How will you pay for graduate school?

Your undergraduate studies were expensive enough. And now you are considering graduate school? Well, fortuantely, that graduate degree will pay off in the long run. Studies show that people with a Master's Degree will earn over $10,000 more per year, on average than those with a bachelor's degree. But, finding the funding for graduate studies can be easier said than done. Here, we discuss a few of your options.

To fund your Studies, you have several options:

Loans, grants, work study, or scholarships. Many graduate programs will insist that you have an pre-determined advisor, and a source of funding for your research lined up. This money often comes from grants or work study. But, there are also loan programs that are available, just as there were when you were an undergraduate.

Departmental Fee Waivers

Under certain conditions, some departments offer fee waivers to their graduate studuents. These are normally given for superior academic achievement. In addition to fee waivers, you may also qualify for local or departmental sponsorships. Be sure to ask your advisor about these to see if these are available. Fee waivers are rare, but they do exist.

Loans

All of the federal student loan programs available to undergraduates are also available to graduate students except the Parental Loan for Undergraduate Students, commonly called the PLUS loan. The reason is that the PLUS loan is geared toward dependent students, and graduate students are presumed to be independent. Of the loans that apply to both undergraduates and graduates, the terms are identical except for borrowing limits. The borrowing limits for graduate students are generally higher. To qualify, you must be enrolled in graduate school on at least a half-time basis.

There are also private student loans that you might consider. A very few are restricted to undergrads, but most are designated for graduate students, including medical, law, and MBA students.

Colleges vary in the graduate loan programs they offer. Consequently, the type and amount of graduate aid that colleges offer can differ substantially. Contact the financial aid office of the graduate schools you are considering to learn more about any potential loan programs.

States, like colleges, also vary in the scope of their loan programs. While most states have a student loan program available for undergraduates, they may restrict the availability of funds for graduate students. Contact your state's higher education agency and inquire about any special loan programs for graduate students.

Scholarships

Like grants, scholarships are offered by a wide range of institutions. The Robert C. Byrd Scholarship Program (a federal scholarship) is limited to undergraduate students only. However, the AmeriCorps Program is available to both undergraduate and graduate students.

Start your scholarship search with the graduate schools you are interested in to learn about any scholarships they offer. Then check your local library or college career placement office for a broader listing of possible scholarship sources from professional organizations, unions, clubs, foundations, etc. You can also use the Internet to research possible scholarship sources. In addition, your state's higher education agency may offer scholarships for particular graduate fields of study.

Grants

Perhaps the biggest difference between graduate school and undergraduate education is the availability of grants. The two biggest federal grant programs--the Pell Grant and the Supplemental Educational Opportunity Grant (SEOG)--are not available to graduate students. Similarly, most state grants are available only to undergraduate students. To find out if your state offers any grants specifically for graduate students, contact the appropriate state agency.

As for other grant sources, there are virtually thousands of foundations, associations, and corporations that offer grants. These are the places where hopeful graduate students will likely have the most success. Ask your local reference librarian or the financial aid administrator at your college for help in getting started on a search.

Work-study

The federal work-study program is available to graduate students as well as undergraduates. This means that graduate students can work in a federally subsidized job while they attend school to earn money for tuition or related expenses. States may also offer special work-study programs for graduate students.

Other funding considerations

Many graduate students utilize their employer's tuition reimbursement benefits to help fund graduate school (each year the first $5,250 is excluded from your income). Although tuition reimbursement is a nice benefit when offered, it usually means the student is working at least half-time and attending graduate school on less than a half-time basis--a situation that makes the student ineligible for federal student loans and possibly other loans as well.

Another consideration is that graduate students are usually independent. Consequently, any loans they apply for (financial aid loans or personal loans) do not consider the parents' income or assets. Some of the options that undergraduate students may be able to take advantage of to lower college costs may not be available to graduate students. These options include such things as attending a community college for two years then transferring to private school or special academic exams that allow undergraduates to place out of certain course requirements. However, on the flip side, some options may indeed be available to graduate students. For example, graduate students may be able to attend school in an accelerated program, attend a co-op graduate program, or have their parents buy housing near the school.

Lifetime Learning credit

The Lifetime Learning Credit applies to all courses that are taken throughout your life, including graduate studies. The credit is worth up to $2,000 for the graduate expenses of you, your spouse, or your child. However, you must meet certain income limits.

By contrast, the Hope credit does not apply to graduate students; only undergraduates in their freshman and sophomore years of college are eligible.

Tax Deductions

The deduction for student loan interest applies to graduate studies as well as undergraduate loans (any loans obtained in the pursuit of higher education qualify). However, graduate students must meet certain income restrictions in order to be able to take the deduction. For more information, see the discussion.

For 2005, you may be eligible to deduct up to $4,000 of educational expenses. To do so, you'll need to meet certain income requirements.