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Paying for Graduate School: What Are Your Financial Aid Options?

Paying for Graduate School: What Are Your Financial Aid Options?
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Orly Michaeli July 30, 2014

Read on to understand the different kinds of loans, federal aid, school aid, and tax breaks you can expect when researching financial aid for graduate school. -

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With master’s degree holders making 25% more than employees with a bachelor’s degree, it’s no surprise that more students are deciding to pursue graduate school.

Paying for a second degree can be daunting and confusing, with all the different types of aid and loans out there. But there’s a bright side to having this abundance of options, you can find the payment methods that are best for you.

Here’s a list of five financial aid options you can explore as you prepare to apply to graduate school.

School Aid

Much like for undergraduate programs, each school will have a Financial Aid office that offers packages to its students. By filling out a FAFSA (Free Application for Federal Student Aid) form, the school will quantify your need. This quantity is referred to as Expected Family Contribution (EFC). A student with a low EFC is considered a student with a higher amount of need, which means a larger amount of aid offered by the school.

Some of the factors that schools consider when calculating EFC are your income, investments, household size, and dependent information (i.e. do you claim your children as dependents on your taxes/do your parents claim you as a dependent).

Many financial aid officers encourage students to apply for aid even if they think they might be ineligible. Despite having a high income or valuable assets, you can still qualify for a non-need-based loan, or a loan that accrues interest while you are still in school.

School aid is usually composed by a variety of options, including:

Fellowships, scholarships, and grants: money rewarded based on talent, merit, or need that does not have to be repaid

Work-study: opportunities to pay off part of your tuition by working for the university or community

Federal loans: money lent by the government that must be paid back with interest. Read below to find out about the different types of loans that are offered

Federal Loans
Federal student aid, or loans distributed by the government through the US Department of Education, are the largest providers of aid to students nationwide. Taking a federal loan means that you will eventually have to either pay back the government directly, or pay back an institution that is authorized to use the government’s money, like your university. Loans can have different characteristics, read below to decide which option is right for you.

Federal Stafford Loans
Graduate students can qualify for a Federal Stafford Loan. This is an unsubsidized loan (or a loan you must pay for during the school year) that is paid directly to the government and is not distributed according to need.

Current interest rate: 6.2%

Largest amount loaned: $20,500 (more for students pursuing certain health professions)

Federal Perkins Loans
This is a type of loan given by certain schools (using federal money) to students who demonstrate financial need. You would repay the loan back to your university.

Interest rate: 5%

Largest amount loaned: $8,000

Federal PLUS Loans
This is a low-cost, federal loan that students can use to cover the remaining cost of education (room, board, tuition, and fees) after using all other aid. During the application process, a credit check is performed. Because the loan is unsubsidized, you must pay the money back while you are in school.

Interest rate: 7.2%

Largest amount loaned: Variable, they are willing to cover whatever expenses you have left after other aid

Other Federal Programs
The government offers a few forms of federal aid that don’t come in the form of loans and that you can avoid repaying. The following are some of those options:

Federal Pell Grant
Awarded to students in postbaccalaureate teacher certificate programs who demonstrate financial need, this is a grant that does not have to be repaid. The amount of money awarded changes per year. In 2013, $5,500 were awarded.

Tax Breaks
Some tax credit programs, like the Lifetime Learning Credit, the Student Loan Interest Deduction, and the Tuition and Fees Deduction, provide students pursuing a graduate degree with breaks on their taxes. Make sure to visit the IRS for more specific information.

Private Loans
You can explore different loan options at banks. Unlike federal loans, private loans may have changing interest rates and conditions. However, if you are in need of additional aid, this can be an option for you. Just make sure to research for the best rates and be wary of potential change in your interest rate.

Managing Your Options

As you decide what financial options are right for you, here are a few steps that you can take to make this task an easier one:

Make a budget: Knowing how much you need in order to make grad school a possibility will help you navigate your financial aid options with a clear and realistic expectations.

Be timely: Make sure to get in all your paperwork on time, or early if possible. If you hand your application in late, the funds may no longer be available to help you.

Look for teaching assistantships: Sometimes, school’s will pay graduate students to be teaching assistants for other courses. This is a good way to make money and build relationships with faculty. Same goes for becoming a research assistant.

Be a campus leader: By having good grades and being involved in campus affairs, you can prove to the university that you are indispensable and use your standing to ask for increased aid the following year.

Build a network: Think about contacting professors, associations/institutions that represent your field of interest, and organizations catering to your nationality or religion. These can become powerful allies and helpful moral support.


  • Calculators and Interest Rates. (2014, July 7). Direct Loans. Retrieved July 29, 2014 from Direct Loans for Federal Student Aid
  • Financial Aid for Graduate and Professional Degree Students. (2012, Fall). Retrieved July 29, 2014 from Federal Student Aid
  • Financing your Graduate Education. (n.d.). Retrieved July 29, 2014, from Idealist
  • Graduate Financial Aid. (n.d.). Graduate School Search. Retrieved July 29, 2014, from Graduate Guide

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Tom Meltzer spent over 20 years writing and teaching for The Princeton Review, where he was lead author of the company's popular guide to colleges, before joining Noodle.

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