Going to Graduate School: Ways to Pay

Are you thinking about going to graduate school? Whether you want to advance in your current field or move your career in a new direction, graduate school might open doors for you. But it isn’t cheap. Here are some suggestions on where to look for financial help.

Loans, loans, loans

Students attending graduate school can borrow from two sources: the federal government and private lenders. Uncle Sam’s three major loan programs–the Stafford loan, Perkins loan, and graduate PLUS loan–are all available to graduate students, provided they attend school on at least a half-time basis. The following chart highlights each loan program:

1 Subsidized means the government pays the
interest during school, deferment, and grace
periods.

2 The interest rate on subsidized Stafford loans
disbursed on or after July 1, 2009, and before July
1, 2010, is 5.6%.

To apply for federal loans, students should file the government’s aid application, the FAFSA. It can be filed online at www.fafsa.ed.gov .Students can also obtain loans from private lenders, though such loans typically carry higher, variable interest rates.

Scholarships and grants

At the graduate level, most scholarships and grants come from the school itself, rather than outside organizations, and are often awarded on the basis of merit, not need. So it’s always a good idea to contact the financial aid office of any school you’re considering to see what special scholarships and grants they offer for graduate students. Many scholarships and grants are awarded at the departmental level, so your chances might depend on what subject you plan to study.

Employer educational assistance

If you plan to work while you attend graduate school, check to see if your employer offers any educational assistance. The first $5,250 of such assistance is exempt from federal income tax. But make sure to read your employer’s fine print: some may require that you maintain a certain grade, or that you remain at the company for a certain number of years after you obtain your degree.

Education tax benefits

Education tax benefits may not help you pay the upfront costs of tuition, but they might help defray some of those costs later on when you file your taxes. For more information, see IRS Publication 970, Tax Benefits for Education www.irs.gov/pub/irs-pdf/p970.pdf . In 2009, you may qualify for the:

Lifetime Learning credit–Is worth up to $2,000 for tuition and fees if your modified adjusted gross income (MAGI) is below $50,000 (single) or $100,000 (married filing jointly).

Deduction for qualified higher education expenses–Lets you deduct $4,000 in tuition and fees if your MAGI is below $65,000 (single) or $130,000 (married filing jointly).

Student loan interest deduction–Lets you deduct up to $2,500 of qualifying student loan interest if your income is $60,000 or less (single) or $120,000 or less (married filing jointly).

A partial credit/deduction is available for each of these tax benefits for filers with slightly higher incomes than those listed.

Look before you leap

Finally, before you make that first tuition payment, ask yourself whether a graduate degree makes sense for your long-term career goals. Will you be more marketable after getting your degree? Will the return on your investment be worthwhile? Do you plan to stay in this career going forward? Assuming the answers to these questions are yes, the expense of graduate school might be a worthwhile investment for you.

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