How to Pay for Grad School: Financing Options

Grad school brings additional funding options

Mature female student sitting with friends in Grad School

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Getting a graduate degree can be a smart money move in the long run, but first, you’ll have to get over a big short-term hurdle: how to pay for grad school. Unlike a four-year program, the cost of a grad degree can vary widely, from $30,000 to $120,000 or more.?

Luckily, there are a lot of options to pay for grad school. We’ll help you zero in on the best choice so you can start your new career off on the right foot when you get to the other side.??

It's best to first exhaust your federal loan options and look for any available free aid, but many people need more help paying for grad school after that. See the best graduate student loans to get started.

Overview of Financing for Grad School

Paying for grad school isn’t too dissimilar from paying for your undergrad studies. Just like before, you’ll need to come up with a plan to finance your education. Unless you were born to a wealthy family, chances are you’ll need to cobble together funding from a few different places, like most people.?

Here are the main strategies for how to pay for a graduate degree:

  • Scholarships and grants
  • Fellowships and assistantships
  • Student loans

Scholarships and Grants

The best way to pay for grad school is by getting free money, and there’s actually quite a lot of it around if you look for it.?

The quickest way to get started down this path is by filling out the Free Application for Federal Student Aid (FAFSA) as early as you can because many scholarships and grants are given out on a first-come first-serve basis. 

The FAFSA becomes available every October 1 for the upcoming school year.

The FAFSA will point out any federal or school-based aid available to you, but many other organizations offer grants and scholarships too. Plan on spending a few hours scouting out as many of these scholarship options as you can. Check with local, state, and tribal governments, nonprofit organizations, industry groups, businesses, and aggregator websites like Fastweb

Take notes on the deadlines, award amounts, and requirements. Put this information in a spreadsheet so you have your own custom menu of free money that you can easily refer to.

Fellowships and Assistantships

Many graduate programs hire their own students to help perform the work of the university. As a teaching assistant, for example, you may be responsible for leading the lab portion of an undergraduate course in your area of study. As a research assistant, you may even be paid to conduct research on your own thesis project.?

In addition to a modest living stipend, some universities even offer tuition waivers for fellows and students. In the biology field, for example, it’s quite common for graduate students to not have to pay anything at all for their graduate degree because all expenses are covered through fellowships and assistantships. This may not be the case with every graduate program, however. 

Student Loans

About 54% of graduate students end up taking out student loans to further their education. Since student loans aren’t free and can cause many headaches after you graduate, it’s best to only use loans to cover any remaining gaps after you’ve received as much free financial aid as possible.

Student loans for grad school can be broken down into the same two categories you might be familiar with from your undergrad days: federal and private student loans.

  • Federal student loans: You apply for these when you fill out the FAFSA. Federal student loans are the best choice because they’re often cheaper and come with far more protections and repayment options to make your post-graduation life easier.?
  • Private student loans: While they are best left as a last resort, you can apply for these loans with individual lenders. Your rates may be higher and lenders are far less willing to work with you if you ran into financial snags after you graduate.?

As an example of how federal student loans are better than private student loans, payments on federal student loans were paused at 0% interest in March 2020 due to the COVID-19 pandemic. Private student loan borrowers have had no such reprieve.?

Other Financing Options

Most people use a combination of free aid, loans, fellowships, and assistantships when figuring out how to pay for grad school. But there are a few other options too:

  • Personal savings: If you’ve been saving up in a 529 plan or other savings account, this is obviously the best choice before taking out loans, but not everyone has savings available.
  • IRA savings: The IRS allows you to use funds from your IRA to pay for “qualified education expenses” without charging the normal 10% early withdrawal penalty if you’re under age 59 ?. 
  • Employer reimbursement: If you’re fortunate enough to be going back to school for a degree that your current employer can benefit from, ask if it’ll reimburse all or a portion of the cost. 
  • Federal work-study: Not just for undergrads, federal work-study jobs are also available for qualifying grad students. When you fill out the FAFSA, you’ll be notified if you’re eligible or not.

Best Graduate Student Loans

?Lender ?APR Range ?Loan Amounts ?Loan Terms
Earnest 4.42%–16.42% $1,000–$250,000 5–15 years
Credible  4.41%–16.99%? Varies by lender? Varies by lender?
SoFi  4.99%–14.48%? $1,000 to cost of attendance? 5–15 years?
Ascent  5.48%–15.94%? $2,001 to cost of attendance; $400,000 aggregate? 5–20 years?
Discover  5.24%–16.37%? $1,000 to cost of attendance? 20 years?
Splash Financial (Refinance) 4.96%—10.99%? $5,000—Not disclosed? 5–25 years?

See more of the best graduate student loans to help pay for your continuing education.

Tips for Financing Grad School

Figuring out how to get money to pay for grad school can be tough, but luckily it’s probably not as hard as grad school itself will be. Here are some general tips to keep in mind:

  • Sort out your undergraduate loans: Most lenders—federal and private—allow you to defer payment on your undergraduate loans if you return to school, but you’ll need to notify them. 
  • Know the norms of your program: Grad school can be horrendously expensive, like if you’re getting an MBA at a private school, or relatively affordable, like if you’re studying wildlife biology at an in-state public college. Know what’s normal for graduate students in your field so you don’t end up paying more than you have to.
  • Do a cost-benefit analysis and post-graduation budget: Many people go to grad school as a default since they’re not sure what to do yet. Instead, try putting together a realistic budget with student loan payments and a starting salary to ensure getting a grad degree makes financial sense too. 
  • Watch for career-specific loan forgiveness programs: Some high-demand professionals, like teachers, may qualify for special programs to have their student loans forgiven. 
  • Read the fine print: Always read the entire contract, even for free financial aid. Some grants, for example, can be converted to loans if you don’t uphold the terms of the contract.

What Are the Different Types of Financing Options for Grad School?

Most students pay for grad school using a combination of savings, scholarships, grants, fellowships, assistantships, and student loans. Depending on your school and your situation, you may also qualify for federal work-study or you may be able to ask your employer to reimburse some of your costs.

What Are the Pros and Cons of Student Loans for Grad School?

Student loans can make or break your plans to attend grad school, especially if you’re not able to find enough funding to cover your costs otherwise. However, they’re the most expensive form of funding and can make it much more difficult to make ends meet after you graduate, especially if you take out private student loans.

What Are the Requirements for Grants and Scholarships?

You’ll be required to fill out the FAFSA to see whether you qualify for federal and school-based financial aid. Organizations that offer other types of financial aid can set their own requirements. Depending on the program, you may have to meet certain merit-based requirements or produce a piece of work, such as an essay, that’s voted on by a panel of judges.

How Can I Maximize My Chances of Getting Financial Aid for Grad School?

You can maximize the amount of financial aid you get by filling out the FAFSA as soon as it becomes available. Many scholarships and grants are offered on a first-come-first-serve basis. Aside from that, be sure to spend time scoping out grants and scholarships through other groups. Keep track of everything in a spreadsheet so you can quickly see your options at a glance.?

What Are the Tax Implications of Taking Out Student Loans for Grad School?

If you’re paying off education debt, you can deduct up to $2,500 of student loan interest payments as long as you meet certain requirements. Also, if you have federal student loans forgiven as part of an income-driven repayment plan (separate from Public Service Loan Forgiveness), you’ll owe taxes on the student loan balance that’s forgiven.

Article Sources
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