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Money for Grad Students: Loans for That Advanced Degree

May 30, 2007 Jennifer Williamson, Distance Columnist | 0 Comments

Money  and Loans for Graduate StudentsThere’s a student-loan crisis in our country

Recent loan scandals have triggered government attempts to regulate the student loan industry.  The U.S. House of Representatives recently considered cutting some student loan interest rates by half. 

But in all the furor, one important group of student borrowers has remained largely overlooked: graduate students.

Graduate students can pay a lot of money for advanced online degrees.  Law and medicine degrees tend to be the most expensive; these often cost anywhere from $20,000 to $40,000 a year. Non-professional degrees are usually cheaper, but in some colleges, it isn’t by much. 

See Also: Online Degree Programs

Just as important as the tuition cost, however, is the time spent out of the workforce.  Some degrees can take six years or longer to complete, while others take only a year or two.  Regardless, time spent in school is time not spent earning money—and that can cost you.

The Student Loan Situation

The College Board’s recent study on student loans indicates that grad students finance more of their online college costs with loans than undergrads do.  According to the data, graduate students pay for an average of 69% of their education costs with loans, while undergrads use loans to fund about 52% of their expenses.

There are endless private loans available for grad students, but the best option is usually a government-backed loan.  These come in three varieties: the Perkins, the Stafford, and the PLUS.

Perkins loans are subsidized, and usually go to the neediest students.  The interest rate as of 2007 is 5%, and the government pays it while you are a student.  There is a limit to how much you can borrow under a Perkins loan: $6,000 per year for graduate students, with a total cumulative limit of $40,000 for graduate and undergraduate expenses combined.

Stafford loans come in several different varieties.  The Federal Family Education Loan Program (FFELP) offers Stafford loans through private institutions.  These loans are guaranteed by the federal government.  The Federal Direct Student Loan Program (FDSLP) is lent directly to students by the government. 

The interest rate as of July 1, 2006 is 6.8%.  Unlike the Perkins loan, the Stafford loan includes disbursement fees of 4%.

Some Stafford loans are subsidized—the government pays the interest while you are in school.  Subsidized Stafford loans are given based on financial need.  Unsubsidized Stafford loans are more widely available.  In 2007, graduate students can borrow up to $8,500 in subsidized and $12,000 in unsubsidized loans.

PLUS loans are unsubsidized, government-backed loans.  Their legal maximum fixed rate is 8.5% as of 2007.  Some institutions, such as the University of Michigan, offer slightly lower rates.  You can borrow the entire cost of your graduate school expenses, minus any other financial aid you receive.  They are given based on credit score, not financial need.

To apply for government-backed student loans, you’ll need to fill out and submit the Free Application for Student Aid.

Private loans are widely available, and many grad students must resort to these to cover some or all of their education costs.  Their interest rates are usually variable rather than fixed, and can range from around 7% to over 16%.

Most government loans rely on financial need to judge who gets a subsidized loan and how much they can borrow.  Luckily, graduate students are automatically considered independent by the federal government—so your parents’ financial status shouldn’t affect your availability.

Other Ways to Pay

However, some graduate students can get most or all of their tuition costs paid for—and even earn a stipend for living expenses—without resorting to loans.  Here are a few of the ways students get these deals.

Become a university employee

Some colleges offer free tuition, a small stipend, and even housing to students who are offered teaching assistants, research assistants, dorm counselors, and other employees.  These programs vary by school and even by department, but many are offered based on merit. 

If you don’t get a teaching assistantship or a research fellowship, consider taking a less scholarly job at the school of your choice.  Some schools offer a certain amount of free classes per year to those who work part-time or full-time as admissions counselors, janitors, food service workers, and other jobs.

Earn a merit scholarship

Other institutions offer merit scholarships to exceptional candidates.  These are often private grants given by alumni and other groups associated with the school.  The amount, requirements, and availability of funds varies by school.

Get your employer to pay

If you have a job and you’re interested in going to grad school, your employer may be willing to pay for some or all of your education costs.  There are usually some strings attached to these deals, however.  Some employers require students to maintain a certain grade-point average to qualify for funding.  Most require employees to stay with the company for a certain amount of time after receiving the degree.  At some companies, employees who quit within a certain amount of time must pay back some or all of the money provided for tuition.

Graduate school is a big investment

While many recent college grads turn to graduate school as a way to postpone entry into the “real world,” it’s not a good choice for students who don’t know exactly what they want to do with their degree.  If you have a strongly defined career goal, however, and know your advanced degree will make you more competitive in your field, the move to graduate school is worth it.


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