarships, there are sites online, such as http://www.ssrc.org/fellowships/, that list them.

Where to find them

The financial aid office and the department head of any given college have information on grants, scholarships, and fellowships. And there are many reputable sites online that list them. One example is www.fastweb.com.

Another popular and reputable source of information is the education issue of US News and World Report that comes out every year.

Paying for graduate school: Other approaches

Get your boss to pay

Some employers offer part or full tuition reimbursement for education expenses, including graduate school. This expense is tax deductible for the employer.

Some companies require you to commit to working for them for a certain number of years in return for tuition money. The purpose of this requirement is to ensure that you don't take the money and jump ship as soon as you graduate.

In-state tuition bargains

Some public universities make it easy for you to pay in-state rates if you are from out of state. These states belong to various academic common markets or reciprocity agreements that offer the lower rates to out-of-staters.

Studying abroad

If you can handle homesickness, culture shock, exchange rates, and the other demands of living in a foreign country, going to grad school in another land can save you a lot of money, as well as broaden your horizons and your marketability. Many graduate programs in other countries are a lot cheaper than in the United States.

Teaching or work-study

When you are a graduate student, you may have limits placed on your ability to work. But there are other options. If you choose to become a teaching assistance or a researcher, you might get a salary for doing so. In addition to paying for your tuition, these positions will also add to your marketability after you graduate.

Consider the Federal Work-Study program if you haven't already. The federal government will pay a portion of your wage if you participate in it, and as with teaching, you add to your resume by doing work-study.

Unconventional approaches

It's worth considering some other ideas. For example, colleges that are just starting programs in your field of interest sometimes lure students by offering reduced (or sometimes no) tuition.

There is an element of risk-taking in these ventures, but if the school and the professors are reputable, the offer is at least worth thinking about. And your efforts there will help get the program off the ground.

Summary of ways to finance graduate school

The costs of getting a master's or doctor's degree can be astronomical and saddle you with years of debt.

This alone puts some people off the thought of going to graduate school. But starting early with your research, your applications and your other prep work can help you qualify for some much-needed aid.

And don't overlook the more unconventional avenues. There can be gold mines of value waiting to be discovered there.

This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.

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