How to afford graduate school
Further yourself, not your debt
A couple of years ago, Helen*, a 28-year-old Cornell law school graduate, landed a job as a litigator at a well-respected New York City law firm. There was just one problem with her prestigious, highly paid position: She hated it. After deciding that she would rather work in the non-profit or government sector, she began to look for a new job. And look and look.
Her timing couldn’t have been worse. There were few legal jobs open in her preferred field. So after a year of fruitless hunting, Helen did what many people do: She went back to school.
“I wanted to make myself more marketable,” says Helen, who is now enrolled in a master’s program at NYU’s Wagner Graduate School of Public Service. “In a better economy, I could’ve gotten the experience by working. Now I’m hopefully getting it with a degree.”
If you’re thinking of going to grad school, here’s how to make the cost work for you.
Before you even apply, carefully weigh the debt you would incur.
Not all graduate degrees are created equal.
“An education is an investment,” says Anthony Sozzo, associate dean of student financial planning at New York Medical College. Look at the salary ranges within your chosen profession and balance them against your potential debt. Then take a deep breath and decide: Can you envision making the future payments? Is it worth it? “You wouldn’t buy a $2 million house and then six months later realize you can’t afford it,” says Sozzo. “Why would you do that with your education?”
Johannes Ma is familiar with this line of questioning. The 29-year-old web developer won a spot at NYU’s Interactive Telecommunications Program, but declined to take it after he realized the debt he would face. The two-year program cost $43,000 a year in tuition alone, and he estimated that he would have to take out about $75,000 in loans each year to cover the costs and living expenses for the master’s program. “I asked myself, ‘Do I want to take out $150,000 for a degree with no guarantee of a job after?'” he said. The answer was a resounding no.
And, remember, not all graduate degrees are created equal. For example, journalism school costs about $31,000 per year. Let’s say you pay a third out-of-pocket and take out $41,000 in Stafford loans for a 2-year program. That means you’ll pay back almost $500 per month for the next 10 years. The salary you need to afford that is $56,000—but the average salary for a journalist ranges from $34,000-$43,000, if you can even find a job. Was school worth it?
If you need help answering this question for yourself, there’s a wealth of information out there to assist you: The calculators at finaid.org are a terrific resource, where you can figure out exactly how much school will cost and how much aid you’ll need.
Keep an open mind
If you decide to apply, do extensive research on potential programs—and don’t base it on the school’s name only.
“At the graduate level, the most important idea is the fit,” says Nathan Bell, the director of research and policy analysis at the Council of Graduate Schools. “The goal is to come out with the skills you need in order to thrive and succeed in a specific field.” The faculty and the research being conducted are what define a program’s reputation—and the quality of your education.
A public university might give you the best of both worlds—stellar academics and reasonable cost. The University of North Carolina at Chapel Hill public health program, for example, was recently ranked number two in the country, according to U.S. News & World Report, and runs about $22,600 per year for tuition and fees for out of state folks. (For residents of North Carolina, it’s about $9,000.) The lesser-ranked Columbia University program (#6) will cost close to twice that.
Don’t fear the big names
Private institutions, while typically more expensive on paper, often have big endowments and more merit-based scholarships to offer students, which can ease the financial pain. Helen’s program at NYU’s Wagner Graduate School of Public Service, for example, offers a host of scholarships for master’s students. They even hand out about a dozen prestigious Dean’s Scholarships every year of approximately $23,000 each, which covers about 75% of tuition.
Play the numbers game
Apply to a number of schools, especially several for which your grades and test scores are above average. You will increase the chances that you’ll be offered a financial package to entice enrollment. Sam*, a 41-year-old communications professional decided to follow his dream and apply to Masters of Fine Arts programs. He applied to a handful of schools, was accepted at two, Sarah Lawrence and The New School. The latter offered him a merit scholarship of $4,500 a year, knocking nearly 20% off the $24,030 yearly tuition. “I was undecided between the two programs, and the money tipped the balance,” he says. “It helped defray the costs, but also made it clear that they really wanted me.”
Don’t overlook the newcomers
Universities are constantly launching new graduate programs, and because they don’t have a reputation to lean on, they often provide financial enticements to attract prospective students. The University of California, Irvine campus opened a law school a few years ago, for example, and its first class of students received 50% off their tuition and fees for the entire three years of school.
Hit up your boss
According to the U.S. Department of Education, about 30% of students enrolled in part-time master’s programs while working received financial assistance from their employers. And support was even more prevalent among part-time MBA students in particular: Nearly half got a leg up from their employers.
A range of companies, from Wall Street firms to the fashion designer and retailer Eileen Fisher, provide educational credit. If you are currently employed, talk to human resources to see what type of courses, if any, are covered. Some employers will only pay for work-related study. Others will only pay for accredited programs or programs that result in a degree. And some require that you commit to working at the company for a set number of years—generally about 3-5—after you complete your degree. Company policies vary, so check your employee handbook or ask someone in human resources.
There are other academic programs that grant significant discounts to those who work while obtaining their degree. Columbia University’s School of Social Work, for example, offers something called a Reduced Residency program: Students who have been employed for at least two years by a human service organization can enroll part-time in the master’s in Social Work program while continuing to work for the social service agency, and may be eligible for a scholarship that covers 50% of tuition.
Create a paper trail
Fill out the Free Application for Federal Student Aid (FAFSA) at fafsa.ed.gov, the federal government’s aid application, according to the federal, state, and school deadlines. The earlier you file, the better, so you can know how much aid you’ll receive before you start school. And, remember, your state or school deadlines may differ; you can find more information on application deadlines on the FAFSA website.
There isn’t a lot of money awarded solely on the basis of financial need at the graduate level, but there is some, so it’s well worth the effort. Even if the FAFSA doesn’t land you free money, it will help you qualify for less expensive federal student loans like Direct Loans (more on those in the “Loans” section coming up).
Find the money
The number of grants, fellowships, and teaching assistantships that are offered to fund graduate studies is vast. From charities to government programs to fraternities, you name a group, they probably fund something. Do your due diligence—research online and speak to people at the universities themselves (they are a great resource). And apply, apply.
Even if the grants seem small compared to the price tag of your education, they can add up. Besides, competition is likely less fierce for a $1,500 scholarship than a $25,000 one; for example, if you’re studying in New York state and are female, you’re probably eligible for the $1,000 Grace LeGendre fellowship. Or, you might find more money by searching for grants related to your field. If you’re studying education, the James Madison fellowship covers up to $24,000 of your costs.
“The money is out there,” says Nathan Bell of the Council of Graduate Schools. “Sometimes it takes digging to get to the source of funds, and it varies tremendously by field, but it’s out there. The students who spend time and energy researching the options for fellowships, grants, and teaching assistantships can sometimes get by with no debt at all.”
The long and short of loans
Even if you do procure a significant amount of funding, you might still require loans. Luckily there are good options available. Direcct Unsubsidized Loans, which are guaranteed by the federal government, are have a relatively low fixed rate and are your best bet for financing a graduate education. But there is a limit: The government caps the amount of loans you can borrow in any given year at $20,500 (unless you’re a medical student, and then it’s $40,500).
In addition, Grad PLUS Loans can help you cover the rest of your school costs. The interest rate is higher, however.
If you have an IRA, the government allows you to make early withdrawals from it to pay for tuition, fees, and supplies. You may have also heard about borrowing from your 401(k). But don’t use these precious retirement funds for grad school. Borrow from either one only in an emergency.
Private loans are another not-so-appealing option. Their interest rates are generally not capped, so they can turn very expensive, very quickly. And they don’t offer flexible repayment options. Be very wary of these loans.
During the time that you’re a student, you can apply to defer payments on most federal loans. But once you get your diploma, you have to think about repaying the money. There are a variety of strategies to lowering the cost of your loan (some lenders may reduce your interest rate if you sign up for electronic payment, for example). The government also offers former students a tax break: You may be able to deduct interest payments on your loans up to $2,500 a year. (Money that goes toward paying the principal, alas, is not tax deductible.)
Some repayment plans assist loan-burdened graduates who don’t earn much money. Under an income-driven repayment plan, you pay no more than a set percentage of your income. The lower your salary, the less you pay each month. If after paying for 25 years, you still haven’t paid off the debt in full, the government might erase the remaining balance. (See ibrinfo.org for more information.)
If you’re unemployed, still in school, or experiencing economic hardship, you can apply for deferment (the lender allows you to postpone repayment and interest) or forbearance (the lender allows you to postpone or reduce payments, but interest continues to accrue) on your federal loan payments for up to three years. See finaid.org for more details.
Try a little forgiveness
Depending on your field, your loan type, and your geographic region, forgiveness programs—which essentially cancel your debt after a certain amount of time—might be another option. If you teach, work in the public service or are employed in the health care field, there are a host of programs, like one run by the National Health Service Corps that offers licensed clinical social workers $60,000 in loan repayments in exchange for two years working in an underserved, high-need geographic area. They’ll even cover your total debt if you work six years or more. More information on forgiveness programs is available at studentloanborrowerassistance.org; type “forgiveness” in the search bar.
Don’t Give Up
The bottom line is if you’re proactive, you can manage to fund a graduate degree, and that education can be priceless. “The goal is to make yourself recession-proof,” says Nathan Bell, “and higher education and graduate education is a great way to do that.”
Even Johannes, the web developer who turned down NYU because of expenses, hasn’t given up on school altogether. The day after he declined with regret the spot in ITP, he received an offer for full-time employment. Now he’s working and saving up as much money as possible. “I feel like I learned a lot from this year’s admissions process. I’m still interested in going back to school and applying to that program again,” he says, and then adds, laughing, “but there are most likely cheaper options.”
*Some names have been changed for privacy.