Paying for Your Master’s Degree How Financial Aid Can Make Advanced Education More Affordable

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Introduction

Despite the debate over the value of a master’s degree, people choose to pursue advanced education for a number of different reasons. For example, earning a graduate degree can equal more career opportunities. According to the Bureau of Labor Statistics (BLS), careers that require a master’s degree for entry are projected to grow 18.4 percent from 2012 to 2022. In addition to opening doors, a master’s degree can also increase earning potential. The BLS reported that master’s degree holders had median weekly earnings of $1,329 in 2013, while those with a high school diploma and bachelor’s degree earned $651 and $1,108 a week, respectively.

Going back to school, however, comes with an ocean of potential costs, and diving in headfirst can lead to years of using entire paychecks to payoff high-interest loans. Fortunately, prospective students have a wide range of options to help make the journey more affordable. Drawing from financial aid experts and former graduate students themselves, the following guide breaks down every financial resource available at the master’s level, from the federal government to corporate scholarships to tuition assistance. Learn how and where to apply and find key insight, advice, and dos and don’ts from those in the know.

Types of Financial Aid for Grad Students

When it comes to financial aid, students have a number of avenues to research and explore. Some types of aid are considered “free money” because they do not need to be repaid, such as employer tuition reimbursement, scholarships, grants and fellowships. There are also institutional programs, such as work-study or assistantships, in which students work on campus or with professors to earn income that goes directly towards postsecondary tuition. Lastly, there are federal or private loans, which must be repaid, usually with interest, after graduation.

Employer Tuition Reimbursement

Some companies offer payment or tuition reimbursement programs to help employees pay for a master’s degree. Employers can provide up to $5,250 in tax-free education assistance for school each year.

In order to be eligible for reimbursement, students may need to meet certain criteria set by employers. For example, an employee may only receive benefits if he or she pursues a degree that is relevant to his or her current job, or the employee may be required to stay with the company for a certain amount of time after earning a master’s degree. Additionally, the money must only be used for the student’s tuition, books, supplies and equipment.

Many companies have tuition reimbursement programs that cover higher education at multiple levels. Phillips 66, for example, reimburses up to 90% of college-related expenses per calendar year – up to $4,000 for undergraduate work and $8,000 for graduate-level study. Terms and conditions can vary greatly by company or industry, however. It’s important to know all the details of the agreement before enrolling in any program. Some questions to ask before applying for reimbursement include:

• Do I need to remain with the company for a specific time after graduation?
• Does the money need to be repaid if I leave the company?
• Is there a restriction on the type of classes I may take?
• Do I need to earn a certain grade or GPA to be reimbursed?
• Can I attend any graduate school or am I restricted to colleges and institutions that have a partnership with the company?
• What are the tax ramifications of accepting tuition reimbursement?
• Are there any other stipulations?

For individuals who wish to pursue reimbursement with an employer who does not have a set program, it can be helpful to document and present the potential benefits. In the event that the employer decides not to provide a financial award, employees may want to explore other options, such as requesting comp time to attend classes.

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Federal Financial Aid:

According to the U.S. Department of Education’s Federal Student Aid office, there is more than $150 billion in federal financial aid available to college students, including graduate students attending accredited online colleges. Students can use this money to pay for a variety of academic expenses, including tuition, room and board, fees, textbooks and other academic supplies.

To qualify for federal aid, students must first complete the Free Application for Federal Student Aid (FAFSA^®) form. Graduate students are usually considered independent student and, therefore, are not required to supply parent information on the FAFSA^®. If students do qualify for federal aid, it will be awarded in one or more of the following categories:

Federal Loans

Federal loans are borrowed money that must be repaid. In contrast to private loans, federal student loans often offer lower interest rates and more repayment options. Additionally, these do not need to be repaid until graduation and some loans may qualify for certain tax deductions.

According to the College Board, federal loans accounted for 63 percent of all graduate financial aid in 2012-13. The government offers a few different options when it comes to loans:

William D. Ford Federal Direct Loan Program

This is the largest federal student loan program-lender. It offers Direct Unsubsidized Loans up to $20,500 per school year, although students in certain health profession programs may receive additional unsubsidized amounts. Direct PLUS Loans, are for graduate students who need more than the maximum Direct Unsubsidized Loans to meet education costs.

Federal Perkins Loan Program

These school-administered loans are available to students with exceptional financial need who meet eligibility requirements. Students can receive up to $8,000 a year, depending on need, other aid, and the availability of funds at their school.

Before signing for any loan agreement, students should understand and be able to commit to all of the terms and conditions.

Grants

Federal grants are usually offered as lump sum awards that do not need to be repaid after graduation. While undergraduate grants are widely available to need-based students, federal grants for students pursuing master’s degrees aren’t, and are usually discipline specific to encourage research and study in certain in-demand fields.

Below are examples of two common types of federal grants that some master’s degree students may be eligible for:

Federal Pell Grant

The Federal Pell Grant is a need-based program that began in 1965. More than 5 million students receive a Federal Pell Grant each year. Most grad students do not qualify unless a course of study will conclude with the award of a teaching license or certificate. For example, students enrolled in a graduate level teaching program at a state university system may qualify. The amount varies each year and is based on the answers to the FAFSA^®.

Teacher Education Assistance for College and Higher Education (TEACH)

This grant provides up to $4,000 a year for students completing coursework for a teaching career. Students must sign an Agreement to Serve, which is a declaration to teach a minimum of four years as a highly qualified teacher in a school that serves low-income students in a high need field. If certain classes are not taken or if specific job requirements are not met, the grant converts to a Direct unsubsidized loan and must be repaid.

Federal Work-Study

Graduate students with financial need may qualify for federal work-study jobs to pay for educational expenses, preferably related to the student’s course of study. Students receive part-time federal work-study based on the FAFSA^®. Pay is at least minimum wage, and students cannot work more hours than they are awarded. The amount varies depending on when a student applies, the level of need, and the school’s funding level. Students should contact their college or university to make sure their school participates in the federal work-study program.

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State Grants

Many states offer financial assistance for graduate students in the form of grants. Visit the U.S. Department of Education Resource Organizations Directory for information about grants, scholarships and other financial aid in specific states, including federally-supported state programs.

Examples of state grants include:

New York: The Tuition Assistance Program (TAP), New York's largest grant program, helps eligible New York residents attending in-state postsecondary institutions pay for tuition. TAP grants are based on the applicant’s and his or her family’s New York State taxable income. It is available to both undergraduate and graduate students who are in good academic standing.

New Jersey: Educational Opportunity Fund provides supplemental financial aid to cover undergraduate and graduate college costs not covered by the state’s Tuition Aid Grant program.

Ohio: The Choose Ohio First Scholarship Program awards Ohio colleges, universities and their business partners that have developed innovative academic programs to recruit and retain more Ohio students into STEM fields. The funding that they receive is used to offer scholarships for those programs to current and potential students.

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Institutional Aid

According to College Board, 18 percent of graduate school aid came from institutions in 2012-13. Colleges and universities use students’ FAFSA^® information to determine how much institutional financial aid they can receive in tuition assistance. Students should check with their school’s financial aid office to find out what types of institutional aid they offer, what forms are required, and which deadlines apply.

Some institutions may have designated financial aid programs for their students. For example, Columbia University collaborates with financial providers to offer the Columbia Comprehensive Educational Financing Plan. It includes federal, institutional, and private sources of funds to meet the needs of Columbia University students in the form of payment plans, loan programs, lines of credit, and tuition insurance.

Scholarships and Fellowships

Graduate students have numerous opportunities to apply for scholarships and fellowships. It is important to start the search as soon as possible, to keep up with or get ahead of students competing for the same packages. To find scholarship and fellowship opportunities, student should:

• Check with their school’s financial aid office.
• Contact the graduate admissions official for awards given through the student’s academic department.
• Search for professional and trade associations in their field for a list of scholarships and fellowships.
• Look for websites for foundations, organizations and civic groups that may offer scholarships.
• Perform independent scholarship research. Examples of scholarship online databases include:

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Assistantships

Assistantships provide financial support while students are earning their degrees, allowing them to work part-time within the college or university setting. Students typically choose between teaching assistantships in the classroom and research assistantships in a lab environment. By participating in assistantships, students can hone their professional skills, such as leadership and interpersonal communication, in addition to earning income to pay for tuition. They also collaborate and develop working relationships with their academic advisors.

There are three types of assistantships:

Graduate Assistant (GA) or Teaching Assistant (TA): GAs and TAs typically have teaching‐related responsibilities, such as assisting in classrooms or labs, facilitating discussion sessions, or grading papers.

Graduate Research Assistant (GRA) or Research Assistantship (RA): GRAs have research‐related responsibilities, generally in their field of study. These positions tend to be more common in research-intensive fields such as science and health.

Graduate Student Assistant (GSA): GSAs have varied responsibilities, including research not related to their own dissertation research.

Sometimes professors choose their own TAs, whereas some schools allow individual departments to review applications and make blanket assistantship decisions as a whole. Hours vary by institution, but graduate assistants typically work half-time, approximately 20 hours a week. Students receive payment for assistantships through a stipend or partial tuition. Some programs also include health insurance. Students must maintain their GPA, graduate-related credits and academic progress towards their degree while participating in an assistantship program.

Students interested in this type of aid need to be proactive. That may mean looking for opportunities before graduate school, when faculty members may be pegging candidates for the following year. Regardless, students should begin to research assistantship programs at least one full year in advance to find out how the application and review process works. The Graduate Director and Department Secretary are both good sources of information.

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Private Loans

Students who are unable to secure a federal student loan can apply for a private student loan from banks and other financial institutions. Terms and conditions for private student loans vary, depending on the lender. Additionally, some private loans have variable rates, which can increase or decrease the cost of the loan. It’s also important to note that unlike a federal student loan, a student’s credit record is significant when applying for a private student loan. Students without an established credit record may need a cosigner.

One of the largest private student loan programs is Sallie Mae, which has been around since 1972. It has fixed and variable loan rates for graduate students. The Sallie Mae Smart Option Student Loan has no origination fees and three repayment options:

• Interest Repayment Option: Student pays interest while in school and benefits from lower interest rates.
• Fixed Repayment Option: Student pays $25/month while in school to reduce loan amount.
• Deferred Repayment Option: Provides flexibility by allowing students to avoid payments while in school or pay as much as they like, with no penalty.

With all of the different private loans available, students should read and understand the terms before committing to a loan. Most private student loans have a disclosure statement, which includes details about the loan rates and fees. It also informs the borrower of limitations associated with the loan. For example, if a borrower declares bankruptcy, they may still be required to repay the loan. Also, private loans cannot be forgiven upon the death of the borrower.

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Tax Credits, Deductions and other Benefits

In 2012-13, federal education tax credits and deductions accounted for six percent of graduate student aid sources. Tax deductions reduce the amount of one’s taxable income. Tax credits, on the other hand, directly reduce the actual tax that must be paid. There is one tax credit that is applicable to graduate school educational expenses: the Lifetime Learning Credit.

Lifetime Leaning Credit

With the Lifetime Learning Credit, students can claim a credit of up to $2,000 for qualified education expenses, with no limit on the number of years it can be claimed per student. A student’s lifetime learning credit can reduce his or her tax to zero. However, individuals cannot receive a credit so large that it leads to a refund.

Qualified expenses include tuition and fees required for enrollment, course-related books, supplies and equipment.

Tuition and Fees Deduction

Students who do not qualify for the Lifetime Learning Tax Credit may be able to deduct qualified higher education expenses during the year through the Tuition and Fees Deduction program. The deduction can reduce the amount of income subject to tax by up to $4,000, as an adjustment to income. The student cannot be a dependent on another person’s tax return to qualify.

Qualified Education Expenses

Grad students can submit a claim for qualifying education expenses that have been paid by cash, check, credit/debit or loan money. Qualified education expenses are amounts that cover tuition, fees and other education-related costs. Some expenses do not qualify, even if the student pays them to enroll or attend the school. Non-qualifying expenses include:

• Room and board
• Insurance
• Transportation
• Living expenses

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Online Grad Schools

In some cases, the challenges of paying for a master’s degree can be reduced by attending an online college. For some, attending a master’s degree program online makes it easier to keep working full time. In addition, the same financial aid opportunities that are available for traditional graduate students are also available for online grad students, including:

• Employer tuition reimbursement
• Federal loans
• Federal work-study
• Federal grants
• Institutional grants
• Federal education tax credits and reductions
• State grants
• Outside scholarships and grants

There are also various ways to reduce tuition when attending graduate school online. For example:

Scholarships from the institution: Many colleges and universities offer scholarships for students with demonstrated academic achievement and financial need. Some school have their own programs, where students may find options such as public service, leadership and first-generation student scholarships.

Corporate and academic tuition grants: Some online grad schools partner with various employers to provide educational benefits to employees. Sometimes faculty and staff at academic institutions qualify for master’s degree tuition benefits. Students should check with an academic advisor to see if their school is a corporate partner.

Alumni tuition reduction program: Some online schools offer tuition reduction to former graduates. Students should inquire as to whether their online grad school has a similar program.

Military tuition reduction: Many online programs offer some type of military benefit to active-duty service members and veterans.

Even if students are unable to qualify for one of the available programs, their school may still offer a tuition payment plan that will allow them to spread out payments over time. Students should contact a financial aid advisor at the school where they plan to attend or visit the school’s website for contact information.

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Loan Forgiveness and Loan Repayment Assistant Programs

Whether due to financial issues or unexpected circumstances, sometimes students can find it difficult to pay back their student loans on time. There are several loan forgiveness and repayment assistance programs available to qualified individuals to ease the burden. Eligibility varies depending on the program, but students may be able to cancel a portion of their federal student loan balance or lower and/or defer payments to make them more affordable.

Public Service Loan Forgiveness

Under Public Service Loan Forgiveness (PSLF), students can have a portion of their loans forgiven if they work in public service. The purpose of the PSLF Program is to encourage individuals to work full-time in positions at government public service agencies and organizations, AmeriCorps, the Peace Corps, and private not-for-profits in areas such as:

• Emergency management
• Military service
• Public safety
• Law enforcement
• Public interest law
• Early childhood education
• Public service assistance to the elderly and people with disabilities
• Public education and school library services
• Public library services

Students can have the remaining balance due on their William D. Ford Federal Direct Loan Program forgiven if they have made 120 qualifying payments while working full-time for certain public service employers. The following graduate school loans may be eligible:

• Federal Direct Unsubsidized Stafford/Ford Loans
• Federal Direct PLUS Loans
• Federal Direct Consolidation Loans

Income-Based Repayment (IBR)

Income-Based Repayment (IBR) is the largest income-driven repayment plan for federal student loans. Since 2009, borrowers have used this program to keep loan payments affordable because it places caps on payments according to income/family size. The IBR program can also forgive remaining debt after 25 years of qualifying payments. IBR is an option for students with Direct Loans with qualifying debt. Students can use this calculator to determine whether they meet the eligibility requirements.

NIH Loan Repayment

The National Institutes of Health (NIH) has extramural programs that will repay eligible student loans. The NIH Loan Repayment Plans (LPRs) encourages individuals to pursue careers in specific health-related areas. People who commit to a minimum of two years conducting qualified research funded by a domestic nonprofit organization may qualify to have $35,000 of student loan debt repaid per year, in addition to salary. NIH is looking for applicants for the following five extramural LRPs:

• Clinical research
• Pediatric research
• Health Disparities research
• Contraception and Infertility Research
• Clinical Research for Individuals from Disadvantaged Backgrounds

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Studying Abroad

Although it may seem as if studying abroad would be more expensive than earning a master’s degree in the U.S., it is not always the case. In fact, the cost of tuition is cheaper in some countries than in the U.S. For example, there is no cost for tuition at public universities and colleges in Norway, and tuition in France is very low. According to CampusFrance, a French national agency for higher education and international student services, annual tuition rates at public colleges in France are set by law and the French government covers most of the cost of education, which results in significant savings per student every year. The annual tuition rate for a master’s degree program in France for 2014-2015 is $346.07

In addition, many international programs are condensed so that they can be completed quickly. For example, a three-year master’s degree program in the U.S. may only take one or two years to complete elsewhere, which can save students a considerable amount of money in the long run. There are also numerous scholarships and grants available. For example:

• Up to 40 Marshall Scholarships are awarded to Americans to study at the graduate level in the UK in any field
• The Eiffel Scholarships program funds master’s level degree programs of 12 to 36 months for international students at higher education institutions in France
• Australia Awards Scholarships are for international students who want to study at Australian Universities at all levels

Students can research scholarships and grants to study abroad through the Institute for International Education and various scholarship online databases, or by contacting schools directly.

Lower cost, however, isn’t the only benefit. Studying abroad can expose graduate students to diverse populations and perspectives that could give them a competitive edge in the U.S. job market post-graduation. Other advantages to studying abroad include:

• Learning a new language
• Experiencing cultural differences
• Globalizing a resume

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Conclusion

Students have many options to pay for a master’s degree. This guide provides a starting point for developing a plan to finance advanced education. The first step is to fill out the FAFSA^®, a requirement for receiving federal loans, grants, and institutional aid.

Students can then move on to other financing options, such as employer tuition reimbursement, assistantships, scholarships and fellowships, keeping in mind the tax ramifications. Student loans should always be considered last, as they must be repaid with interest.

All financial aid programs have deadlines, and there can be a lot of competition for funding. The key to financing a master’s degree is to get started early, whether students decide to study in the U.S. or abroad.