Fast Fact

At least 40 percent of grad students get some free money.

Source: U.S. News

How to Pay for Graduate School

Graduate school is expensive. Prices in 2009 averaged $28,375 per year for a master's degree at a public school and $38,665 per year at a private school. And the average cost is even higher if you're pursing a more advanced or professional degree.

The good news is that four out of every five full-time graduate students get some type of aid. If you're thinking about going to graduate school or pursuing a professional degree, take some time to explore some of the different ways you can pay.

Grants, Fellowships, and Scholarships

Grants, fellowships, and scholarships are great options for funding graduate school because you don't need to pay this money back (as long as you meet all of the obligations).

What do I need to know about these sources of funds?
There are many types of grants, fellowships, and scholarships available to graduate students. The federal government and government agencies often sponsor grants and fellowships to encourage study in certain disciplines, such as in the health field. Other organizations and entities, such as educational institutions, also fund these types of aid.

Don't hold off on applying for grants, fellowships, and scholarships, even if you haven't firmed up your graduate school plans yet. The application process can take several months to complete, and you want to give yourself enough time to prepare all of the requested documentation.

Where can I find out more?
The Web is a great resource for finding grants, fellowships, and scholarships:

  • Grants.gov—Explore more than 1,000 federal grant programs totaling approximately $500 billion in annual aid.
  • science.gov—Find a government fellowship in the field of science or health.
  • Fastweb Scholarship Search—Join Fastweb today to find scholarships based on your personal profile.

Tuition Reimbursement

Your employer may offer a tuition reimbursement program in which they give money toward your education.

What do I need to know about this source of funds?
Tuition reimbursement is fairly common, especially at big companies. According to the 2007–2008 National Postsecondary Student Aid Study, about 22% of all graduate students received aid through a tuition reimbursement program.

You generally don't need to pay tuition reimbursement money back, unless you violate the restrictions your employer may have placed on the funds. For example, some employers may require that you earn a certain GPA or that you work for the employer for a specific amount of time. If you don't earn the required grade or if you leave your job before the specified time, you may be responsible for repaying the money.

Where can I find out more?
Check with your employer to see if there is tuition reimbursement available at your company. Ask about any restrictions, as well as how much money the company is willing to give. Many companies provide up to 100% reimbursement for college programs that may directly enhance your job skills.


Tuition Waivers

Depending on your circumstances, you may be eligible for a tuition waiver. A tuition waiver is a reduction in tuition to make school more affordable for you.

What do I need to know about this source of funds?
According to the National Center for Education Statistics, up to 10% of graduate students receive a tuition waiver for graduate school. The reasons for a tuition waiver can be multifold and vary by school and state. For example, your school may give you a waiver if you served in the Peace Corps or the U.S. Military. Some schools offer waivers to resident assistants. Others give waivers to the children of school employees. Waivers may be based on financial need.

Some schools offer waivers on a first come, first-served basis, so inquire early in the application process. Also realize that if your school offers you a waiver but you receive enough other monies (through scholarships or grants) to cover your full tuition, the school may revoke the waiver.

Where can I find out more?
Check first with your school to see if they offer any tuition waivers. You may also want to check with your state's Department of Education, which may be able to provide information about the waivers available at state-funded schools.


Assistantships

Assistantships require you to work for your school in some capacity (for example, as a teaching assistant or research assistant) while being paid a stipend.

What do I need to know about this source of funds?
Assistantships help you cover the expense of your education, while in return providing your school with affordable teachers and researchers. Assistantships are most common in the physical sciences. Nearly half of all full-time candidates for master's degrees in science earn money through work as assistants.

Assistantships provide a great opportunity to get some experience under your belt. And although an assistantship may sound kind of "easy," keep in mind the time commitment. You may be teaching one or more courses in addition to carrying a full course load.

Where can I find out more?
Each college or university administers its own assistantship programs. Check with your school to see what types of assistantships are available.


Your Savings

If you can't get enough "free" money to pay for graduate school (money that you don't need to pay back), you may need to tap into your savings.

What do I need to know about this source of funds?
If you end up paying for some of your graduate education out of pocket, be sure to take advantage of the penalty-free IRA (individual retirement account) deductions that the U.S. Government allows. As long as you use the money toward education, you can make a withdrawal from your IRA without paying an early withdrawal penalty.

Note: This same tax benefit does not apply to your 401(k).

Where can I find out more?
Visit the IRS website to get the details on what types of educational expenses are exempt from the early withdrawal penalty.


Tax Incentives

The government offers a few types of tax breaks to students attending postsecondary school.

What do I need to know about this source of funds?
If you decide to pursue a graduate or professional education, be sure to consider the education-related tax incentives that the U.S. Government offers. You are eligible to claim only one of these tax benefits in any given tax year.

  • Education Credits—You may be eligible for a credit on your federal taxes for education expenses (such as tuition). A tax credit reduces the amount of federal income tax that you may have to pay.
  • Tuition and fees deduction—You may be able to deduct qualified education expenses on your taxes. Unlike a tax credit, which reduces the amount of federal income tax that you may have to pay, a tax deduction reduces the amount of income that is subject to tax. The maximum deduction in 2009 was $4,000.
  • Business expenses—If you need a graduate degree to keep your present job or to improve the skills required for your present job, you may be allowed to deduct your unreimbursed education expenses on your federal taxes.

Where can I find out more?
There is a lot of general information available on the Web, but the best thing to do is talk to a professional who specializes in this topic, such as a tax advisor.

  • Education Credits—Read information on the IRS website to become familiar with Education Credits.
  • Tuition and Fees Deduction—Get the details about the tuition and fees deduction that the IRS offers students.
  • Work-Related Education—Find out if you meet the eligibility requirements to claim an unreimbursed employee business expense.

Federal Student Loans

As a graduate or professional student, you are eligible to borrow more federal loan money than an undergraduate student is.

What do I need to know about this source of funds?
For graduate or professional students, the federal government offers Direct Stafford Loans, Direct PLUS Loans, and Perkins loans (available through your school). You must fill out the FAFSA® (Free Application for Federal Student Aid) to apply for any of these loans.

  Direct Stafford Loans Direct PLUS Loans Perkins Loans
Loan Amount

Up to $20,500 for each year of study (The total loan limit for undergraduate and graduate loans combined is $138,500.)

Up to the cost of attendance (determined by your school) minus any other financial assistance you receive (including Direct Stafford Loans)

Up to $8,000 for each award year (The total loan limit for undergraduate and graduate loans combined is $60,000.)

Eligibility

Subsidized—Based on financial need

Unsubsidized—Not based on financial need

Based on your credit history (must be in good standing)

Based on financial need
Repayment

Begins 6 months after you graduate, leave school, or drop below half-time enrollment

Begins on the final disbursement; eligible for an in-school deferment if you are enrolled at least half time

Begins 9 months after you graduate or leave school; if you drop below half-time enrollment, contact your school to discuss when repayment begins

Where can I find out more?
To learn more about the Federal Direct Loan Program and the options that are available to you, visit Student Aid on the Web.


Alternative (Private) Loans

Alternative loans—borrowed from a private lender—do not offer the same benefits (for example, a low interest rate) that federal student loans do.

What do I need to know about this source of funds?
Compared with federal loans, alternative (private) student loans may have higher upfront fees, higher interest rates, and fewer repayment options. Because of this, you should consider alternative loans only after you have exhausted all other aid options.

Where can I find out more?
Alternative loans are primarily available through banks, credit unions, and other financial institutions. They require a credit check, and you may need a co-signer. If you think you'll need an alternative loan to help pay for school, you may want to ask your financial aid office if they have any information on available alternative loans.

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