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22 Ways to Pay for Grad School (With or Without Student Loans)


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More students than ever are heading to graduate school. According to a 2016 report from the Council of Graduate Schools, total graduate school enrollment has increased by about 1.1% every year since 2006. And the National Student Clearinghouse Research Center reports that graduate enrollment was up 4.3% in spring 2021 over spring 2020.

If you’re one of the many students pursuing an advanced degree, you may be wondering how to pay for it, especially if you already have undergraduate student loans. Paying for graduate school can be even more challenging than paying for an undergrad degree because graduate school is typically more expensive. There are fewer grants and scholarships available, and graduate student loans come with higher costs.

Fortunately, there are plenty of other ways to pay for graduate school, ones that ensure you can graduate without overwhelming student loan debt. And even if you need to borrow for your education, there are ways to do it wisely to ensure the greatest return on your higher education investment.

Ways to Pay for Graduate School

Although more people are attending graduate school today than a decade ago, graduate degrees have gotten significantly more expensive. The cost has risen even faster than that of undergraduate degrees.

According to a 2018 report from the Urban Institute, the net price students pay for a master’s degree (tuition and fees minus any grants) increased 79% since 1996, while the net price for a bachelor’s degree has increased only 49%.

While grad school may be worth the investment for the increased earning potential it brings, it could negate any raise you get from your new degree if you borrow too much. So while you may be unable to avoid financing at least some of your grad school expenses, always borrow as a last resort and first seek other ways to pay for your degree.

1. Negotiate for More Aid

Apply to schools and for financial aid as early as possible. It starts with filling out the Free Application for Federal Student Aid, known as the FAFSA. It’s available at the beginning of each October before the start of the academic year you’re applying for. You have until the deadline of June 30 to complete it.

But early application is the key to getting assistance. More grant money is available at the beginning of the application cycle. So apply as early as possible (by December at the latest) to ensure access to the full pot. And once you have a financial aid award offer or two in hand, shop around.

In addition to being the necessary tool to qualify you for all federal aid, including federal student loans and grants, most schools use the FAFSA to evaluate you for institutional aid, including their own need-based grants. You must resubmit the FAFSA every year you’re enrolled in graduate school to requalify for aid.

While the sticker prices for grad school can be rather shocking, there’s plenty of aid available. For example, according to a 2018 report from the Financial Times, the most significant funding sources for MBA degrees were scholarships, grants, and fellowships, outpacing even student loans.

And don’t be afraid to ask for more aid. If the offer from your No. 1 school choice wasn’t generous enough, use a more generous offer from another school to negotiate for more.

Most universities’ academic departments give out graduate aid rather than the central financial aid office. So speak with a graduate admissions official or someone affiliated with your program to help sort through your options.

Also check with your school on the protocol for negotiating for more aid. Some schools require requests to be in writing or for you to answer specific questions to help admissions officers make their decision.

2. Choose a Lower-Cost School

School choice can be tricky. Sometimes it matters where you go to college. If you’re getting your graduate degree to work in finance or for a specific law firm, some universities are “feeder schools,” meaning specific firms recruit their candidates from those schools only.

But for most of us, an Ivy League education isn’t worth the price. Employers are more interested in your job experience, accomplishments, and the degree itself.

So you could pay to get your law degree from Harvard, which comes with a tuition of $67,081 for the 2020-21 academic year. Or you could pay in-state tuition to get your law degree from a state university like The Ohio State or the University of Wisconsin-Madison, which are both still among the top 40 law schools in the country, according to U.S. News & World Report. But each costs less than half of Harvard’s tuition — $32,060 and $27,704, respectively. And these are just two examples.

Your return on investment depends on your future job plans. For example, when I was considering law school, I wanted to work in social justice. I was accepted to Georgetown University and was excited about the prospect of attending such a prestigious school and living and studying in D.C. But Georgetown didn’t offer me much financial aid.

At the same time, a law school in my hometown offered me a nearly full ride. In the end, I decided to attend the school that offered me more aid because I knew if I went to Georgetown, I’d end up with so much student loan debt, I’d have to work in corporate law to pay it all off rather than do the kind of legal work I really wanted to (and I ended up changing majors anyway). So you have to decide whether the job is worth the cost of the degree.

Choose your school based on your future job plans. Take your potential salary and weigh that against the potential cost of attending your chosen school, including any amount of student loans you’d have to borrow and what your monthly loan payments could be.

Find possible salary data at the Bureau of Labor Statistics or a website like PayScale or Glassdoor. And use the loan simulator at Federal Student Aid to discover your potential student loan payment. In general, avoid borrowing more than your potential annual salary.

3. Secure a Fellowship

Fellowships are merit-based grants awarded to graduate students, and many come with small stipends. So they often cover your tuition as well as room and board and other living expenses. Occasionally, fellowships even cover health insurance.

Thus, they allow you to focus exclusively on your studies rather than having to work or teach, as in the case of an assistantship. Plus, unlike loans, you don’t have to pay them back. And they carry a certain prestige — they look great on your resume.

Moreover, fellowships can help you hone your skills in your chosen career field. They’re more than just money given to pursue your studies. They’re often tied to helping you pursue project-based research in a particular area. Thus, they’re as much educational opportunities as financial ones.

And while the purpose of most fellowships is to cover the cost of tuition, some fellowships fund scholarly activities outside the classroom, such as study-abroad trips, performances, or thesis projects.

Fellowships can come from various places, including your school, federal funding, or outside organizations. You can discover fellowships you might be eligible for by researching databases like the one maintained by ProFellow or the database at UCLA.

Be aware that fellowships are highly competitive, as they’re prizes awarded to graduate and postgraduate scholars based on their potential to make a positive contribution to their academic discipline.

4. Look Into Grants

According to 2019 data released by the National Center for Education Statistics (NCES), about 40% of all graduate students in the U.S. received grants in the 2015-16 academic year, the most recent year for which information is available. Grants are a form of financial aid you don’t have to earn or repay. It’s a form of gift aid given to the student.

Although people often use the terms “grant” and “scholarship” interchangeably, grants tend to be for financial need, whereas scholarships are generally based on merit.

Education grants are typically awarded by the federal or state governments as well as schools. For example, the ED awards the federal Pell Grant based on a family’s expected contribution to the overall cost of attendance as determined by the FAFSA. It’s the largest single grant program. However, it’s only available to undergraduates.

In fact, grants are far more common for undergraduates in general. According to the NCES data, more than 80% of first-time, full-time undergraduates at private four-year colleges and about 50% of those at public colleges received institutional grants for the 2017-18 academic year. And 25% to 38% received federal and state grants.

But that doesn’t mean grants aren’t worth looking into at the graduate level.

Because institutions typically award grants based on financial need, the process begins with filling out the FAFSA. The FAFSA determines what federal grants you’re eligible for. Many schools also use the FAFSA to determine what they can offer you, although some schools have their own aid applications.

Apply early, and don’t wait for an offer of aid. Speak to a financial aid contact person for your graduate program and explain your situation. Be open about what financial resources you need to attend. Many schools offer their own grants and are willing to work with you. Seeking out and applying for institutional aid can be one of the more successful ways to pay for grad school.

5. Apply for Scholarships

Scholarships tend to be more modest in size for graduates than undergraduates. According to Sallie Mae’s 2017 study How America Pays for Graduate School, grants, scholarships, fellowships, or tuition waivers generally cover about 15% of graduate school costs. But every dollar helps. And fortunately, scholarships for grad students are small but plentiful.

One way to find scholarships is to join professional associations in your chosen field. For example, the National Political Science Honor Society Pi Sigma Alpha awards annual scholarships of $2,000 for graduate study. Graduate student members of the National Black MBA Association can apply for an award of up to $5,000. And the Dental Trade Alliance Foundation awards annual graduate scholarships of at least $5,000 to dental students.

Alternatively, use an online scholarship search tool. A few to try include:

6. Get an Accelerated Degree

It may not work for all degrees, but one increasingly popular tactic for cutting the cost of getting a Master’s of Business Administration (MBA) is to fast-track the degree. Many schools offer one-year MBAs, including the University of Notre Dame, Emory University, St. John’s University, and Northwestern’s Kellogg School of Management, to name a few.

There’s an obvious advantage in that you only need to pay for one year of tuition rather than two. The less obvious advantage is that you only lose one year of full-time work if you decide to opt out of working while in grad school.

Speaking of the fast track, some schools even offer five-year bachelor’s-master’s programs that allow students to graduate with both degrees. A dual bachelor’s-MBA degree could be particularly advantageous for business graduates seeking an edge in a competitive job market. They’re worth looking into for undergrads who already know they want to go straight to grad school.

7. Skip a Master’s Degree in Favor of a Doctoral Degree

According to U.S. News & World Report, students interested in fields from public health to English to computer science have options for doctoral (Ph.D.) programs that offer full funding. And while there are situations in which a doctorate might not be worth it, if you can get a fully funded one, there’s less reason not to go for it.

Specifically, if you’re considering a master’s degree in a field with an option for doctorate funding, it’s worth looking into the doctoral degree as an alternative to the master’s. Many assume you have to get a master’s degree before getting a doctoral degree. But it’s possible to apply to doctoral programs without first getting a master’s degree, as most doctoral programs fold the master’s degree into them.

Further, getting a master’s degree can often be more costly than a doctoral degree, despite the doctoral program taking several more years. That’s because schools look to master’s degrees as drivers of revenue. But they tend to hand out fellowships and grants to doctoral students.

Note that even though the program is technically “free,” you must account for your time out of the workforce when considering the financial return.

8. Work Part-Time

It’s challenging to work full-time if you’re also attending school full-time. Some graduate programs even have prohibitions against working. That’s the case for the first year at many law schools, for example.

Further, part-time work doesn’t cover the cost of tuition at most graduate schools, which can range from $25,000 to close to $100,000 per year, depending on the school and program, much less your living expenses. But every little bit you can add to the pot helps reduce any amount you could have to borrow.

The best jobs for graduate students aren’t much different from jobs for undergraduate college students. They allow for maximum flexibility in your schedule. Gig economy jobs tend to fit that bill, allowing students to earn cash on demand between classes. These include things like:

Read our article on the best side gigs for more ideas.

Another flexible part-time option involves putting your skills to work as a freelancer. Starting with a freelancer website like Fiverr or Upwork, you can find work doing everything from website creation to graphic design, social media marketing, and content creation.

Or use your entrepreneurial skills to work part-time as a tutor. As a grad student, you likely have plenty to teach younger students. Many companies, such as Education First and VIPKid, offer online tutoring to students worldwide. So you can work from home on your own schedule.

The pay can vary greatly depending on the type of job and amount of hustle you put in. But you could earn anywhere from about $1,000 per month as an Airbnb host, according to The Washington Post, or $20 an hour as a tutor, according to Glassdoor.

9. Participate in Federal Work-Study

Alternatively, you can work a convenient on-campus part-time job through the federal work-study program. You may have heard of or participated in federal work-study as an undergrad. But the program also applies to grad students.

Unlike grants, federal work-study requires students to work for the money the government gives them to pay for education expenses. The U.S. Department of Education (ED) subsidizes the paychecks of college and graduate students who work qualifying part-time jobs. These are typically on-campus university jobs and could include anything from slinging burgers in the college cafeteria to crunching numbers as a lab assistant. But they could also include relevant off-campus jobs with approved nonprofit organizations or private companies pertinent to a student’s studies.

The pay is low, but you earn at least the federal minimum wage, which is $7.25 per hour as of 2021. And while undergraduates receive hourly pay, graduates have the potential to earn a salary, depending on the work.

Earnings are typically paid biweekly, although some colleges pay weekly or monthly. The money goes directly to you rather than being applied to your school balance. And your employer pays you as you earn, just like any job. So you don’t get any money in advance. For these reasons, many students choose to use the income for living expenses rather than put it toward tuition.

The more popular jobs, such as working in the library or with a favorite professor, tend to fill up quickly, so apply early if you intend to pursue work-study. Many schools have limited opportunities and may award work-study on a first-come, first-served basis.

The gateway to applying for and receiving work-study is the FAFSA, as students must demonstrate financial need. So complete the FAFSA as soon as it’s available on Oct. 1 before each academic year you intend to be in graduate school.

The FAFSA asks whether you’re interested in work-study. Answering yes doesn’t guarantee a job, and you’re not required to accept if offered one. So it doesn’t hurt to say yes even if you’re undecided.

Not all students qualify for work-study, as it’s based on financial need. Students who don’t qualify for federal work-study may be able to get institutional work-study, which is when an academic department or office hires the student using university (rather than federal) funds.

10. Become a Research or Teaching Assistant

Another option for part-time on-campus work is a research or teaching assistantship. Even better, assistantships connect more directly to your studies and come with more opportunities for tuition reimbursement. These positions tend to be exclusively for graduate students, and individual academic departments award them to outstanding scholars.

Assistantships generally cover at least a part of your tuition and often pay a periodic stipend in exchange for a certain amount of research or classroom instruction. Thus, they can be a helpful way to cover a significant portion of your grad school expenses. Plus, you’ll be fully immersed in your field of study and have access to networking and professional development opportunities.

However, assistantships tend to be a lot of work. The average assistantship requires a minimum of 20 hours per week teaching undergraduates, conducting lab work for your professor, or doing research. And while that can give you some excellent experience in your field and add some competitive edge to your resume, it can be a challenging commitment when paired with your course load.

Although assistantships are common, they’re limited in number. Doctoral students typically have more options than master’s degree candidates since they’re often pursuing professorial careers. But teaching assistants are also common in professional degree programs, such as law school and medical school.

Regardless, if you’re interested in pursuing one, be as proactive as possible. Reach out to your school early to see what’s available. Once you know the topic you want to study, focus on the relevant programs and find faculty members in your field who need an assistant. Then, apply as soon as possible.

11. Do a Paid Internship

Like any job, a paid internship can help you earn money to put toward your education expenses. But an internship comes with a dual benefit: It also opens doors to full-time work in your desired field after graduation. In fact, internships are so critical, they’re a vital part of many graduate programs.

For example, while schools typically discourage law students from working during their first year so they can concentrate on their courses, students spend their first summers securing important internships with law firms or judges. And internships with particular firms are highly coveted because of the networking opportunities they bring.

Further, a study by the National Association of Colleges and Employers found that for graduates of the class of 2019 across all degree levels, of those who were offered a job after graduation, 57.5% had completed an internship. Even more telling, pay matters — two-thirds of those who received job offers had completed paid internships, while less than 44% of unpaid interns got job offers.

An internship is a practical way to develop career skills in your chosen field. And if you can secure one with pay, employers take notice. It signals your value. Only consider an unpaid internship if it offers substantial networking opportunities or the chance to develop resume-building career skills you’re missing.

12. Work Full Time

It’s bordering on impossible to be a full-time student and work full time. But many graduate students attend school part time while they continue to work their full-time jobs. Many do it out of necessity because they can’t afford time off from their careers. But even if that’s not the case for you, it may be something worth considering. It could allow you to graduate debt-free.

Working full time allows you to avoid borrowing money to cover living expenses. And while it may take you longer to complete your degree, thus prolonging the amount of time until your degree can boost your earning potential, it also prevents you from taking time out of the workforce. And time out of the workforce often comes with its own setback in earning potential.

Fortunately, many schools are responding to students’ decreased willingness to take years off from their careers with programs they can complete in less time, like one-year MBAs and flexible hybrid programs that combine low residency requirements with online classes or part-time programs.

Additionally, many programs have evening classes that can work around full-time jobs. For example, although many law schools prohibit first-year students from working, law schools with nighttime courses permit students who enroll in those programs to keep their full-time day jobs.

Plus, staying at your job may offer another benefit: tuition assistance from your employer.

13. Take Advantage of Tuition Reimbursement Programs

Many employers offer tuition reimbursement as a benefit. These include large corporations. For example, these companies provide some form of tuition reimbursement:

According to the 2018 Employee Benefits report by the Society for Human Resource Management (SHRM), 49% of the more than 3,000 employers surveyed offered some sort of financial assistance for graduate school. It allows them to boost their collective skill set without hiring new employees. And according to SHRM, it contributes to employee retention.

Tuition reimbursement is different from student loan repayment assistance, another employee benefit offered by many employers to help pay off existing student loans.

Tuition reimbursement is an amount paid for completing current coursework and may come with stipulations, including minimum GPA requirements, employment terms, and specific courses that qualify.

Companies that offer this benefit typically require that coursework have some connection to your current job role. For example, if you work in information technology, your job will likely approve tuition reimbursement for a technology-focused MBA but probably not a law degree.

And most companies require you to have worked for the company for six months to a year before you qualify for the benefit. They also generally require you to stay with the company for an additional length of time to avoid paying back a prorated amount of the tuition reimbursement.

Note that according to IRS rules as of 2021, companies can only reimburse employees’ tuition up to $5,250 per year tax-free. So many company reimbursement programs max out at that amount. But it’s still a significant portion of money you don’t have to borrow in student loans.

Also know that often, you have to pay your tuition in advance, and your company reimburses you. So you must have the cash in hand to pay your school bill upfront.

Check your benefits package or talk to your human resources department to determine whether your company offers this perk and how much reimbursement you can get.

14. Use Military Benefits

Those who are actively serving in a branch of the Army, Navy, Air Force, or Marines can have their full tuition and expenses paid as well as receive a monthly stipend of $2,200 or more, depending on their field of study and branch of the military.

There are many qualifying graduate fields, including medicine, dentistry, nursing, veterinary medicine, law, business, engineering, and information science. Visit each military branch’s website for a complete list of graduate education fields and benefits.

Those serving in the U.S. Coast Guard can also have a portion of their tuition covered.

The military also offers numerous loan repayment assistance programs (LRAPs). These help you pay back existing student loans. For example, if you already borrowed money to get your law degree and enlist in the Air Force as a judge advocate general (better known as JAG) for three years, the Air Force will pay $65,000 toward your student loans through the Judge Advocate Student Loan Repayment Program.

Another way to use the military to help pay for grad school is through the GI Bill. If you’re a former military member, you can use the GI Bill to help pay for higher education expenses at any level — undergraduate or graduate.

However, your benefits vary based on when you were discharged. In 2017, Congress passed the Harry W. Colmery Veterans Educational Assistance Act, also known as the Forever GI Bill, which eliminated the 15-year limit on educational benefits for new enlisted members. That means veterans no longer have a time limit for completing their education. But the benefit only applies to those discharged after Jan. 1, 2013.

Those who served up to 36 months (three years) in the military are eligible to have their full tuition and fees covered at public universities at the in-state rate for up to 36 months. The GI Bill also gives students a monthly housing allowance and stipend for textbooks and supplies.

For those attending private universities who need more funding, check to see if your school takes part in the Yellow Ribbon program. The program is an agreement schools make with the U.S. Department of Veteran’s Affairs (VA) to split costs not covered by the GI Bill, thus eliminating costs for the student. Currently, only veterans are eligible for the program, but it will extend to active-duty members in August 2022.

Many schools participate in the Yellow Ribbon program, including Ivy League universities. To see if your school is one of them, check the interactive map on the VA’s website.

15. Budget Carefully

If you’ve been out of school for a while, the days of being a broke college student may seem like a distant memory. But it’s time to revisit them. One of the best ways to keep grad school debt in check is to monitor your spending carefully.

One of the most consequential differences between student loans for graduates versus undergraduates is there are no caps on borrowing. Although you can’t borrow more in federal loans than the amount your school certifies as the total cost of attendance minus any other financial aid you receive, the cost of attendance includes more than just tuition. It also covers living expenses. Although you can borrow loans to cover expenses like rent, try to avoid it if possible.

The less you borrow, the more return you’ll get on your degree. I made the mistake of borrowing student loans to cover living expenses in grad school, and I definitely paid for it later. And you know what they say: A penny saved is a penny earned. So live on a tight budget for now, knowing it’s only for a short while.

To help you save, work out a personal budget. Use old-fashioned paper or a computer spreadsheet to track your monthly bills and discretionary spending, or use a budgeting app like Tiller or Personal Capital. Knowing how much you’re spending each month and what your expenses are can help you stick to predetermined limits and ensure you borrow as little as possible.

16. Take Out Federal Direct Student Loans

Borrowing student loans should be a last resort. But for many grad students, it’s an unavoidable one. According to 2020 data from The Brookings Institution, 50% of the current outstanding student loan debt in the U.S. is owed by grad students, who account for only 25% of borrowers. The other half is owed by undergraduates, who represent 75% of all borrowers.

Grad school is expensive. According to 2019 statistics from the Pew Research Center, the majority of those with six-figure student loan debt are graduate students. So chances are you’ll need to borrow to cover at least part of the tab. But six-figure student loan debt is tough to repay, even with a six-figure salary.

So borrow carefully, and start with federal direct loans. The ED lends federal direct loans. Direct loans for graduate students come with a higher interest rate than those for undergraduates. But the rate is still typically lower than that of a private student loan, and you have access to all of the repayment options and borrower protections that come with federal student loans. Private loans have much less generous terms.

The interest rate for graduate direct loans disbursed between July 1, 2021, and July 1, 2022, is 5.28%, and they’re subject to an origination fee of 1.059%.

All graduate direct loans are unsubsidized, which means interest begins accruing from the moment they’re disbursed. So even though payments are automatically deferred while you’re in school, you will owe a greater balance on graduation day than you originally borrowed. The interest is also capitalized (added to the principal balance). So you start paying interest on interest. For that reason, it’s best to make interest-only payments during school.

17. Supplement With Federal Grad PLUS Loans

If you reach the annual or lifetime cap for federal direct loans, federal grad PLUS loans allow you to borrow up to the total cost of attendance. There’s no limit on borrowing with grad PLUS loans except as defined by your school. Your school decides the annual cost to attend, including the total amount of tuition, fees, books, transportation, equipment, supplies, and living expenses.

There is no lifetime limit to how much you can borrow with PLUS loans. Thus, it’s possible to finance your entire education with federal loans without ever resorting to the private loan market. That means you can retain all the advantages of federal student loans, such as access to more generous deferment and forbearance terms. You also have superior borrower protections, like discharge on death or permanent and total disability and a wider variety of repayment options, including income-driven repayment and student loan forgiveness options.

You don’t need to have good credit to qualify. Although the ED checks your credit, they only look to see that your credit history doesn’t have any significant delinquencies or recent bankruptcies. You don’t need a high income or credit score.

But PLUS loans aren’t without their drawbacks. Like federal direct loans, they’re also unsubsidized. The interest rates are typically high, and they come with a hefty origination fee of 4.228%. So think carefully before taking one out, and don’t borrow more than you need.

18. Use Private Student Loans From a State-Based or Nonprofit Lender

Because the interest rate on grad PLUS loans is so high, it’s worth it to at least shop for a lower rate on a private loan.

When you think of private student loans, it’s likely your first thought is of money lent by banks. But some private loans come from states or nonprofit organizations. And because they’re guided solely by the public-purpose mission of helping families and individuals pay for school, they often have more favorable terms than loans from for-profit lenders.

Nonprofit and state-based lenders typically offer loans with fixed interest rates. Most don’t charge origination fees, and many include borrower benefits for graduates who work in a high-need area or critical field in the state. Several nonprofits also offer flexible financial hardship repayment programs.

But if you plan to work in a public-service field, be aware that private loan options, even those from state-based lenders, are ineligible for Public Service Loan Forgiveness. So if you’re planning to work in public service, you’re probably better off borrowing federal loans.

Find loans available in your state by searching the Education Finance Council’s nonprofit education loans information website, where you can compare quotes from different lenders.

19. Consider Private Student Loans From a For-Profit Lender

For-profit student loan companies like banks and credit unions issue private student loans as well. Most student loan experts caution against borrowing student loans from for-profit lenders because private loans have limited repayment options, less generous or nonexistent deferment and forbearance terms, and typically higher interest rates.

But private student loans could have advantages for some borrowers. Private banks offer interest rates based on your credit history, so if you have an excellent credit score and high income, you could qualify for a lower rate from a private lender than the government offers on grad PLUS loans. And a less costly loan means a greater return on your degree.

Additionally, some private lenders specialize in loans for certain graduate degrees, such as health professional degrees, and offer perks for these students. For example, Laurel Road provides health care students full deferment while in school plus an interest rate reduction once they’re employed.

If you refinance your student loans after you graduate, you can find even more private loan refinance lenders with additional benefits. For example, Splash Financial offers medical students the option to make low $100-per-month payments during their residencies. Plus, their student loans have interest rates even lower than federal direct loans.

If you go this route, compare offers from several lenders and look at more than just interest rates. Consider other benefits like repayment options and lengths of deferment and forbearance terms, including in-school deferment options. Use a tool like Credible to compare offers. Credible uses a soft credit inquiry to match you with lenders, so it doesn’t affect your credit score.

20. Make Use of Federal Loan Forgiveness Programs

If you borrow student loans for graduate school, especially if you borrow a significant amount, take advantage of student loan forgiveness if you can. Although you can have your loan balance forgiven after making 20 to 25 years of payments, depending on the plan, that type of forgiveness isn’t generally worth it.

The borrowers who stand to benefit the most from student loan forgiveness are those who qualify for Public Service Loan Forgiveness (PSLF), a loan forgiveness program for individuals working in public service.

Unlike the standard forgiveness, those who have their loan balance forgiven through PSLF only have to make 10 years of income-based payments. Plus, the forgiven balance isn’t subject to income tax.

The American Rescue Plan Act of 2021 made the remaining balance of student loans forgiven through the standard path tax-exempt through 2025. But up until then, they’ve been subject to income tax. And though Congress could opt to extend the date or make it permanent, this exemption could revert to the old standard after 2025.

Further, many graduate students pursue advanced degrees for jobs that require them but whose incomes will never account for the cost. Teachers are one example. Teachers in K-12 grade levels are required to pursue master’s and doctoral degrees to advance in their careers, but their raises aren’t sufficient to cover the cost of their degrees.

Likewise, a doctorate is required to teach at the college level, which involves five to six years of graduate study beyond a bachelor’s degree, easily costing a minimum of $125,000 at a rate of $25,000 per year — the average in-state cost of a public university, according to 2021 statistics from EducationData.org. But most college professors don’t make six figures. The mean salary is just above $80,000, according to the Bureau of Labor Statistics.

And teachers aren’t the only ones who struggle to pay back student loans. Although doctors make a mean income of $208,000 per year, according to the Bureau of Labor Statistics, the average medical school debt outpaces it at $232,000, according to Credible.

Yet teachers, doctors, and professionals like lawyers working for nonprofits are ideal candidates for PSLF. To qualify, one must make 120 payments while enrolled in an income-driven repayment program and working full time for a qualifying employer. Your employer must be a government agency or nonprofit organization. That includes most hospitals and all public schools and colleges.

If you’re considering PSLF, weigh the forgiveness benefit against any lost salary potential from working in a public-service versus private-sector job. But if you were planning a public-service career anyway, PSLF is an ideal way to pay for graduate school.

But note that the program has a flawed history. It’s historically rejected 98% of applicants. And while there’s always a chance that trend could continue or the program could disappear in the future, the current push in today’s political climate is toward fixing the system, according to Insider.

For the best chance at having your loans forgiven through PSLF, it’s crucial to complete and submit all required certification forms annually. According to data released by the ED, between November 2020 and April 2021, nearly a quarter of PSLF applications were denied because of missing information. Visit the PSLF page at Federal Student Aid for specific requirements and to download the employer certification forms.

21. Use a Federal Loan Assistance Repayment Program

If you work for a federal agency after you graduate, your job may come with a recruitment perk: student loan repayment assistance, otherwise known as an LRAP. Federal law regulates LRAPs for federal agencies, which allows them to offer job candidates up to $10,000 per year to a maximum of $60,000 total in student loan repayment assistance.

LRAPs are a way to attract highly qualified job candidates to fill high-need positions. But the law permits any federal agency to offer them as an employee benefit, although it’s up to participating agencies to determine their own program requirements.

Recipients of a federal LRAP must fulfill a minimum three-year service obligation with the federal agency.

Employees of federal agencies can also qualify for PSLF, so it doesn’t hurt to double up. Plus, depending on how much you owe, this program has a slight advantage over PSLF. If you owe $60,000 or less, you could have your entire balance wiped clean without making any payments toward your loans or needing to wait 10 years for forgiveness of the balance. So you won’t have to stay at the job for 10 years.

However, the program also has its drawbacks. For one, if you lose your job for misconduct or poor performance or leave before your three years are up, you have to pay back any money the agency paid toward your loans.

And whether or not you complete the term, you have to pay income tax on any annual amount above $5,250 paid toward your loans, which is the amount allowable as tax-exempt by the IRS.

Additionally, not all government jobs offer this perk or the same repayment amounts. And only federal loans are eligible for the program.

There’s no formal application for a federal LRAP. Instead, you need to ask your potential or current employer if student loan repayment is a benefit offered through that federal agency.

More than 35 federal agencies offer the perk, including all 15 cabinet-level departments and over 20 independent agencies. If you’re interviewing for a federal agency that doesn’t, ask them if they’ll consider providing the benefit if you accept the position. All federal agencies are eligible to offer it.

22. Use an Employer Loan Repayment Program

And if you go to work for a private company, look into employer LRAPs as a way to help repay your student loans.

In the years before the coronavirus pandemic, an increasing number of companies were offering their own LRAPs as an employee benefit. As noted by SHRM, LRAPs help attract high-quality new hires.

From employees’ perspective, one of the biggest shifts in their financial priorities over the last decade has been away from saving for retirement and toward paying off student loans. And as the COVID-19 pandemic has continued — heightening individuals’ immediate financial worries — that priority has only intensified. It placed a considerable emphasis on student loan repayment as a sought-after perk over 401(k) matches.

Fortunately, in August 2018, the IRS approved an Abbott Laboratories plan to qualify employees who contribute at least 2% of their paychecks toward their student loan payments for the company’s 5% 401(k) match. Thus, this program combines student loan repayment with retirement savings to prevent employees from missing out on either. And this has paved the way for other companies to follow suit.

More recently, the Consolidated Appropriations Act of 2021 has made it even easier for employers to provide student loan relief by making it tax-free. Through Dec. 31, 2025, employers can contribute up to $5,250 annually per employee toward the latter’s education debt without the employer or employee being subject to taxes. Some experts believe it could become a permanent provision, according to U.S. News & World Report.

Although not every employer provides an LRAP, it’s worth looking into. Just like your company’s 401(k) match, if you don’t use it, it’s like leaving money on the table.

If your company doesn’t offer this benefit, speak with your HR department to let them know about the advantages of providing it. As U.S. News points out, it helps them attract top job candidates, retain the best employees, and reduce stress on the overall economy.


Final Word

According to statistics compiled by Credible, the average grad school debt is $84,300. Although this amount can vary widely by degree, few graduate students can pay for grad school without taking on student loans, even if they were able to avoid them as an undergrad.

From higher program fees to steeper loan costs to greater life responsibilities, at first glance, graduate students seem to have a much tougher road to tread than undergrads. But the picture isn’t all bleak.

Some options are better for undergrads, like more grant opportunities and lower student loan interest rates. But graduate students have more access to fellowships, assistantships, and LRAPs since many of these are designed for jobs that require advanced degrees like medical and law degrees.

Plus, though grad students may borrow higher amounts of money than undergrads, they’re also far more likely to repay it, according to Insider. That’s because students’ advanced degrees tend to lead to more lucrative and rewarding careers.

So with a bit of strategic planning to take advantage of as many strategies as possible, you can maximize your return on investment to make graduate school ultimately worth it.

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