The decision to go to graduate school has been made. The school and course of study have been selected and the acceptance letter is in hand. Now comes the really hard part — paying for it.
Graduate students usually assume a lot of debt, much more than undergraduate students. The average cost of a master's degree can range from $30,000 to $120,000, according to FinAid.org, a website that offers student financial aid information, advice and tools.
According to FinAid.org, the median additional debt is $25,000 for a master’s degree and $79,836 for a professional degree. More than 25 percent of graduate and professional students borrow more than $42,898 for a master’s and $118,500 for a professional degree.
Mark Kantrowitz, publisher of the FinAid and Fastweb websites, warns of overborrowing.
“The rule of thumb is not to borrow more than what the expected starting salary would be after graduation,” Kantrowitz said. “For instance, a master’s of nursing might cost $60,000, but at today’s demands, a nurse would make that. Don’t borrow $100,000 for a master’s of journalism or history unless you’re going to get a Ph.D. and teach in a university.”
Still, there are outlets for tuition assistance. With plenty of research, graduate students can come up with a patchwork of loans, grants and reimbursements that can make a dent in the bill.
Employer support
“The most obvious avenue is to get your employer to pay for all or part of your studies, especially for an MBA,” Kantrowitz said. “But there usually is a service commitment. A business will often require you to work a year for every year of studies they pay for.”
However, according to the Society for Human Resource Management, fewer companies are writing those checks. The percent of employers who don't offer reimbursement for graduate study rose to 44 percent last year, up from 35 percent in 2007, and many of those who do are tightening up the internal requirements.
Federal loans
Federal education loans are a good bet since their interest rates are lower than traditional bank loans, have more flexible repayment plans and don’t require credit checks or collateral.
A Stafford loan, with a fixed rate of 6.8 percent through 2013, is the most common way to pay for school. There are two types of graduate Stafford loans: subsidized (the government pays the interest when the student is in school) and unsubsidized (the student pays the interest but it can be deferred until after graduation). Subsidized loans are based on family need; unsubsidized loans are not.
Both types offer other benefits. For instance, a student can borrow up to $20,500 a year for a total of $138,500 (up to $65,000 may be subsidized); for health professionals, the total amount jumps to $224,000. In addition, repayment doesn’t start until six months after graduation. The standard repayment term is 10 years, although there is some flexibility.
Another federal loan is the Graduate PLUS loan, a low, fixed-interest rate student loan guaranteed by the government and not based on need. Currently, the interest rate is at 7.9 percent and payment can be deferred until after graduation.
Scholarships/fellowships
Many colleges, alumni groups and private and public organizations offer scholarships or fellowships for advance studies but Kantrowitz warned it’s harder to get one for a “terminal” degree.
“Most of the fellowship money is for students who are getting a master’s so they can go on to get a Ph.D. It’s tends to be more limiting for those who are simply pursuing a master’s degree,” he said.
Private bank loans
Many banks have special student loans with deferred payments and lower interest rates.
College 529 plans
College 529 plans, which are federally funded but run through the state savings program, can be used to help pay for graduate school.
"There are many benefits to having a 529 plan and anyone can start one at any time," said Chuck Penuel, director of Georgia's Path2College 529 program. "For one thing, there is no federal tax on the earnings as it grows."
Paying off loans
Even with tuition assistance, graduate school is expensive and it may take at least a decade to pay off the loans. And don’t even think about defaulting.
“You have a better chance of… winning the lottery than the government letting you off on the loan,” Kantrowitz said.
He suggested living within a tight budget.
“Get a roommate, don’t get expensive coffee, buy used books,” he said. “Make informed decisions. Otherwise, you could be in debt for a very long time.”
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