Graduate students pursue a higher degree for many different reasons; higher salary, specific professions requiring a higher degree, or purely academic passion.

But to most students, while graduate study generally leads to higher salaries in the future, it does not come cheap. Depending on the degree, graduates with a master’s degree earn between $400,000 and $1.2 million more over their working lives than those with just a bachelor’s degree only. However, they also graduate with $66,000 in student loan debt on average, compared to the average undergrad borrowing of about $30,000.

So, how should you prepare to run this race?

First, consider as many financing options as possible.

Second, compare and contrast different options.

Lastly, choose the option that best fits your particular situation, not the one that your friends go after.

Now, here are your options.

STEP 1: Take advantage of free money

When financing for graduate school, the best strategy is to gather up as much free money as possible so that you could borrow less later. The places to look for are grants, scholarships, fellowships, assistantships or tuition waivers from schools or government.

When financing for graduate school, the best strategy is to gather up as much free money as possible so that you could borrow less later. The places to look for are grants, scholarships, fellowships, assistantships or tuition waivers from schools or government.

1. Grants are generally need-based, directed to give financial support for students from underserved communities. However, some grants are available to students studying a certain profession. For example, the federal TEACH Grants are available to students studying to become teachers in low-income neighborhoods. In order to apply for federal and state grants, you need to fill out the Free Application for Federal Student Aid (FAFSA).

For school-specific grants, ask your school’s financial aid office. For study-specific grants, check with your professors or department heads. For private grants, check out TUN’s Scholarship Engine. For example, the Geological Society of America offers a research grant of $7,500 for graduate students studying earth science, geology or geophysics.  

2. Scholarships are generally merit-based. While scholarships for graduate students can be highly competitive, there are many organizations that offer scholarships, ranging from governments to private companies. Ask your school or department for types of scholarships that other students in your program have received. Also, check out TUN’s Scholarship Engine to find one that best fits you.

3. Fellowships are also generally merit-based and can be awarded by universities, the government or independent organizations. Most fellowships include an internship or other professional work experience or research opportunity. Again, fellowships can be highly competitive, involving interviews and presentations. However, they are also very field-specific, meaning there are so many types of fellowships out there. For example, Goldman Sachs offers an MBA Fellowship that includes summer internships for graduate students of color, Native Americans or women in their first year of MBA.

4. Assistantships are also generally merit-based, but specific to research positions at universities. Teaching assistants and research assistants fall under this category. Although the exact amount of stipend may vary, most graduate programs require students to go through some kind of assistantship.

5. Tuition waivers are merit- or need-based financial awards given by universities. Also, they can be partial or full. Ask your school or your department directly for more info.

All these programs can be very competitive, especially in popular fields of study, such as law or medicine. According to a study by Sallie Mae, university grants, scholarships, fellowships or tuition waivers, private scholarships or government grants pay for only about 15 percent of graduate school fees.  

So, the key here is to be persistent. Keep searching and keep applying because free money, however small, is always better than borrowed money.

STEP 2: Look for programs that pay

When looking for a graduate program to apply, it is smart to first look for programs that specifically covers your tuition, or at least offer some type of stipend to provide for living expenses. Many graduate programs offer teaching or research assistantships that will give you not only money, but valuable work experience.

Even if your program does not cover any economic cost, you can still apply for work study positions on campus or paid internships outside campus.

If you’re thinking of going to graduate school after a few years of working, you can also check if your employer is willing to sponsor your education. Remember that your graduate education will be valuable to both yourself and your future boss.

STEP 3: Borrow as little as possible

Now, although most students do take out student loans, borrowing money should be your last resort. You should always remind yourself to only borrow when necessary. And always check for the cheapest loan option.

1. Federal student loans

The biggest lender is the U.S. government. According to a study by Sallie Mae, on average, about half of all borrowed money for graduate education comes from federal student loans.

They offer benefits, such as fixed interest rates set by law every July 1, which are often lower than private loans, no credit check (except for Direct PLUS loans), loan forgiveness and more. Note that some students may be able to get lower interest rates through private student loans if they have excellent credit.

However, they have restrictions as well. They can only be used toward school-related expenses, and your school needs to be enrolled as a Title IV school. While most schools are included, some for-profit and community colleges are not included. Check here to see if your school is a Title IV school.

Here are two types of federal student loans offered to graduate students.

• Direct Unsubsidized Loans are used the most by graduate students. You don’t need to establish financial need to borrow, but you can only borrow up to $20,500 per year. In total, you can borrow up to $138,500, which includes any Direct Loans you borrowed as an undergraduate. The current interest rate for loans first disbursed on or after July 1, 2024, and before July 1, 2025 is fixed at 8.08%. Interest will accrue while you’re in school and you are required to start making repayments 6 months after graduation.

• Grad PLUS Loans come with a higher interest rate of 9.08 percent for loans first disbursed on or after July 1, 2024, and before July 1, 2025. Unlike Direct Subsidized Loans, there is no aggregate limit with PLUS loans. You can borrow up to the cost of attendance as determined by your school. However, you must have a good credit score. As noted above, you may be able to get private student loans with lower interest rates if you have excellent credit, in which case Grad PLUS Loans would not make sense for you.

For more detailed information on federal student loans, check here.

2. Private student loans

Graduate students can also get student loans from private lenders, such as banks, credit unions or other financial service companies. They offer both fixed and variable interest rate loans. Most private loans adjust interest rates to your or your cosigner’s credit score. The stronger your credit score is, the lower your interest rates will be.

For more info on private student loans, check here.

3. What you need to consider before borrowing

Make sure to compare and contrast interest rates and loan benefits among federal and private student loans and choose a loan option that best fits your situation. For example, if you have a good credit score, you might get a lower interest rate with a private lender than the government.

4. The special case of international students

If you’re an international student, you cannot apply for federal student loans because they are only available to U.S. citizens and permanent residents. However, you can apply for private student loans. But note that you will most likely need a citizen or permanent resident cosigner with a good credit score to borrow on your behalf.

For more info on paying for college as international students, check here.

Conclusion

Spend and borrow wisely! Since graduate school is very expensive, it can either pay off really nicely or come with more debt. Always keep in mind that finding free money for graduate school is not only the best option, but also possible. And don’t stress if you end up borrowing some. But remind yourself to borrow only what’s necessary. Also, don’t cry over making life changes, such as preparing dinner at home or carrying around a tumbler for coffee and tea, to cut down on everyday expenses. You’ll thank yourself later because you’ll find yourself out of debt faster.