Applying to Graduate School? Here's How To Pay For It

The last year has made a lot of people think about life and how they want to spend it and for some that means a career change and going back to school. If that's you, you should know grad school is expensive. Let's talk about how you're going to finance it. Here's what you need to know if you're going to be paying for grad school in 2022. Taking out debt for a graduate degree is a big deal. The cost of your graduate school degree will depend greatly on what you decide to study. My graduate school degree was about $12,000. My master's is in education. My husband, on the other hand, has a master's in business administration. His MBA cost about $90,000. He has friends who paid $100,000 and more for their MBAs. Some schools are seeing 30% more graduate school applications over the past couple years and a few are even reporting 50% more graduate school applications. We think this could be for a couple of reasons. Some are social. People may be feeling like they're not treated well at their job and they want to do something different. They want a different career. Others may be economic. Historically, we see that in times of recession, people generally go back to grad school in droves. If either of these reasons are you or maybe you have another reason, let's talk about how you're going to pay for it. The first thing you want to do is find the free money and the first step in doing that is filling out the FAFSA. As you remember from undergraduate school, the FAFSA is the form that you fill out to get money from the federal government. The FAFSA is also important if you want to get money from your school and from your state. Many schools require you to fill out that form before they will award you any money and state aid can be the same way, so you want to fill that out as soon as possible to get as much money as you qualify for. After you've gotten all of that, look to your employer. Some employers offer tuition assistance programs. Sometimes these programs will require you to pay up front and have your job give you the money back. Other times, they'll just give you the money outright. If your current employer doesn't offer a tuition assistance program and that's something you're interested in, now might be a good time to start your job search and find an employer that better meets your needs. In fact, my husband and I both had our graduate school paid for by our employer, which at that time was the army. After you've gotten all the money you qualify for through the FAFSA with your school and with the state and exhausted all opportunities with your employer, if you still have gaps, you might want to look into student loans. There are two types of student loans, federal student loans and private student loans. Federal student loans have the same interest rate for everybody and it remains the same for the entire year. For this year, that rate is 6.28. Next year, it might be different. For private loans, the rate varies by lender, by credit circumstances, by your employment circumstances. However, that rate could be better than what the federal government is offering, so you definitely want to check. Private lenders often tie their student loan rates to their undergraduate student loan rates, but you'll see that those rate ranges aren't exactly the same. Graduate rates tend to be a little bit higher than what's offered to undergraduate students. You'll also see differences between different types of graduate school. Dental school students might get a different rate range, MBA students, medical students. The only way to know for sure what rate you'll get is to go through the pre-qualification process. One thing to also keep in mind is that private loans typically don't come with origination fees, whereas federal student loans do. Federal student loans also only offer one fixed interest rate. No variable rates are available. With private student loans, you may have the opportunity to choose between variable interest rates and fixed interest rates. Fixed interest rates are good because you know exactly what you're getting. It remains the same through the life of the loan. Variable interest rates can be good because they typically start out lower, but they can change depending on economic indicators that are not in your control, so it can be unpredictable as to when and how much the rate will change. So what you want to do is pre-qualify with private lenders to determine if you'll get a better loan with a private company or if you'll get a better deal with the federal government. There are some other things to consider though when thinking about federal versus private. Federal loans come with certain safety nets that you don't get with private student loans. So for example, if you are unemployed, a federal student loan will allow you to put your loan in forbearance. They will also allow you to get on an income-driven repayment program to where you're only paying a percentage of your income based on the program that you're in. Private loans don't often offer that. So it's really important for you to think about your circumstances, consider where you see yourself, think about what you need in a loan, and determine which is best for you. Getting pre-qualified for a private student loan can be easy. Go to the platform, fill in your personal information, they'll do a soft credit pull on you, see what rate you qualify for. But after you decide to take out the loan, getting the loan underwritten and finally approved might be a little bit harder. You'll need to have all of your documents ready to deliver that verify your credit worthiness, your employment status, any assets you own. You'll also need to have your cosigner on standby ready to provide their documents as well so that your lender can verify and get you the loan. They'll also need to check with your school to make sure that you are enrolled there, that you're borrowing the right amount before they can approve and disburse the loan. So if you are going with a private lender, make sure that you apply and start submitting the paperwork in plenty of time so that you have your loan disbursed and your tuition paid for when you're ready to start school. After your loan is approved, your private lender will send the money directly to your school. Your school will take that money and apply it to any outstanding balance you have on your account. If there's any money left over, your school will send the money to you, either in a check or in direct deposit. Once you get that money, think about your financial situation. If you're employed, if you're in a position where you have all of your living expenses already covered, consider rerouting that money back to your lender. This will help you get a jump start on your loan and will help you avoid additional interest accrual. Remember, as soon as that money is disbursed, it's already accruing interest. So don't hold on to any extra money that you don't need. Deciding to go to graduate school is a big deal and can cost a lot of money. So think about what your goals are for going to graduate school. Are you looking for a complete career change or are you thinking that you're automatically going to get a salary bump? When I got my graduate degree, my salary didn't change at all. My husband, on the other hand, saw a significant bump in his salary, so it's not guaranteed. The cost of graduate school is high now and our studies show that it's only getting higher. So think about what you want and what you get out, what you want to get out of it, and how much debt you're willing to take on. Some estimates show that that debt could be $70,000 or more. Is it worth it for you? That's only for you to decide. My name is Cecilia Clark and I'm an education writer with NerdWallet. We actually have a ton of tools and information to help you get through the graduate application and financing process. For example, our FAFSA guide can walk you through the FAFSA process and help you know exactly what you need to do. If you learned anything from this video, please click like and subscribe.