Financial Aid Basics Advice for Grad Students

grad studentGraduate students have a great deal to worry about and think over. In addition to paying attention to their coursework, which is likely to be demanding, they may have teaching responsibilities to adhere to, jobs to hold down and families to care for. It’s just a lot of stress. However, a study conducted by the University of Chicago suggests that these concerns pale in comparison to the other topics graduate students deal with on a daily basis. In fact, among all of the concerns these students cited, those related to finances were the most prevalent, with 21 percent of students suggesting that they consider money struggles to be the most pressing issue they face.

Thankfully, graduate students do have options, when it comes to financial aid. In fact, some students may have solutions right in front of them, but they may not know that this help even exists.

The Good and the Bad

Enrollment in graduate studies is on the decline, according to a study produced by the Council of Graduate Schools, and experts suggest that some students forgo an advanced education out of fears related to cost. They think they won’t be able to qualify for the loans they need, or that they won’t be able to pay those loans back when they do complete their educations. If these students had dug a little deeper, however, they may have found that they could find a way to deal with their tuition costs without sacrificing their futures.

For example, students in graduate programs may find it easier to qualify for low-cost federal student loans. As undergraduates, these students were required to include parental income in each Free Application for Federal Student Aid form (FAFSA) and those numbers may have kept them from the loans that could help. Graduate students are considered independent agents, on the other hand, so they’re not required to disclose data relating to parental income.

Unfortunately, these federal loans come with aggregate limits, meaning that a student who obtained loans for undergraduate work might bump up against the limits and find it hard to obtain a federal loan. The limits are high, standing at $138,500 in 2013, according to the U.S. Department of Education, but it is possible for some students to experience this limit problem.

Again, however, this is a problem that could be easily solved, as graduate students tend to have a credit history undergraduates would covet. They may have possessions that could be used as collateral, including:

  • Cars
  • Homes
  • Musical instruments
  • Boats

They may also have years of on-time credit card and utility payments, making them seem like a reasonable loan risk. These students may find it all too easy to borrow money from a private bank for their tuition, since they have a good credit history.

Getting Started

What are your financial aid options?Filling out a FAFSA is the best way for a graduate student to begin the funding process. This little form triggers a slew of behind-the-scenes work that could result in grants or low-interest loans. Some of these funds are disbursed on a first-come-first-served basis, so it’s vital for students to fill this form out as soon as it’s available, as the time spent on the form could translate into great loan deals.

When the form has been processed, students will be provided with an offer letter that details all of the aid that’s available to that student, based on the information provided. Grants should, obviously, be used first, as these are sources of funds that don’t require repayment. Federal Direct Unsubsidized Loans should be the next choice, as these loans come with low interest rates. If neither of these options will work, GradPLUS Loans could be a solution for graduate students, but they come with a slightly higher interest rate. Private loans should be considered if, and only if, all of these options fail to meet the financial needs of the student.

Making It Count

Some of these funding sources can be relatively difficult to find, but those students who dig and scratch and scrape for each and every education dime could come up with plans that cost no money at all.

Working might also be a great option for some graduate students, and some students choose to enroll in graduate studies on a part-time basis only, so they’ll have hours open each day in order to earn money that could be used to pay for education. In 2010, per a study in The Chronicle of Higher Education, 44 percent of students opted for this form of graduate school. It’s a trend that is growing more popular, experts say, and it can allow some students to fund their education without obtaining huge loans.

Those who do accept loans also have the option to cancel any disbursements they simply do not need. If students estimate that they need a significant amount of money for school and don’t really need as much as they once thought, they may be able to simply decline those funds, and thereby reduce the amount they owe.

Payment Concerns

student with payment concernsWhen students can obtain loans, they’ll need to pay attention to their payment options. Sometimes, there are variables that can ease the pain of repayment. Federal loans, for example, might include deferment clauses that allow students to forgo their payments until classes are complete. Private loans may have the same clauses, but the student might be required to ask for the program to begin. These plans can be costly, as the interest might begin to accrue long before the student begins to pay the loan back, but it could provide a graduate student with some very real breathing room as the education process moves forward.

Students who do have payment concerns might face very real consequences, if they allow the flow of money to lapse when deferment ends. Federal loans can come with penalty clauses, while private loans might have acceleration fees. All of this information is typically spelled out in the loan documents, but a study from NERA Economic Consulting suggests that about 65 percent of student borrowers don’t understand how their student loans work. Students should be sure to read all of their loan documents closely, paying close attention to the sections involving payment, so they know just what they’re expected to do and what might happen if they neglect their responsibilities.

If you’re struggling to understand how private student loans work, or you’ve read your documents repeatedly and still can’t see how one loan is better than another, we can help. Our Compare Student Loans tool allows you to compare a few different loans, side by side, so you can make good choices about how all of the loans might work and what they’re designed to do. Our Scholarship Center can even help you to find out more about the bonus money that might reduce your loan needs. All of our tools are free too, so you won’t have to worry about expense. Come back and visit often, and compare multiple products each time. We’re here to help you get the education you want, at a price you can afford.

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