Getting into a top graduate program was the first hurdle for Adam Windram. He was thrilled when he received his acceptance letter for a master’s in public policy program at the College of William & Mary. But there was one more challenge: figuring out how to pay for it.
Like many grad students, Windram is combining multiple resources to make his degree possible: several federal loans, an assistantship with a stipend, a special in-state tuition rate, and some support from family and personal savings. “On the whole, I’m very happy with my situation,” Windram says. “I’m looking at a lot less debt than I had initially feared, and I have the opportunity to attend a great and very old university with an excellent academic reputation.”
Graduate school is an expensive undertaking, especially given that many students are still saddled with undergrad debt. However, if you are thorough in researching your options, proactive, and a little creative, you can be the master of financial aid for your master’s degree—and not the other way around.
A graduate degree generally means advancing your career and your pay grade. According to the National Center for Education Statistics, 2013 earnings for those with a master’s degree or higher were 23% greater than for those with a bachelor’s.
But the payoff varies, and with the high and rising cost of grad school, you need to be sure you’re investing your money wisely. Karen McCarthy, a senior policy analyst with the National Association of Student Financial Aid Administrators, suggests talking with graduate program advisors about employment prospects in your field.
“Ask if they have any information about where graduates end up working, or collect information about starting salaries or salaries 10 years out,” she says. “It might not change your mind, but at least then you’re making informed decisions and know what you’re getting into.” You can also research employment statistics through bls.gov or look into potential salaries on websites like Salary.com.
Of course, not all benefits of grad school are quantifiable. Maybe you simply want to change or advance your career, regardless of salary.
According to Reyna Gobel, author of CliffsNotes Graduation Debt (now in its second edition) and CliffsNotes Parents’ Guide to Paying for College and Repaying Student Loans, what’s most important is having a well-thought-out reason for going back to school. “You need to decide if this is the best course of action for the career you want,” she says. “A lot of times grad school is a great investment, and it’s only an extra year or so of your time. But it’s not a great idea if you have no idea what you want to be doing.”
Another degree, another FAFSA
Ah, memories. As with undergrad, the first step to financial aid is filling out the Free Application for Federal Student Aid (FAFSA) at fafsa.ed.gov. But there is one key difference for grad students: whether or not you feel like one, you are now considered an independent adult.
“It’s essentially the same set of questions, so the process is identical, with the exception of not having to put in parents’ information,” says Chuck Walz, Director of Financial Aid at Notre Dame de Namur University in Belmont, California.
Even if you’re not sure you’ll need federal aid, you should fill out the FAFSA. Some scholarships require it, and if something changes and you do need more funding, it’s good to have it ready. The deadline is June 30, but you should fill it out much earlier.
“The best thing you can do is fill it out as soon as possible, because some need-based aid is first come, first served,” Gobel says. “Generally, fill it out the first week of January.” Remember, you can estimate tax information and go back and correct it later if necessary.
Traditional financial aid
Institutional and departmental scholarships
School scholarships accounted for a significant portion (19%) of graduate student financial aid in 2013–2014, according to the College Board.
When researching schools, in addition to contacting the central financial aid office, contact your intended academic department about opportunities specific to your program or field. Some funding is given out automatically, while other opportunities involve an application. It’s a good idea to be proactive, says Walz.
“Every institution is different,” he says. “Funding may be listed on the school website—or it may not be. Particularly with departmental scholarships, they may be listed on the financial aid side of the website, or they may be on the department side. Maybe they don’t tell you about it at all, because it’s an internal set of rules. That’s why it’s always good to ask.”
Private scholarships are a hot commodity for grad students. Students should begin researching private support long before applications are due. There may not be quite as much funding as for undergrad, but there are still millions of dollars to be had.
“You need to be diligent and apply for everything, even if it seems small,” says Laura Bedford, Executive Director of Student Financial Services at Utica College. “There’s a lot of money out there, and a lot of it goes unclaimed.” She suggests setting aside time each week to apply. “Write one great essay and tweak it for each scholarship. You don’t have to reinvent the wheel.”
Websites (like this one!) offer thousands of scholarship listings from every corporation, organization, and association under the sun. Bedford also advises checking directly with any smaller local groups you or your family may be affiliated with, such as churches or rotary clubs.
Uncle Sam is the largest financial aid source for grad students, providing $33 billion in funding in 2013–2014. But even though you can secure a federal loan with relative ease, it doesn’t mean you should. Experts suggest exhausting all other possibilities first and borrowing no more than you have to.
If you do need a loan, there are two differences from undergrad to keep in mind. First, graduate loans are unsubsidized, meaning interest accrues from day one. Second, those interest rates are marginally higher (in 2015, they went up by about 1.5%).
But there is good news. Federal loans have fixed interest rates, so they won’t change over time. They also offer excellent protections and benefits for borrowers, including repayment and deferment options, protections in case of death or disability, and the potential for loan forgiveness.
There are two types of federal loans for grad students:
- Direct Unsubsidized Loans: Nearly all students are eligible for this loan. Although your school determines the exact amount, the loan is worth up to $20,500 per year or a cumulative total of $138,500 (including undergraduate loans). If you’re a student in medical school or another health profession, you may be eligible for higher amounts.
- Direct PLUS loans: PLUS loans are only for students who need to borrow more than the maximum unsubsidized loan to meet their education costs, including tuition, room, board, and other fees. These loans are given regardless of income, but borrowers must pass a credit check or have a creditworthy cosigner.
“Always take unsubsidized loans first,” Bedford says. “Then look at the PLUS loans and other alternatives.”
Private loan interest rates can be as low as 3.2%—or as high as 19%. Low interest rates may be tempting, but tread carefully. “The interest rate matters, but you need to look at other terms and benefits of the loans as well,” McCarthy says.
Gobel advises borrowing only what you can pay off quickly. “I would do it only if you can pay it off within a few years, because you won’t have the same options for deferment or forbearance if you have a financial emergency, or at least it’s not as likely.”
Another downside: most private loans have variable interest rates, meaning they can increase. Private loans are also tied to credit, which means you won’t necessarily receive the lowest advertised interest rates, and the loans are harder to obtain if your credit is poor.
On the other hand, private loans have flexibility federal loans don’t. For example, they generally offer higher limits, and some are available to students enrolled less than half time, as well as international students with a creditworthy cosigner who is a U.S. citizen or permanent resident.
Assistantships are awarded by schools and provide exciting opportunities to gain work experience and connect with professors, all while offsetting costs. Common assistantship roles include teaching assistant, research assistant, assistant to a professor, or resident assistant. These positions are usually part time and have excellent benefits, such as tuition and fee waivers, a stipend, and/or health insurance.
Although fellowships often go to students pursuing doctoral degrees, some are available for master’s students. Fellowships may be awarded by independent organizations, the government, or universities. They are generally geared toward a certain field and/or demographic. Awards can include tuition and fee assistance, a stipend, health insurance, travel assistance, and research funding. Requirements might include several years of post-grad service or completing a special project. Some are renewable after one year.
A small amount of federal work-study funding is available for grad students. If you do receive work-study, take advantage. You’ll be able to earn money while working in a position usually related to your course work. These positions are part time and pay at least minimum wage.
Federal and state grants
The federal government offers a limited number of grants for graduate students, the majority of which are for veterans and members of the military. Two grants available to the general public are the Teacher Education Assistance for College and Higher (TEACH) Education grant, which provides up to $4,000 a year for students who spend four years teaching in high-need areas, and Fulbright Grants, which offer funding to study, research, or teach abroad. States may also have some small grants available.
Additional ways to lower costs
Approximately half of employers offer a tuition assistance or reimbursement program. The average maximum reimbursement is nearly $5,000, according to the Society for Human Resource Management. Some possible strings attached might include holding a minimum GPA or working a set number of years after graduation.
A handful of colleges and universities offer tuition discounts to undergrad alums who return for grad school, sometimes as much as 25% off. Similar price breaks may exist at your parents’ or spouse’s alma maters.
Regional student exchange programs
Public universities may collaborate to offer in-state tuition rates to students from neighboring states. Four organizations offer discounts within their region: the New England Board of Higher Education, Southern Regional Education Board, Midwestern Higher Education Compact, and Western Interstate Commission for Higher Education. The rules vary; for example, the discount may only apply to certain schools or programs.
If you work in public service after graduation, you may be eligible for loan forgiveness. This fairy-godmother-like program cancels remaining federal loan debt after 10 years of qualifying payments while working in public service full time. Eligible occupations include teachers, government employees, volunteer workers, public interest lawyers, health care workers, and military service members.
Loan forgiveness also provides a safety net for those whose loan payments exceed 15% of their annual discretionary income. These students are eligible for a federal program called Income-Based Repayment (IBR), which allows them to make monthly payments based on—you guessed it—income. If they are still repaying loans through IBR after 25 years, the government forgives the balance.
Loan Repayment Assistance Programs
Schools, employers, states, and the federal government are increasingly offering Loan Repayment Assistance Programs (LRAPs). LRAPs help students with jobs in the public service and government sector keep up with monthly payments on federal and sometimes even private loans.
Federal tax credits and deductions saved graduate students $3.1 billion in 2013–2014. The Lifetime Learning Credit allows grad students a credit equal to 20% of the first $10,000 paid in tuition and fees. Interest paid on student loans is also considered a deduction, which can reduce taxable income by up to $2,500. Finally, taxpayers can deduct up to $4,000 in tuition as an exclusion from income, though the deduction cannot be used if the Lifetime Learning Credit was applied the same year. Income limits and other restrictions may apply.
If going to graduate school is the best choice for your career, don’t let the price tag stop you. There are options that help make it affordable at any income level. Keep in mind that one of the best ways to limit debt is to be an excellent student as an undergrad. Good grades, relationships with professors, and involvement in extracurriculars will help open doors to many of the opportunities above.