Money·4 min read

Should You Take Out New Loans for Grad School?

Elle Woods
Design: theSkimm | Photo: Alamy
August 19, 2021

The Story

Because of all the recent economic uncertainty, many workers have been reconsidering their careers and opting for new paths. Like, taking it to grad school. If that sounds like you, there are a few things to consider first. Like, ya know, how to pay for it.

Right, that. How much are we talking?

Depends on the program. The average grad student paid over $18,000 in tuition and fees for the 2016-17 school year. And while the pandemic slowed higher-ed tuition hikes, affordability is still an obstacle. 


Agreed. Chances are, you might need to borrow some money to cover those costs. Just keep in mind that Uncle Sam has his limits. For most people, the max amount of student loans you can take out is about $138,000. That includes any unpaid loans you have from undergrad. Also, federal student loan interest rates have started to increase again.

Is it worth it?

Time for some research. A LOT of research. Think: What kind of job security your desired field usually offers? And what level of education it typically requires and/or rewards. And what's the ROE, aka return on education. As in, your potential post-school salary minus any lost earnings during the time you’re in school and your potential loan payments. (Handy calculator here.)

The gov says a master’s degree could help you earn an avg of 18% more each week than if you stuck with a bachelor’s. But it varies a lot by industry. And you might have to press pause on other expensive life goals to get there. Like buying a home, planning a wedding, or starting a family.

Hmmm. Is there any way to make that equation a little happier?

Find out if your current job offers tuition assistance — or if they’ll consider helping out even if this benefit isn’t already in your HR handbook. If higher ed could make you better at your job, they may be willing to pitch in. You can also look for ways to earn while you learn through fellowships or work-study programs. Like becoming a research or teaching assistant.

And don’t forget about financial aid. About 40% of grad students received grants for the 2015-16 year. Google “grad school scholarships” to find more ways to get schooled for free.

Anything else to think about before applying?

If grad school still seems like a good idea, check out a few specific programs. Find out how long they take, whether you can work at the same time, and if you’d want to move to attend a great school. 

And if you go for it – and need a loan – shop around for the best rates you can find. Grad PLUS loans are a good place to start. The federal gov sets rates each year and keeps them relatively low. But you’ll need to prove that you don’t have an adverse credit history (think: a history of late payments or bills in collections) to qualify. Otherwise, you might need an endorser, aka a co-signer.

You can also apply for private student loans (psst...a good credit score usually helps with that, too.) But they can be more expensive. One way to trim costs: negotiate with lenders by presenting them with other (lower) quotes you’ve received. They might match those terms if it means earning your business. Oh, and look for auto-pay discounts, which could knock 0.25% to 0.5% off your rate if you set up automatic payments from a checking or savings account. That might not seem like a ton of money, but a little goes a long way in the loan-repayment game. 


Going back to school could eventually = a higher paycheck. But this is one of those times where it takes money (and time) to make money. Think about your current financial situation and long-term goals before buying new school supplies.

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