When deciding whether you should attend grad school, one major concern is financing your advanced degree. The most common ways to pay for grad school are through student loans, scholarships and savings.
There’s no guarantee that you’ll find a scholarship, however, and it usually doesn’t pay all of your costs. Also, most students don’t have enough in savings to pay for grad school. So, loans may be necessary.
Determine your ability to repay the loan
My advice is to first decide what you can afford, and then me can work, advises Sara Goldrick-Rab, professor of higher education policy and sociology at Temple University, and author of Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream.
For example, you cannot expect a master’s degree in education to quickly pay off and make loan repayment easy-so I would hesitate to borrow to get it. To reduce your student loan debt, Goldrick-Rab recommends attending school part-time while you work.
Most students assume that they’ll have a well-paying job; that can be dependent on a variety of factors. In addition, students often underestimate the monthly amount they’ll need to repay.
Unfortunately, student loans are crippling to many students of undergraduate and graduate schools, and it isn’t uncommon for students to graduate with well over $100,000 in debt and monthly payments after graduation of $1,000 or more, says Steven Rothberg, president and founder of College Recruiter. With rent or mortgage payments, a car payment, groceries and other expenses, he says it’s not hard to understand why many college grads are barely getting by.
However, some graduate degrees, such as those in business fields, have a higher return on investment (jobs in these fields pay more), so business students can potentially assume higher loan amounts.
There’s data to suggest that the economic payback on loans from MBA salaries are at their highest levels, says Shari Hubert, associate dean of admissions at Duke University’s Fuqua School of Business. So, depending on your post-MBA job, she says you should be able to service the debt and live comfortably, depending on your risk tolerance and the level of debt you have going into the programme.
Research the various types of loans
The unsubsidised Federal Direct Stafford Loan has an annual loan limit of $20,500 for graduate students, with an interest rate of 6.079%, he explains. After that, there’s the Federal Grad PLUS loan, which is available up to the cost of attendance minus other aid, with an interest rate of 7.079%.
This may not be enough, however. According to a recent survey of grad students commissioned by College Ave Student Loans, 24% expect to borrow more than $90,000, so private loans are another option to help close the gap.
If you are planning to pursue a professional degree, you may want to research professional-specific graduate loans, as they are often tailored to your specific situation, Kantrowitz explains.
If you have to turn to private loans, make sure you read the promissory note and understand the terms of the loan, advises Chad Chubb, CFP, founder of Philadelphia-based financial planning firm WealthKeel, which has a specialty niche serving physicians and attorneys.
If possible, try to avoid [having] a co-signer, and try to limit the loan to no more than two times your expected salary. If it’s any more than that, it may be difficult to repay the loan.
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