Debt and the Real Cost of Grad School

Freelance Writer

Being a grad student isn't cheap—that probably doesn’t come as a surprise. But what's the real cost of getting a graduate degree?

The realities of graduate student debt today

According to the New America Education Policy Program brief The Graduate Student Debt Review, about 40% of the approximately $1 trillion owed in total student debt is shouldered by graduate students. In 2012, the average graduate student left school with nearly $58,000 in debt, up about $17,000 from the 2004 average. However, of the nearly 21 million current college students, only three million are in grad school. That means a very small portion of the student population bears an enormous amount of the total debt.

So, why do grad students get the short shrift—and what can they do to make graduate school a financial viable option?

According to the brief, student loans run the gamut from several thousand dollars to amounts in the six figures. Students in law or medical programs tend to carry higher debt upon graduation, averaging $140,000 and $161,000 respectively Those students often take on such high debt expecting to see a commensurately high income shortly after landing a job. But even a Master of Arts degree graduate typically clocks in at more than $50,000 in total debt.

It doesn’t help that a lot of the financial aid available to undergrads, including Pell Grants for low-income students, isn’t available to grad students either. Rather, there are more student loan options—with higher borrowing limits at that. Put it all together and the lopsided student loan debt burden shouldered by grad students starts to make more sense. However, that doesn’t make it easier to carry.

Alleviating the student loan burden

Grad students can lighten the load by being proactive and flexible in their graduate school search, as well as their quest for financial aid. It starts by putting a lot of thought into your graduate program choices and a lot of work into finding funding for grad school. Students need to consider all of their options and really understand the financial impact of student debt. As a grad student paying for part of your own schooling, you also have to consider the bigger picture. For example, your credit record can impact your aid, so if your credit score is less than stellar, you should work on improving it and consider postponing grad school until you’ve done so.

You should also have a good sense of what your finances will look like after you’ve completed your graduate degree. When you leave grad school with a student loan bill of $50,000, you're likely to have a monthly payment plan that will cost you $400 a month. Assuming a 6% interest rate, you'll be responsible for that bill for 15 years. (If you're coming from medical school with that hefty $161,000 staring you down, that payment jumps by almost another $1,000 a month.)

Getting a graduate degree might seem especially urgent and necessary to move your career forward, but you have to look at the costs realistically. You don't have to skip grad school, but you should compare financial aid packages and figure out how you can work any projected loan payments into your post-grad life. Can you give up the idea of your dream school for more financial stability after you graduate? Will you need to get roommates to reduce your housing costs? Can you push back other goals that involve money—cars, vacations—or will you be willing to find cheaper alternatives?

Before you commit to any loans, check out graduate scholarships, grants, teaching opportunities, and fellowships to help you pay your tuition. Make sure you exhaust all your options before you sign on the dotted line for yet another loan.

Consider tackling the financial aid process as a part-time job. It takes effort, lots of (virtual) paperwork, and an unrelenting commitment to deadlines. If you don't start early and stay on top of all the requirements and the deadlines, you could miss some potentially big aid.

When you are researching, keep a running list of potential aid programs and their deadlines. It helps to keep a calendar of all the deadlines; then you'll have a note of when to apply the following year, if need be.

When you are ready to apply for loans, start with federal loans, as they generally have better interest rates than a private lender like a bank. Fill out the Free Application for Federal Student Aid (FAFSA) to see what kind of aid you can get (including federal PLUS loans) and talk to your graduate program about other aid opportunities. A grad student can borrow up to $20,500 with a Stafford loan, but the interest starts accruing when you are in school (unlike undergrad Stafford loans that don't start accruing interest until after graduation).

The cost of graduate school is intimidating if you'll be depending on loans and other aid. But if you approach the financial aspect of grad school as carefully as you do the academic portion, you'll have a better shot at getting a great education without a huge financial burden.

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