Paying for Graduate School: Consider Work Options

(Page 2 of 2 of Paying for Graduate School: How to Finance Higher Education )

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You may consider working to finance all or part of your education. Make sure you know whether there are any limits on how much your school allows you to work. For example, full-time students at law schools accredited by the American Bar Association are not supposed to work more than 20 hours per week.

Become a teaching or research assistant. You will usually receive a stipend or salary for teaching classes, leading discussion sessions, or doing research for a professor. In addition to helping cover your costs, you'll be able to develop skills in your chosen field.

Choose a job with few demands. Alternatively, you can take a job with few demands outside the workplace. You'll already be busy with school: Look for something that will allow you to focus on your schoolwork when you need to, even if it pays a little less.

Use federal Work-Study. The Federal Work-Study program allows you to work part time on campus or at a participating nonprofit or public interest organization. (In some cases, even for-profit corporations can participate if the work is in your field of study.) The amount you can make is determined by the amount of your award; the advantage for the employer is that the federal government pays some portion of your wage.

Take Out Loans

If you're like most students, the above options won't cover everything, and you'll need to take out student loans. But not all loans are created equal. Here are some options and considerations. Note that to qualify for the federal loan programs, the school you attend must participate in these federal programs. Most of them also limit the amount you can borrow (these amounts are regularly adjusted).

Perkins loans. Perkins loans are need-based, low-interest loans administered directly through educational institutions and funded by the federal government. They're available to undergraduate, graduate, and professional students. As with other federal loans, Perkins loans can be deferred or go into forbearance during tough economic times. (For more information, see Nolo's article Student Loans: Cancellation, Deferment, and Forbearance.)

Perkins loans do not accrue interest while you are in school, and give you up to a nine-month "grace period" after completing your education before you must start repaying the loan. Borrowers may be able to discharge debt if they teach, join the military, or enter public-service careers. For more information, visit the U.S. Department of Education's webpage on Perkins Loans (available at www.ed.gov).

Subsidized Stafford loans. Subsidized Stafford loans are need-based loans available at relatively low interest rates. Interest does not accrue while you are in school, and you have a six-month grace period before you must begin repaying the loan. You also have the opportunity to defer your loans, put them in forbearance, or even discharge them if you do certain types of work.

Unsubsidized Stafford loans. These have many of the same features of subsidized Stafford loans, including the interest rate and grace period, but interest begins to accrue as soon as you take out the loan. (If you don't pay the interest before your first payment is due, it will be added to your principal.) Above the annual limit you can borrow with a subsidized Stafford loan, you can take out an additional amount in unsubsidized loans each year. 

PLUS loans. If your expenses exceed the amount of financial aid you receive from the sources listed above, you may be eligible for a PLUS loan. PLUS loans have higher interest rates than Stafford or Perkins loans, and if you have a poor credit history, you will need a cosigner. Also, there is no grace period after you graduate -- you must begin repayment immediately. On the plus side, there are no limits to the amount you can borrow on a PLUS loan -- it's determined by the amount of your unmet need.

Private loans. Many institutions and other lenders offer private loans. But pay careful attention to the interest rates, which generally aren't as favorable as government loans. Also, these loans don't usually have the repayment or consolidation flexibility that federal government loans do. For more information on loan consolidation, see Nolo's article Student Loan Repayment Options.

Family and friends. Don't overlook the possibility of borrowing money from family members or friends. You can pay a fair interest rate, help someone you know earn a return on a stable investment, and probably work out an arrangement for a flexible repayment plan if you need it. For more information, see Nolo's article Promissory Notes for Personal Loans to Family or Friends.

Home equity. If you own a home, you may be able to borrow against the home's equity. This sometimes has the advantage of a lower interest rate; plus, the interest on the loan is tax deductible. For more information, see Nolo's article, Home Equity Loan and HELOC Basics. If you don't have enough equity to take out a loan, also consider renting out rooms in your home to defray some of your costs.

To learn about paying off your student loans, read Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Robin Leonard and Margaret Reiter (Nolo).

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