How to Pay for Graduate School: Explore All Options Available
Making it into graduate school can feel daunting to a young adult for many reasons. The last thing you want to worry about is how you are going to pay for it, along with any college debt you may have already incurred.
Paying For Graduate School: Tips & Advice
Here are some tips and advice on how to pay for graduate school. These can help ease the burden so that you can focus on your studies.
Apply for Financial Aid (FAFSA)
The first step when it comes to financial aid is to fill out the Free Application for Federal Student Aid (the FAFSA). This makes you eligible for certain federal loans, which we discuss further on in this post.
Any loans granted will be considered in your financial aid package, which may include other forms of aid as well. You can follow this link to the FAFSA.
Apply for scholarships
Most graduate schools offer financial aid in the form of scholarships, fellowships, and grants. These can cover all or part of your studies and are not repayable.
Grants are usually based on needs. Scholarships and fellowships, on the other hand, are based on a combination of needs and merits.
You need to do your research. Find out what your graduate school offers, which scholarships apply to your academic department, and which stem from a central financial aid office. Depending on what you study, you may also qualify for financial aid from several public or private organizations.
Most importantly, note that scholarships, fellowships, and grants are extremely competitive! So, apply as early as possible to obtain the maximum benefit you can.
If you are not already working, there are graduate assistantships available at most graduate schools.
Assistantships are a form of paid academic employment that can help cover part of your tuition (referred to as ‘tuition remission’). They sometimes include a living stipend as well. In exchange, you provide teaching or research assistance for a set number of hours per week on campus.
Assistantships are also based on merit, often departmental, and are incredibly competitive. Again, you need to do your research and be proactive. Find out what work-study programs your school offers and if there are any specific faculty members in need of assistance in your department.
Graduate programs are designed to accommodate the working professional, whether in a part-time or permanent capacity. Explore the options available and consider finding a job that you can do while keeping up with your studies.
Refinance existing loans
Refinancing any existing college loans can help you obtain a lower interest rate and help you pay them off faster. Essentially, a private lender pays off your existing loans and replaces them with a new loan on better terms.
You, or a co-signer, need a strong credit score to qualify for refinancing.
But be aware, refinancing an existing federal loan may cause you to lose important federal loan perks, such as loan forgiveness and income-driven repayment plans. Make sure that refinancing gives you a lower interest rate and that you can meet the terms of your refinanced loan.
Assess exactly how much you need
Factoring in any financial aid obtained, expected earnings, savings, and existing college and other debt, work out how much you still need for tuition if any.
Remember, you need to be able to live, so include reasonable living expenses that are not covered by the above. Living according to a monthly budget is a good way to monitor your living expenses and see how they fluctuate.
After completing the FAFSA, you will be eligible to apply for federal loans, which include Direct Unsubsidized Loans (also called “Stafford Loans”) and Direct Graduate PLUS loans.
With Stafford loans, you can borrow up to $20,500 per year, with an aggregate limit of $138,500, including any undergraduate Stafford loans. They have a fixed interest rate, set annually by the government, and are unsubsidized. This means that you are responsible for all interest accrued during the period of your enrolment.
Graduate PLUS loans have a higher fixed interest rate. The loan amount is determined by the total cost of attendance, less any other financial aid amounts. These loans are credit-based, so you need to have a good credit score. However, the credit requirements are less strict than with private lenders.
If the FAFSA, work-study, and financial aid options do not have you covered, you will need to look to private loans through banks and credit unions.
If you have a good credit score, you could benefit from lower interest rates. There are fixed and variable interest rate options, should you be able to start repaying while you study.
If you are in the non-profit or public sector, or a field that is in demand, look out for any state, federal, or school-sponsored repayment programs.
Have a look at:
- SoFi, for fee-free loans and flexible repayment plans.
- Ascent, for customized loan terms and a co-signer release option, if you make certain consecutive on-time payments.
- Sallie Mae, for a good contender to the federal Graduate PLUS loans.
- You can use Credible to compare lenders and find the best option for you.
Understand interest rates and payment terms
The implications of interest rates and repayment terms are the most important factors to understand when taking out a loan.
Fixed interest rates mean the interest rate is a fixed amount that does not fluctuate over time. Variable interest rates do fluctuate over time but are often lower to start than fixed rates.
Depending on your financial needs, you can either:
- defer payment of the loan amount and interest
- pay interest only
- make partial payments of a fixed monthly amount
- or start making immediate payments of both the loan amount and interest.
If you choose to defer, interest accrues over time and, at the end of deferment, any unpaid interest gets added to the principal loan amount (called capitalization). Any contributions towards the interest before capitalization will reduce your total loan amount and improve your financial position.
Use a co-signer
A co-signer is a person with a strong credit score who agrees to take responsibility for your private loan repayments should you default. If you do not have a good credit score, having a co-signer may be the only way to secure loans from private lenders.
You can also benefit from lower interest rates and qualify for larger loans if your co-signer has a strong credit score.
As you make consistent, on-time loan repayments, you will slowly build on your credit score. Consider loans with a co-signer release option or refinance your loan to have them removed.
Explore local options
Always start local when it comes to school choice, financial aid, and banks.
Relocating can be costly and unnecessary if you can obtain a reputable qualification from a graduate school near-by.
To find out what private and state-funded scholarships are on offer locally, contact your city’s Chamber of Commerce and your state’s Department of Education.
You will need to make important financial decisions throughout your life and these can impact your future as much as your studies do. Combining research on your chosen career path with sound financial planning will ensure that you graduate with both qualifications and greater financial freedom.