Victor David knew that to pursue a career in higher education he’d have to get some higher education himself.
After obtaining a bachelor’s degree in politics from the Catholic University of America in 2014, he set his sights on a masterís degree in management. (He eventually wants to work in student development at a college, or perhaps university administration.) And when it came to paying for that degree, he didn’t want to go the usual route.
“I’ve heard horror stories of people who took out loans and were still paying them back 15 years after graduating,” he says.
So he sought out employment at a place that provided tuition assistance and landed a full-time job at Catholic as the scheduling coordinator for its conferences office. The university offers its employees four classes per academic year free of charge, so David, 23, is getting his degree on a part-time basis.
Graduate school is a big investment. It can lead to big payoffs down the road, but paying for the actual schooling on the front end proves daunting to many students. The key is putting together a financing plan that’s right for you and your career goals, so that you take on any debt in the wisest way possible.
The odds are you will borrow something to help pay for grad school, since loans make up the biggest chunk of graduate-level financial aid. For the 2013-14 school year, graduate students borrowed $33 billion in federal loans, which comprised 61 percent of all financial aid they received, according to the College Board.
Federal loan options for graduate students include direct unsubsidized loans. Interest starts to accrue on these loans from the get-go, but students donít have to demonstrate financial need to qualify. Students can also take out federal direct PLUS loans as long as they donít have an adverse credit history. Students can borrow up to $20,500 each year in direct unsubsidized loans and cover extra grad school costs with direct PLUS loans.
Private lenders like banks serve as other sources of funds, but federal loans are often the safer choice. ìItís always better to go to federal loans first because of their protections, like income-contingent payment plans or the potential for loan forgiveness if you work in public service,” says Justin Draeger, president of the National Association of Student Financial Aid Administrators. These kinds of safety nets typically aren’t available with private loans.
No matter their age, graduate students apply for loans as independent adults no longer under the umbrella of Mom and Dad. They’re fully responsible for the loans they take out, which stay with them until they’re paid back. “Unlike other types of debt, in the worst-case scenario, student loans canít be written off under current bankruptcy laws,” says Daniel Denecke, associate vice president at the D.C.-based Council of Graduate Schools.
That’s why experts advise students to research costs of programs, financing options and expected salaries. And you donít have to borrow the maximum for which you’re eligible if you can get by with less.
“I don’t think the difficulty is getting the loan,” says Charles Caramello, dean of the Graduate School at the University of Maryland. “The important thing is understanding what it means when you take out such a loan. And the more informed the choice, the better the choice will be.”
Many universities now offer financial counseling for students, who can also find information at sites like the Department of Education’s federal student aid page and the Council of Graduate School’s GradSense.
What are students’ options besides loans? They can try to borrow from the Bank of Mom and Dad. Some students tap into their savings, especially those who have spent time in the workforce and stashed away funds.
Federal and state grants made up just 4 percent of the grad school financing pie in 2013-14, according to the College Board. Fellowships and assistantships are often awarded for doctoral students, but less frequently for those at the master’s level.
Pursuing a degree part time can make paying for it easier. It allows students to keep working — and bring in an income. “You’re spreading out your payments over two or three years rather than one or two years,” Caramello says.
Taking David’s approach can help defray out-of-pocket costs for grad school. A 2013 report from the Society for Human Resource Management found that 59 percent of employers offer graduate educational assistance.
If you can’t get your degree debt-free like David, don’t worry. “The data we’ve seen bear out that graduate students who have to take out loans are making generally good investments in terms of higher salaries and better chances of employment,” Denecke says. So those loan payments should all be worth it in the end.
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