Just in case you weren’t already aware: grad school is expensive. If you’re lucky, federal or private graduate school financial aid will offset some of the expense—you might even get some tuition reimbursement from your employer. But even so, the remaining costs are usually substantial. For students paying for their entire grad school bill, total costs can be daunting. The good news about grad school debt is the return on investment for graduate school is often worth the cost. The bad news is it’s still debt. If your post–grad school salary doesn’t even make a dent in your student loan debt, then it’s hard to justify a graduate degree. And the longer you take to pay it off, the more interest you will pay. These tips can help you deal with the grad school debt you have accrued.
Get organized
Make a list of all your grad school loans (and undergrad loans, for that matter) with due dates and lender contact information. Be forewarned too: the loan payment is due even if you don't get a statement or other notice from the lender. Undergraduate loans that were deferred while you were in graduate school will also resume repayment sooner than new loans obtained in graduate school; new loans typically have a six-month grace period, while other loans will re-enter repayment within 60 days.
Related: Financial Aid for Grad School: What You Need to Know
Autopayments and taxes
Not only are you less likely to be late with a payment if they're automatically transferred from your bank account to the lender, but many lenders offer discounts, such as interest rate reductions, as an incentive for enrolling in auto-debit. This can save you money. Additionally, up to $2,500 in interest on federal and private student loans can be deducted from income on your federal tax returns. The deduction is an above-the-line exclusion from income, so you can claim it even if you don't itemize.
Pay loans with the highest interest rates first
If you find yourself with some extra money (Holiday bonus? Grandma still sends a birthday check? Surprisingly lucrative yard sale?), put it toward an additional payment on the loan with the highest interest rate. Do this even if some of your other loans have higher balances. This will save you the most money over the life of the loans and lead to quicker repayment of all your loans. Be sure to include instructions too, specifying the ID number of the student loan and that the extra payment should be applied to the principal balance and not treated as an early payment of the next installment. You do not want the lender to skip installments, especially if you're signed up for auto-debit.
Related: How to Pay for Grad School: Plan Ahead to Get Ahead
Manage your money responsibly
This means paying all your debts on time (not just grad school student debt), so your credit scores should improve within a few years of graduation. At that point, you can shop around for a better interest rate on a private consolidation loan and consider refinancing some or all of your student loans. Generally, private lenders cannot match the interest rates on Federal Stafford loans, but you might be able to get a better deal on your private student loans and Grad PLUS loans if you have excellent credit. You should also create a budget if you don’t have one already. Account for your graduate student loan payments, all of your recurring payments like rent and insurance, your incidental expenses, emergency fund savings—everything.
Get other people to pay your debt
Are you eligible for certain repayment plans on your federal student loans? Can you get a job with a company that offers tuition reimbursement or student loan forgiveness? Do you have a super-rich relative looking for a new philanthropic cause?! Okay, we’re joking with that last one (mostly). Although it does raise an interesting, if slightly controversial, point about using crowdfunding to pay back school student loan debt.
Related: Financial Aid for Grad School: What's Different This Time Around?
Some final advice
Fortunately, the problems posed by graduate school debt are manageable with a little strategy. According to Sean-Michael Green, Associate Vice President for Graduate Enrollment and Marketing at the University of New Haven, a smart first step is to try to minimize the amount you owe if you can. “Try to maximize the ‘free’ money you can receive in the form of grants and scholarships,” he says. “Many institutions offer assistantships that come with a partial or full tuition waiver in exchange for providing service to the university, often in the form of teaching or research.”
Green also advises keeping living expenses to a minimum while you’re pursuing your graduate studies. “Being a graduate student entails living a spare lifestyle, struggling to make ends meet at times,” he says. “I advise folks that while they are destined to go through this phase, they can either do it while they are actually grad students, or they can suffer through it as professionals paying back their loans.” The point is to be smart, and methodical, and leave no stone unturned when it comes to paying back your grad school debt.
Do you have any questions about grad school financial aid, loans, and/or student debt? Get more advice with the advice in our Graduate School Articles section.
