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Grad school is a big investment of time and money, and chances are that you’ll need to borrow money to get the extra degree. So while you’re understandably focused on how the degree could boost your career—and potentially your salary—you’ve got to figure that debt into your financial future too.
More than three-quarters of grad students take out some kind of loan, according to a recent study. Like any other investment, you should understand what signing up to get that advanced degree means for your financial future.
Here are six things to keep in mind to help you lower your bill, courtesy of financial-aid consultant Kal Chany, author of “Paying for College Without Going Broke.”
1. Search for funding based on your focus
If you’re pursuing a professional degree in a field such as health services, law, education, or business, chances are you can find specialized scholarships, loan forgiveness programs, or other opportunities that can help lower your costs.
The U.S. Department of Health and Human Services, for example, has a range of programs—from grants to repayment help—for students going into health services careers like medicine and nursing. Many professional service organizations—such as the American Bar Association—offer scholarships to promote diversity within the field.
There is no one resource to research all your options, but free search engines like those from the College Board or FastWeb, which help you find scholarships based on your own profile, may be a good place to start.
2. Fellowships and tuition breaks
You moved heaven and earth to get in, but don’t forget: You are also a customer, and the deal needs to be right. Some of the best breaks on grad-school tuition come from the school itself. Nearly half of Harvard Business School students receive a fellowship, for example.
If you’re going for an academic degree without a specific professional path—a master’s degree in the humanities, for example—you may not get the same tuition breaks as a future pharmacist, but there are good options for you too. Chany says: “If you’re going for a Master of Fine Arts (MFA), the free money is more likely to be in the form of fellowships, assistantships.”
3. Delay your start date; consider residency
Take the time to make sure that you’re getting the best deal. Talk with your program directors about any potential benefits to applying early. There might be fellowships or assistantships with deadlines that fall before the general admissions deadline. Waiting a year to apply—or seeing if you can defer acceptance—could translate into a better aid package, which could mean fewer student loans.
You might even be able to establish residency near your school so that you can qualify for lower, in-state tuition rates. “Sometimes my clients think that if you delay making a decision, it’s procrastination,” says Chany. “But you shouldn’t have a feeling of ‘I’ve got to get everything done, I don’t want to be behind.’”
4. Shop around for the best student loan rates
Graduate student loans tend to be priced competitively. You may find the best deal through a government-sponsored Direct Unsubsidized Loan, sometimes known as a Stafford loan, or Graduate PLUS loans, which either you or your parents can take out. There is also a wide range of private student loan options from banks of all sizes—though many depend on your having very good credit.
Remember, since grad school loans aren’t subsidized, the clock starts ticking for interest payments, from the second you start. “By the time you get done with the program, what you owe is already more than what you borrowed,” says Chany.
5. See if carrying older debt is a better bet
Every financial decision you make is connected, and the best investment advice also holds true for financing grad school: The less emotional you can be, the better. For example, while it may seem wise to get clear of your undergrad loans before taking on additional debt, “the interest rate for [federal] loans is lower for undergraduates than for grad students,” Chany says. “So instead of paying off the undergrad loans, it may make more sense to [take advantage of deferment and] stockpile the cash.” One case where it’s usually better to borrow more is if you financed part of your undergrad education with a Direct Subsidized Loan: The U.S. Department of Education will pay your loan interest during a period of deferment, which includes the time you are in school and up to six months after.
6. Take advantage of potential tax breaks
And certainly not least, if you’re considering going back to school—even if it’s just part-time to get ahead in your current field—remember that you might qualify for tax breaks such as the American Opportunity Tax Credit or the Lifetime Learning Credit. (Learn more about the qualifications here). And while your mom might not be as apt to brag as she would if you landed some prestigious scholarship, adjusting your withholdings can add up to as much free money as if an institution wrote you a $2,000 check.
Here’s something else to keep in mind:
Grad school students can’t get federal grants.
Though millions of American undergraduates benefit from federal grants such as the Pell grant, a need-based scholarship, these grants don’t exist for grad students. Grad students also don’t have access to federally subsidized loans, for which undergrads can also apply. These loans are also interest-free, while you’re in school, and for the first six months after graduation, and whenever the loan is in “deferment.”
You can learn more about student loan refinancing with LendKey*