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Continuing Education: How to Pay for Grad School

Whether you’re pursuing your master’s, doctoral or another advanced degree, consider the financial implications of how you’ll pay for grad school.

graduation-cap.jpg_lg.jpgPursuing a degree beyond your undergraduate education is a path that often leads to substantial benefits in life. In fact, more than 9 in 10 grad students believe that they are investing in themselves by attending some sort of graduate program.1 This investment often pays off in the forms of advancing your career path, opening yourself up to roles that require more responsibility or leadership, and increasing your earnings.

No matter the advanced degree (master’s, doctoral or otherwise), roughly two-thirds of students agree that graduate school is the new minimum level of education for career advancement in any professional occupation.1 Furthermore, research shows that those with a higher education level do on average earn more and the overall number of individuals attending grad school is consistently rising. According to data released in 2017 by the U.S. Bureau of Labor Statistics, the median weekly earnings of those with a master’s, professional, and/or doctoral degree surpasses those with a bachelor’s or associate degree. Additionally, looking at just master’s degrees alone, while 235,564 degrees were conferred for a total of 33 professions for the school year of 1970-71, 758,708 degrees were conferred for the school year of 2014-15.2

Earning a graduate degree is clearly becoming more of a norm for many professions; yet the decision of whether or not to attend grad school is a complex one. Many enter their undergraduate years fully knowing that they’ll likely need further schooling to enter into their desired field—medical, dental and law students are excellent examples of this. For others, they may not even consider grad school until the later years of undergrad or even several years into their careers. For example, 49% of MBA majors waited between 1-2 or up to 10+ years between attending undergrad and grad school.1

The financial implications

Choosing to continue your education beyond an undergraduate degree is a decision that can affect many things in your life: your career, your personal life, and certainly your finances. The high cost of attending some sort of grad school indicates that planning ahead for exactly which financial resources to utilize is crucial. The average cost for an in-state, first-year medical student at a public institution including tuition, fees and health insurance in 2016-17 was $34,594.3 The average the typical graduate student spent for the same school year was $24,812.1 Moreover, doctoral students spent 40% more on average than master’s degree students at $30,960 and $22,496, respectively.1

From a financial standpoint, the first step in the process should be calculating all of your expenses to determine what you’ll be responsible for each year. This should include more than just your tuition—factor in costs such as rent or mortgage payments, everyday living expenses, moving/travel/commuting expenses, books, and whatever else you’ll be responsible for during your time in school. Once you have a figure in mind, you’ll be able to more accurately plan for how to fund your education.

There are four main methods for how to pay for grad school:

  1. Utilize your own savings
  2. Work throughout school
  3. Apply for scholarships, grants or fellowships
  4. Consider federal student aid and/or private student loans

Be sure to consult with your financial advisor and your school to determine if other options would be better suited for your particular situation. Below is a more in-depth look at each option:

1. Utilize your own savings

The best option for paying for grad school is paying with your own money that does not need to be paid back or accrue interest. If you have the luxury of knowing that you want to attend grad school but your anticipated start date is still several months or even years out, strive to save as much as you possibly can in the meantime. A strict adherence to your budget during this time can be immensely helpful. Find ways to help yourself save more, such as downsizing your home or moving to a more affordable area, cutting back on eating out, canceling any recurring expenses that you can live without, paying down any existing forms of debt you may have, and so on. While it may seem excessive at times, saving as much as you possibly can will provide you with a nice cushion to rely on when your first year rolls around.

2. Work throughout school

Working throughout school, depending on your schedule, could help significantly with both your school and daily living expenses. If you’re currently working full-time, consider asking your employer if they offer any sort of employer-provided tuition reimbursement. However, even if you’re fortunate enough to work for a company that does offer tuition reimbursement, don’t automatically expect that to take care of your entire tuition bill. In 2017, of the full- and part-time students who indicated that they received an employer tuition reimbursement or stipend (14%), the average amount contributed was $4,413.1 The IRS caps the tax-free tuition benefits that an employee can receive at $5,250 per year. While an employer could potentially offer more, the additional money would qualify as compensation and would likely be taxed accordingly. Get in touch with the appropriate person at your company discuss the details of this in advance.  

Regardless of whether your current employer offers tuition assistance or not, finding a job that can accommodate your busier school schedule is ideal. Whether you attend school part-time and work part-time or attend school full-time and find time to work when your schedule allows, even just a few hours a week can help relieve some of the financial burden.

3. Apply for scholarships, grants or fellowships

While many consider these to be strictly for undergrad students, there are numerous scholarship and grant programs available on the graduate level as well. Do your research on scholarships or grants that you would be eligible for based on your program, school, or even interests, hobbies, aspirations, etc. Fellowships are merit-based programs that you can apply for that are to be used to cover costs related to your schooling. Don’t keep your search for any of these limited to your school—there are many private and professional organizations that offer programs for grad students to apply for. Application requirements will vary based on the specific program. Given that many may require an essay or professional recommendations and there can be a lot of competition, a good rule to follow is to allow yourself plenty of time to complete the process.

4. Consider federal student aid or private student loans

While applying for federal aid is not likely to garner much excitement, especially from those still dealing with undergraduate student loans, it is a widely used option for grad students across the board. In 2017, student borrowing accounted for 53% of all graduate school expenses.1 To get started, you’ll need to complete a Free Application for Federal Student Aid (FAFSA) to apply for aid including federal grants, work-study and loans. Make sure you’re aware of the deadline to apply for your college, state and designated school year. As a graduate student, you will almost certainly be considered an independent student, meaning you will not need to provide any parent or guardian information.

Federal student aid options available to graduate students include the following:

  • Federal Direct Loans. There are two types of federal direct loans that graduate students may qualify for and which are the most commonly utilized: Direct Unsubsidized Loans and Direct PLUS Loans. Students eligible for the Direct Unsubsidized Loans may borrow up to $20,500 per school year (or up to $40,500 for medical students), with some exceptions based upon the student’s program.4 Students who need to borrow more than is specified by the Direct Unsubsidized Loans may apply for a Direct PLUS Loan. Both options are unsubsidized, which means that as a student, you’re responsible for paying all of the interest that accrues on the loan until the balance is completely paid off. Federal loans do offer more generous protection for borrowers than private loans do, including the possibility of income-driven repayment options, forgiveness options, and more.
  • Federal Work-Study. To find out about federal work-study options at your school or prospective school, get in touch with your financial aid office. Options will likely depend on when you apply, your level of financial need and your school’s funding level. All earnings will go toward helping you pay education expenses and the program encourages both community service work and work related to your studies.4

If you’ve exhausted all other options, private loans offer another route for students who may require more than their own savings or federal aid offers. You can inquire about private loans from commercial lenders such as banks or other financial institutions. Because the interest rates depend on your complete financial picture, including your credit history, the rates presented are often higher than the rates of federal loans.

Other items to consider

Depending on your specific financial situation, you may have more options than those listed above to explore. For example, the American Opportunity Tax Credit and Lifetime Learning Credit offer a chance for you to claim a credit of up to $2,500 and up to $2,000 for qualified education expenses, respectively.5 Restrictions on applying for only one of these credits per year as well as on your modified adjusted gross income (MAGI) apply, so be sure to consult your financial advisor and/or tax professional for specifics.

Lastly, many grad students resort to either using credit cards or pulling funds from their retirement savings accounts to help fund their educations. Due to the often-high interest rates accompanying credit cards and the fine associated with withdrawing funds early from your retirement account, it is advised to refrain from these methods as payment options if at all possible.

Graduate students tend to be more self-reliant than undergraduates—in 2017, 77% of graduate school expenses were paid by the student, compared to 30% of undergraduate expenses paid by the student.1 Given this, it is all the more important for grad students to plan ahead for how to tackle tuition, fees, and other education-related expenses. You’re making a valuable investment in yourself by attending grad school—take some time to develop a well-thought-out strategy for taking on that significant of a financial investment.

Interested in discussing this topic further with a financial advisor? With offices in 23 states, there is likely a North Star financial advisor near you. Contact an advisor here.

Written by North Star Resource Group.

1“How America Pays for College.” Sallie Mae and Ipsos. Published July 2017. 

2“Master’s degrees conferred by postsecondary institutions, by field of study: Selected years, 1970-71 through 2015-16.” National Center for Education Statistics, Digest of Education Statistics, Table 322.10. Published August 2017. 

3“Tuition and Student Fees Report, 2012-2013 through 2017-2018.” Association of American Medical Colleges. Updated October 2017.

4“Financial Aid for Graduate or Professional Students.” Federal Student Aid, an Office of the U.S. Department of Education. Published September 2017.

5“Tax Benefits for Education.” Department of the Treasury Internal Revenue Service, Publication 970. Published January 2018.

Financial Advisors do not provide specific tax/legal advice and this information should not be considered as such. You should always consult your tax/legal advisor regarding your own specific tax/legal situation.

North Star Consultants, Inc. - Insurance Products and Services. CRI Securities, LLC – Securities and Investments. Securian Financial Services, Inc. - Variable Products and Securities. North Star Resource Group offers securities and investment advisory services through CRI Securities, LLC and Securian Financial Services, Inc. CRI Securities, LLC is affiliated with Securian Financial Services, Inc. Members FINRA/SIPC. North Star Resource Group is not affiliated with Securian Financial Services, Inc. North Star Resource Group is independently owned and operated. North Star Resource Group| 2701 University Ave SE | Minneapolis, MN 55414. 2106031 / DOFU 05-2018

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