Avoiding Consumer Debt During Grad School

1/3 of Americans over age 25 have a college degree or higher according to the 2017 US Census report, bringing these numbers to the highest education levels in the US since 1940. Given today’s professional world, it’s no wonder that so many people are pursuing higher education and advanced degrees. Education is one of the most important assets for professional and personal success. 

People with advanced degrees, in particular, see a rise in salary, bonuses, and other compensation measures. An advanced degree also allows you the opportunity to become a specialist in your field, granting you access to knowledge and skills that can make a big impact in your career and community at large.

But graduate school comes at a price. FinAid.org cites that on average a student can expect to pay anywhere from $30,000 to $120,000 for a master’s degree depending on the subject, institution, and the program itself.

Is there a way to attend graduate school while minimizing the effects of your non-education debt? The first step is to understand what loans are available to you to cover education costs, and building a financial strategy from there that reduces the impact that non-education debt has on your budget.

Know Your Loans

It’s next to impossible to afford graduate school without some student loans, and the options for graduate students are different than their undergraduate counterparts. You will have two routes you can take to get a loan: federal or private.

Federal Loans

Federal student loans are the most common type of loan taken out by graduate students. They generally offer the lowest interest rate and more flexibility in their repayment terms. There are two types of federal student loans: subsidized and unsubsidized.

While you are in school, your direct subsidized loans are accruing interest – but the federal government is paying it until you graduate. This saves the borrower a percentage of their debt. Unfortunately, The Department of Education only offers subsidized loans to undergraduate students. For graduate school attendees, you will need to look into unsubsidized federal loans.

An unsubsidized loan begins accruing interest as soon as the money is taken out, even while you’re in school. This type of loan is more difficult as you will be responsible for interest payments for a longer amount of time. However, you may want to look into a Direct PLUS Loan for Graduate and Professional Students, which may provide you with more flexibility.

Private loan

While federal loans are usually the best choice, it is important to assess all of your options when it comes to student loans. Sometimes students are able to get a lower interest rate with private lenders, but be sure to look at the repayment terms. If you have good credit, you may be able to get a great rate. Shop around before you commit to a lender. 

Avoid Excess Spending

While you can shop around for a student loan lender, it is important that you give your credit card and spending habits a rest while you are in graduate school. Avoiding consumer debt in grad school is the best way to ensure that you are prioritizing the health of your finances and building wealth in the process

How can you do it?

The best way is to avoid large purchases such as buying a new car or making a large down payment on a house. Mortgage debt and additional loan debts aren’t the best things to carry on your shoulders when you still have student debt to pay down. Just because society may pressure you into feeling like it is “time” to make these larger “adult” purchases, you don’t have to. Waiting until you are financially secure is the best way to remain in control of your finances. 

Credit card debt is another area to be cautious of while in graduate school. Be sure that you do not carry a balance on your card month to month because the high-interest rate that comes along with those prolonged balances will only hurt you in the long run. 

Right now your priority is your schoolwork. Focus on the impact you’re making there, and try to keep the rest of your expenses to a minimum.

When you keep your budget in line with your priorities, sticking with it won’t seem like work, it’ll seem like a stepping stone, helping you on your way to achieving your financial goals.

Keep Your Goals In Mind

If you’re feeling overwhelmed by grad school debt, remember your “why.” Grad school is a big commitment, but you likely chose to be there for a reason. You want to make a difference, remember your driver.

Take a look at the questions below and give yourself some time to answer them:

  • Why are you attending graduate school?
  • How can your degree make a difference?
  • In what ways will you use your degree to create an impact on your own life and the lives of those around you?

These are big questions, no doubt. But, these are the questions that you’ve probably already asked yourself before you started down this path, and they should be the ones you continue to ask yourself as you continue your education and career.

Here at Deerfield, we love helping people who have a strong desire to use their resources to make a difference. Interested in how our philosophy can help you? Schedule a call with us, we’d love to speak with you. 


Share on facebook
Share on twitter
Share on linkedin
Get the latest financial news delivered right to your email.

Subscribe to the Latest Insights

* indicates required