More questions quickly follow: If I’m working – perhaps in a school – is there financial aid available? What sorts? Enough to cover my expenses? And will I be able to afford to pay back loans on a junior teacher’s salary?

Here is what you need to know to get started.

The Three Types of Financial Aid

Virtually all types of financial aid fall into one of there categories:

  1. Scholarships/grants
  2. Work-Study
  3. Loans

Your eligibility for each type of financial aid; how much you might receive; and how much (and when) you have to pay back loans are all factors you have to consider when you are thinking about how to pay for graduate school.

Getting Started: Two Essential Rules

As you begin to explore your options, it is important to remember these two rules:

  1. In each of the three categories of financial aid – scholarships/grants, work-study, and loans – you will probably be eligible for some options, and ineligible for others. Thus each of the three categories is comprised of “building blocks” which you can assemble in order to put together the money you need to get your degree.
  2. Almost all financial aid – federal monies, state programs, college’s own scholarships – flows through the college. The financial aid office will figure out what you are eligible for, and assemble a mix of options (building blocks) that they think make sense for you. But you have to apply! (More on that below.)

Some Money is Just “Better”

Not surprisingly, some types of financial aid are simply better than others. We listed the three types of financial aid – scholarships/grants, work-study, and loans – in that particular order for a reason: scholarships/grants are better than work-study aid; and work-study money is better than loans.

Scholarships: also called grants, but there is no real difference – is free money. You don’t have to pay it back. (With a few exceptions, like not living up to an obligation to work in a particular area after graduation.) If a college offers you a scholarship (or grant) take it – assuming you want to attend that school. (More on that later.)

Work-study money is pretty simple: colleges have a pot of money (usually from the federal government) that they can make available to students in exchange for some hours worked – typically in a job that is related to the degree you are pursuing. (OK, occasionally it requires working in a school dining room or in the library.) The hours and funds available are usually pretty limited, but work-study can be a reasonably painless way to get spending money while in school. Of course, if you are already working and planning to attend graduate school in the evenings or on weekends, work-study may be a moot point.

And loans, not surprisingly, are just that: you borrow, and you pay back – typically after you graduate. There are lots of different sources of loans – government and private – with many different interest rates and particulars of repayment. More on these options below as well.

Scholarships & Grants

Scholarships and grants are really the same thing; the terms are used interchangeably. They usually come from two different sources:

  1. The government – almost all of it from the federal government, but some states have their own programs
  2. The college/university itself

There are really only two types of federal government grants: - Pell Grants for Post-Baccalaureate (undergraduate) Teacher Certificate or Licensing Programs. Pell grants are need-based, and you have to have a pretty low income to qualify. They are limited to about $4000. For more on Pell grants, click here. - TEACH grants are limited to about $3736 per year, and require you to teach for four years in a high-need field, serving low-income children. Learn more about the TEACH program here.

University-based grants are generally easier to get and often have fewer eligibility requirements. Grants and scholarships awarded by colleges are a sophisticated form of marketing and discounting. As you have undoubtedly figured out, graduate school can be expensive. Colleges realize that the “sticker shock” of paying for graduate school can deter a person. So, in order to help prospective students “bite the bullet” and make the decision to enroll – at their institution – lots of colleges offer admitted student partial scholarships.

Take the money!

There is nothing sinister about these scholarships/grants. There are no hidden costs or obligations. Colleges offer them in order to attract students – sometimes the “better” students – and to be price-competitive with other schools. Once you have been admitted to several colleges, it is important to compare the financial aid package each is offering you: what combination of grants, work-study, and loans are they offering you? Given each school’s cost, how much will you actually be paying or borrowing?

Work-Study

There isn’t much to say about work-study money for a couple reasons. First, it is usually a tiny portion of any financial aid package: typically not more than 5-10% of the total. The reason is simple: work-study requires time; and graduate students typically don’t have a lot of free time. Colleges realize this. With classes, student teaching, often a full-time job, and perhaps a family, adding in a work-study position at minimum wage (or slightly more) makes little sense.

But technically, work-study can still be part of the financial aid package offered by a college. The jobs themselves can be on-campus or off-campus, and colleges try to find positions consistent with your course of study. But there is no guarantee. So the bottom line is that work-study – with its low pay, time demands, and sometimes menial jobs – is usually not a large building block in a graduate student’s financial aid mix.

Loans

There are basically two types of loans: expensive loans and more expensive loans. We are not being cute or facetious. Every loan comes with a cost: the interest rate you will be paying; how you will repay it – a fixed amount monthly or a portion of the income you are earning after graduation ; and over how long a period you will be repaying it. Lenders will actually tell you how much your total repayments will be. Look carefully at each option.

Loans are basically offered by two sources: the government and private banks or lenders. Government loans are not really subsidized for graduate students (as they are for undergraduates) but generally offer slightly lower interest rates than private lenders.

There are two main government loan programs (though really low-income students may be eligible for an additional program, the Federal Perkins Loan Program):

  1. William Ford Direct Student Loans: Where you can borrow up to $20,500 annually. For more information click here; and
  2. The PLUS loan: Which allows you to borrow up to the cost of attendance, minus any other loan you receive. But you must be credit-worthy or have a co-signer. More information here.

Private loans are issued by more than a dozen banks and lenders. Their interest rates are generally competitive with government loan programs, particularly for the most credit-worthy borrowers. Interest rates are currently in the 6% - 8% range.

If You Don’t Ask You Don’t Get

The only way to get financial aid – of any sort – is to apply for it. That means you have to do two things:

  1. You have to fill out the FAFSA. You may remember the FAFSA from your undergraduate days. We once described it as the equivalent of root canal surgery without anesthesia. When you were an undergraduate, the FAFSA was probably completed by your parents. Now, because you are considered an adult – or at least financially independent – you have to fill out the FAFSA. Worry not: it has gotten a bit (not a lot) easier. Start here.
  2. You need to fill out each college’s financial aid application. (Sorry, you’re an adult now.) It is really important to complete each school’s own forms. Each college has its own financial resources and strategy to attract students. And they control access to federal funds as well as their own. Just do it.

Assessing Financial Aid Offers

When you are admitted, you will also receive a financial aid “package” – an offer – from the college. Each college’s package will probably be different. Assess the type of aid each school is offering you – grants vs. work-study vs. loans – and how much of each. Compare the actual total cost of attending each – not just tuition, but any incidental fees or expenses – and how much you will be paying, borrowing, and repaying.

If you feel that one school’s financial aid offer is out of line with other offers you receive, don’t hesitate to call the financial aid office. But be diplomatic about trying to “play off” one school against the other: if you are too aggressive (or obnoxious) in trying to secure a better mix from a particular school, it can backfire! Tell a financial aid counselor how much you want to attend their school, and just need a bit more help to make it happen. Financial aid counselors have the ability to exercise a bit of professional discretion – if they want to.

Good luck!

Steve
Steve Cohen

Steve Cohen is an attorney and author in New York. He is the co-author of the best- selling Getting In!, Getting to the Right Job, the award-winning Book-of the-Month Club selection Learn-to- Read Treasure Hunts, and four other highly regarded (but not best-selling) books. He is a regular contributor to The New York Times, Wall Street Journal, Time magazine, City Journal, and the Observer; and often writes about education. He co-chaired the Clinton White House literacy task force Prescription for Reading Partnership, and served on the Board of Directors of Reach Out and Read and the United States Naval Institute. He attended the U.S. Naval Academy, received his AB from Brown University and his JD cum laude from New York Law School.