The best ways to finance your graduate degree

Pursuing a graduate degree is not a cheap endeavor, which is why sometimes it’s not even worth it. With tuition costing an average of $8,850 per year at public institutions that offer master’s degrees and private schools charging three to four times as much, there are situations where your future earnings just aren’t enough to justify the costs. 

Then again, a graduate degree can lead to higher pay and better job prospects in some cases. There are also situations where you have to have a graduate degree to work in a specific field. Examples include social work or school administration.

Even if you decide a graduate degree will be worth the time and money spent, however, you should still determine the least expensive ways to borrow the money. Consider these tips as you prepare for graduate school and all the costs that come with it. 

Start with federal, state and university aid first

No matter which level of education you’re pursuing, it almost always makes sense to consider government resources first. You can approach graduate school in this sense just like you started your initial stretch of college. 

Fill out a FAFSA form, or Free Application for Financial Aid, so state and federal government agencies can determine if you’re eligible for any aid and how much.

While it’s possible you’ll qualify for aid that doesn’t need to be paid back, federal student loans for graduate school tend to be popular since they come with low fixed interest rates and consumer protections like deferment and forbearance. 

With Stafford loans, for example, you can borrow up to $20,500 per year for graduate school with a fixed APR of 6.60%. Direct PLUS loans, on the other hand, let you borrow more with a fixed APR of 7.60%. 

Consider private student loans

While you are usually better off maximizing federal student loans, you can also consider private student loans from an independent lender or loan platform like SoFi or College Ave. 

Private student loans can come with fixed interest rates as low as 4.33%, which is much lower than federal loans offer. The catch is, they typically require good or excellent credit or a qualified co-signer, whereas federal student loans are available to anyone.

Private student loans also fail to offer consumer protections like deferment and income-driven repayment plans, so you should only use this option if you’re absolutely sure you’ll be able to repay your loans with ease. 

Set yourself up for Public Service Loan Forgiveness (PSLF)

If you work in a field that serves the public, it makes sense to consider how a program like Public Service Loan Forgiveness (PSLF) could help you pay off your graduate school loans after the fact. This program promises loan forgiveness for individuals who agree to work in certain public service jobs and make on-time payments for ten years, or 120 months in a row.

With PSLF, you should theoretically have all your loans forgiven once you complete the ten-year commitment. However, keep in mind that you’ll have limited choice in jobs and may need to move to an area where your expertise is in demand.

The most important detail to know about PSLF is that not all student loans work with this program and private student loans definitely do not. To qualify for PSLF, you will need to have federal student loans and you still may need to consolidate certain loans such as PLUS loans with a Direct Consolidation Loan first. 

The bottom line: If you’re focusing on qualifying for PSLF, make sure you utilize federal student loans that work with the program. If you take out private student loans instead, you will not be eligible. 

Work for an employer with education reimbursement

More and more employers are offering programs that let workers attend school part-time for a discount. The catch is, you will need to keep working for them while you attend school and you normally have to agree to work for them several years after you graduate. 

It’s hard to say whether your employer or any potential employer you have in mind offers education reimbursement, so your best bet is heading to Human Resources so you can ask. 

Consider zero interest borrowing options

Also remember that other options exist to help with higher education costs outside just tuition and fees. A credit card that grants 0% APR on purchases for a limited time can be a valuable tool if you need extra cash to cover some living expenses or pay for books. 

Just remember that, like all good things, zero interest offers always come to an end and you’ll eventually be charged a much higher APR. 

Also, you can pay your college tuition and fees with a 0% APR credit card if your school allows it. This doesn’t mean you should, and this strategy can be risky if you wind up being unable to repay your loans before your introductory offer ends. 

In a nutshell

Before you commit to graduate school, make sure to determine what your long-term return on investment (ROI) might look like. If earning a graduate degree won’t lead to considerably higher earnings, you may be better off skipping grad school altogether and looking for other ways to boost your income. 

If you know for sure that graduate school is a sure thing, on the other hand, then don’t discount the fact that how you borrow money can make a big difference in your long-term costs. Look for ways to borrow less, secure the lowest APR possible or to get someone else to pay, and you’ll be a lot better off.

Holly Johnson

Personal finance writer

Holly Johnson is an award-winning personal finance writer who focuses on credit cards and credit, early retirement and travel. Johnson blogs at ClubThrifty.com and is also the co-author of Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love, which is available on Amazon.com.