Can I get a student loan for a master’s degree?
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UPDATED: Oct 30, 2013
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It is possible to get student loans for graduate studies and Master’s degrees. In fact, students have an option from several different types of financing.
Joseph Rojek, the Director of Admissions and Financial Solutions at Olivet Nazarene University, said that when it comes to Master’s degrees, students have three options for borrowing student loans:
1. Financial Aid: Financial Aid is available for Master’s degree students in the form of Unsubsidized Stafford loans, which do not go into repayment until six months after a borrower graduates. However, they do begin accruing interest from the date they are disbursed. These student loans are not needs-based and can be borrowed by anyone.
2. Private Student Loans: Depending on the creditworthiness of a borrower, private student loans can be more costly or more affordable than Stafford loans. This is because lenders calculate an interest rate depending on credit score, presence of a co-signer, and a host of other factors. (Go here to apply for a private student loan)
3. University Payment Plans: Some universities offer payment plans with zero percent interest to some students. Depending on the university, applicants may only qualify if they are taking certain courses or a certain number of credits.
Students can also combine several of these into a hybrid debt.
“The key point here is that you have to be flexible with options because students may run into financial hardships,” said Rojek. “We are focused on retaining students anyway we can. We cannot do the academic work for them but we can certainly illustrate their options on a continual basis so that there is no excuse for the students not to have options available to them.”
While undergraduate students and graduate students can both qualify for financial aid, graduate students will never be able to qualify for need-based financing, such as grants or Subsidized Stafford loans.
Graduates do not necessarily need this extra aid though since many Master’s degree students are working adults. Some even expect pay increases once their Master’s studies are over.
“Generally speaking, graduate students currently employed are setting themselves up to have more opportunities which could include making a higher income, which would make it easier to repay their student loan debt,” said Rojek. “However, these students may also have accrued more debt from being in school longer if they go straight from Undergrad.”
One way these students can avoid accruing debt is by paying it off. In fact, that’s just what one wise student has been doing.
Graduate Student Loan Stories
Kimberly Terell borrowed student loans in order to pursue her Master’s degree at NC State.
She has a full-time job and subsequently does not qualify for a grant or scholarship. In order to stay on top of her debt each semester, she consistently pays off her balance every few months.
“I have been paying the loans off by the end of each semester so I will have no outstanding loans by graduation in May of 2014,” she said. “I have been able to do this solely through my business as the owner/designer of an accessories store called Rowan’s Originals. Every penny of profit I make goes into repaying my tuition.”
Terell has borrowed $20,000 so far with each semester requiring a $4,000 student loan at 5.41 percent interest.
Like many graduate students, she obtained her student loans through Sallie Mae by applying through the FAFSA website. In order for borrowers to receive their student loans in time though, it is necessary to fill out the FAFSA early. Unfortunately, she did apply late one semester, which resulted in her being forced to pay for tuition with a credit card.
“I recommend doing everything as far in advance as possible,” she said.
Dave Cannon, a Senior Content Strategist at Palo Alto Software, attended Brigham Young University. Unfortunately, he experienced difficulty getting Stafford loans because of the expected family contribution (EFC) stipulation.
“Students in graduate programs have more varied life circumstances than undergraduate students, so it’s more difficult to peg an EFC that will allow them to get the full extent of loans they need to pay for life and school,” he said.
Cannon blasted how public policy dictates what each person’s lifestyle should cost and how policies don’t allow borrowers to get financing beyond a certain amount.
“In my situation, we had some significant healthcare bills and no support from my immediate family, but because of the EFC I was unable to secure enough Stafford Loans (subsidized or unsubsidized) to keep us afloat,” he said. “Many students in this situation seek usurious private student loans or turn to credit card debt.”
Cannon recommends that students select Master’s degrees that can offer realistic career opportunities. By asking probing questions at campus visits, student loan borrowers can determine if a particular Master’s degree program is worth the investment.
“Some Master’s programs exist, frankly, to subsidize the tuition for Ph.D. students,” said Cannon. “You might have a hard time paying back your student loans if you graduate from a Master’s program that was created as an afterthought by the department.”
In total Cannon borrowed $55,000 worth of Stafford loans along with additional student loans financed by his business school. His interest rates stood at 6.5 to 6.8 percent but in order to complete his studies, he and his family also accumulated over $12,000 in credit card debt, which was earning 12 to 25 percent interest.
While Cannon was glad to avoid borrowing possibly expensive private student loans, he admits that credit cards may not have been a better alternative.
“We have a schedule to finish paying off the credit cards over the next year and then decide how to pay down student loan debt,” he said. “In the meantime we’re making a very small payment on the student loans.”
Cannon and his family have adopted a strategy to pay off his Master’s student loan debt. The Cannons fire off every dollar they can spare at that college debt balance. While this means they forgo saving up down payments on other purchases, such as a car, it means that they will pay off the balance in short order as opposed to dragging it out over decades.
If the Master’s degree ends up helping Cannon earn more income for his family, then it will all have been worth it.