It's that time of year again. Last month, millions of students returned to campuses around the country. And while the idea of "back-to-school" conjures up thoughts of backpacks, lunchboxes and new beginnings, parents of graduate students and student-loan borrowers are reminded of the huge sums of cash they will have to shovel out for tuition and related education expenses. For those who volunteer to return to school for graduate degrees, the options for funding are vanishing with the new student loan legislation being enacted this summer. Here's the low down on three things grad students should consider before taking the student loan plunge (again).
What Options are Out There?
In June of 2012, legislation went into effect ending graduate students' ability to borrow using subsidized Stafford loans. So the first question is: what is the difference between a subsidized loan and an unsubsidized loan? Generally speaking, subsidized loans offer more assistance to students with financial need and provide the benefit of having the Department of Education pay the interest on the loan while you're in school. Unsubsidized loans may or may not be needs-based and the borrower is responsible for all interest on the loan. While subsidized Stafford loans are no longer accessible to graduate students, there are four primary sources of lending that remain:
How Much to Take
The bottom line here is simple: take as little as possible. If you are choosing to pursue a graduate degree you are probably doing so in an effort to advance your career. If, instead, you are choosing a graduate degree to "find yourself," allow me to suggest a less costly alternative like meditation or travel. The average cost of a two-year graduate program is roughly $60,000 and that barely scratches the surface when it comes to a top-tier business school or a three-year law degree or medical school. My advice is to start your search early. Research scholarship and grant opportunities both within the institution and the community and start saving in advance for living expenses. Better yet, if you can, get assistance from your employer and attend part-time.
Here we outline the pros and cons of each payback option offered for federal loans. The obvious conclusion here is to pay as little in interest as possible, which generally means the sooner you pay off your loan, the less money you will end up paying overall.
Researching ways to fund your graduate education is just as important as researching the schools to which you intend to apply. Being comfortable with the terms of financing that education can remove a lot of the stress associated with going back to school, allowing you to focus more on the degree and less on the debt.
Kristen E. Owen is a Wealth Management Associate at Monument Wealth Management, a Registered Investment Advisory firm located just outside Washington, D.C. in Alexandria, VA. Follow Kristen and the rest of Monument Wealth Management on Twitter, LinkedIn, YouTube, Facebook, and their "Off the Wall" blog which can be found on their website.
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