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College Students and Recent Grads

Reduce Money Stress: Learn How to Budget with 4 Easy Strategies

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Depressed man slumped on the desk with his hands holding credit card and currency

Creating a budget has the same thrill level as getting an impacted a wisdom tooth removed. For some, the wisdom tooth might even be preferable. But a budget will prevent that “where did all my money go?” feeling and subsequently help you build wealth.

Fortunately, there are multiple ways to budget so you can find one that suits your personality. But first, you need to learn the building blocks of a budget.

What you need

  1. Figure out how much money is coming in each month
  2. Tally up your monthly expenses including: rent (or mortgage), groceries, transportation expenses, debt repayment (credit cards and/or student loans), cell phone bill, utilities and your “fun fund.”
  3. Set a percentage of money you save each month.
  4. Subtract your monthly expenses and set savings from your monthly income to determine how much wiggle room you have each month

These steps are the foundation of budgeting. Next, you need to figure out which style of budgeting is right for you.

Types of budgeting

The penny tracker

A budget extraordinaire subscribes to the penny tracking lifestyle. Every item he or she buys is meticulously tracked, totaled and compared against an allotted budget.

The penny tracker will create itemized lines of how much can be spent per month on specific categories, ie: food, rent, bills, and entertainment.

All the money a penny tracker spends is carefully written down (or monitored through an online service).

For example, if Tammy has $300 allocated for food each month, she’ll write down all the money she spends on groceries, morning lattes and going out to eat. Each time she spends money on food, Tammy writes it down and then subtracts it from her budget to see how much is left for her to spend.

The beauty of this method is the ability to see where all of your money is going. There is never a surprise about the sudden drop in a bank account or a particularly high credit card bill. It keeps accountability high and also helps plug leaks in a budget.

By tracking each penny you spend, you’ll be able to see if you’re consistently throwing cash at a non-essential purchase that could be put elsewhere, like debt repayment or saving up for a large purchase.

If you don’t want to be a penny tracker for life, you should still take a month to track all of your spending. This exercise will help illuminate any trouble areas you may have and keep you from wondering, “where did all my money go?”

The “leftovers” spender

A slightly more practical style of budgeting, the “leftovers” spender subscribes to the mentality of paying him or herself first, taking care of all the bills and then using the remaining money at his or her own discretion.

Save it, spend it, do what have you because it’s the “leftovers” in your budget.

It looks something like this:

Sam earns $2,200 a month (after taxes and a 401(k) contribution).

Each month he owes:

  • $800 for rent
  • Approximately $120 for utilities
  • $65 for his phone bill
  • $250 for student loans
  • $250 for car insurance and gas
  • $300 towards savings
  • $200 to groceries

$215 is leftover each month. This means Sam can use that $215 towards entertainment or pad a different area of his budget, perhaps food, or throw money towards debt repayment or savings.

This style of budgeting keeps people from feeling the need to constantly track every penny and keep rigid tabs on their spending, but it still can prevent overspending by simply being aware of how much you have to spend.

The 50/30/20 Rule or the Envelope Method

It’s a common rule of personal finance, but the 50/30/20 rule is similar to the leftover spender mentality. You allocate 50% of your budget towards fixed expenses (all those delightful bills), 30% towards saving or other financial goals and the spare 20% towards flexible categories (which might include groceries because the cost fluctuate).  Some experts might say 30% for “fun/flexible” spending with 20% towards savings and debt repayments.

Regardless, it’s a method which distributes your income towards various categories and it’s up to you to monitor your spending to ensure your 20% flexible spending doesn’t really turn into 50% of your monthly pay.

The envelope method uses a similar strategy and is not meant to be taken literally.

Instead, it’s a mentality similar to the 50/30/20 rule in which you allocate a specific amount of your budget to certain expenses (or saving goals).

If you do take the envelop method literally, keep your cash in a locked safe box in your home and recognize you’ll be losing money on interest by not keeping your funds in the bank.

Online resources

Tracking your money doesn’t have to mean whipping out pen and paper to jot down a note to yourself, nor does it mean tallying up all the receipts you have stored in your wallet.

Instead, you can use apps or online tools to help monitor your budget. Popular tools like Mint.com, a free service which allows you to sync credit cards and bank accounts with your profile, help keep track of your spending automatically. Mint provides a weekly email update with an overview on your spending habits. If you spend cash, you’ll have to proactively add in what you spent.

You can also try your hand with apps like Level Money, Budget Ease or Prosper Daily. Plenty more exist, so if one doesn’t appeal to you then move on to try something else.

Or, just kick it old school and track your money with pen, paper and a spreadsheet.

Budgeting saves you money

Without any sort of budget, it’s easy to let yourself slip into debt, rack up a large credit card bill or stop saving for the future. Budgets may not be the most enjoyable task, but they’re an important part of financial health —consider them the broccoli of personal finance.

Got questions? Get in touch via TwitterFacebook or email (info@magnifymoney.com) 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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College Students and Recent Grads, Student Loan ReFi

Best Private Student Loan Companies in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

private student loans
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Taking out private student loans can be a relatively expensive ways to borrow for school, yet many college students make the mistake of turning to private loans too quickly. From 2015 to 2016, more than half (53%) of undergraduates borrowed from private lenders before maximizing their federal loan allotment, according to the Institute for College Access and Success.

On the other hand, federal loans can only go so far, especially if you are pursuing a postgraduate degree that requires more schooling. Once you’ve tapped out your federal aid, a private student loan could help you fill the gap.

While federal loans offer a relatively uniform application process and loan terms, private lenders’ terms can vary widely. If you’re thinking about paying for school with a private student loan, it’s vital to compare lenders’ offerings to find the one that’s best for you.

How we ranked the best private student loans

There’s a lot to review when you’re shopping around with private lenders. Your annual percentage rate (APR), fees and loan repayment term could impact how much you pay in interest over the lifetime of the loan. Other features — such as a straightforward application process and the option to request that a cosigner be removed from the loan — could also affect your repayment.

We started the search for the best private student loan companies by identifying the 10 largest national private lenders. Each lender’s undergraduate student loan was graded on eight critical factors:

  • Private lenders offer loans with varying interest rates depending on the applicant’s creditworthiness — or that of the applicant’s cosigner. Lenders advertise an interest-rate range that you can use to compare one with another.
  • In this case, each lender was assigned grades based on its lowest and highest APRs compared with the average lowest and highest APRs for all 10 lenders. Each lender received four scores (as they all offer variable-rate and fixed-rate loans), and the lenders with below-average APRs received top marks.
  • Lenders could charge application, origination and prepayment fees based on your loan balance.
  • Although fees are becoming a thing of the past, one of these 10 lenders (CommonBond) still charges a federal-like origination fee when the loan is disbursed.
  • All of the top 10 lenders offer an online application, but the clarity and ease of use can vary. The lenders with intuitive processes, plus pre-qualification offers, got the best grades.
  • Many private student lenders, including all 10 of the lenders we compared, offer a 0.25% interest rate discount if you enroll in autopay. A few lenders earned extra points for also extending a 0.25% interest rate discount to borrowers with a related bank account.
  • Most of the private student loans we compared offered several repayment terms with a maximum of 15 or 20 years. Lenders that feature fewer loan-term options didn’t score as well because they offer less flexibility to borrowers.
  • Most undergraduate students qualify for private loans thanks to a creditworthy cosigner, who can also help reduce the interest rate. Some private student loan lenders let you apply to release your cosigner after you make a given number of consecutive, on-time full principal and interest payments and pass a credit check. Setting the bar for a top score of only 12 payments was the shortest option available among the lenders we compared.
  • You may be able to choose from different repayment plans, such as making interest-only payments while you’re in school or fully deferring payments until your post-school grace period ends. Lenders that offer full interest and principal deferment received top marks.
  • A few lenders earned extra credit because they offer unique perks, such as a principal rate reduction or cash back when you graduate.

After assigning each lender a grade, we ranked them and selected the top five for our “Best Private Student Loan Companies” list.

Our top picks for private student loan companies

 

Sallie Mae

CommonBond

College Ave

Citizens Bank

Wells Fargo

Ranking12345
Variable APR4.62% to 11.47%3.95% to 9.81%4.20% to 11.44%4.47% to 12.34%5.25% to 10.24%
Fixed APR5.74% to 11.85%5.29% to 9.83%5.29% to 12.78%5.74% to 12.19%5.24% to 9.99%
Rate discount0.25% for autopay0.25% for autopay0.25% for autopay0.25% for autopay, 0.25% for having a Citizens Bank account0.25% for autopay, 0.25 to 0.50% for having a Wells Fargo banking or investment account
Origination feeNo Origination FeesYesNo Origination FeesNo Origination FeesNo Origination Fees
Repayment terms5 to 15 years5, 10 or 15 years5, 8, 10 or 15 years5, 10 or 15 years15 years
Cosigner releaseAfter 12 months of timely paymentsAfter 24 months of timely paymentsAfter half your term has elapsed and after 24 months of timely paymentsAfter 36 months of timely paymentsAfter 24 months of timely payments
PerkReceive study support, plus credit score trackingPause your repayment for up to 12 months after leaving school via economic hardship forbearanceReceive $150 bonus upon graduationReceive approval for multiple years of loans at onceN/A

Learn More Secured

on Sallie Mae Bank’s secure website

Learn More Secured

on CommonBond’s secure website

Learn More Secured

on College AVE’s secure website

Learn More Secured

on Citizens Bank (RI)’s secure website

Learn More Secured

on Wells Fargo Bank’s secure website

*Rates are current as of Jan. 24, 2019, and may include a 0.25% autopay discount.

#1 Sallie MaeSmart Option Student Loan

Sallie Mae offers a wide range of student loans to undergraduate, graduate and professional students, as well as their parents. That may not come as a surprise though, since Sallie Mae is one of the most widely known private student loan companies. It opened its doors in 1972 as a government-sponsored company before privatizing in 2004.

  • Why it’s our top pick:
    • The undergraduate Smart Option Student Loan has a few standout benefits, such as the option to release a cosigner after making 12 consecutive monthly payments.
    • You can also choose from three in-school repayment plans: full deferment, $25 monthly payments or interest-only payments. And if you’re having trouble making payments after graduation, you can also request to make 12 interest-only payments.
    • Borrowers also get non-loan-related perks, such as quarterly access to one of their FICO credit scores, plus four months of academic support from Chegg.
  • Room for improvement:
    • Overall, Sallie Mae serves borrowers a variety of choices and benefits. However, it doesn’t offer as many potential discounts as some of the other top lenders. Still, if you find you qualify for a lower pre-discount rate with Sallie Mae than another lender, Sallie Mae could indeed be a smart option.
  • Fine print to watch out for:
    • Sallie Mae says it offers repayment terms between 5 and 15 years, but your repayment term depends on a variety of factors, including your loan amount. Unlike with other lenders, you can’t independently choose your repayment term.

LEARN MORE Secured

on Sallie Mae Bank’s secure website

#2 CommonBond

Founded in 2012, the student loan refinancing and lending firm CommonBond is perhaps the most giving among competitors. For every loan it funds, it pays for the education of a child abroad. That could among a number of factors that push CommonBond over the top when you’re considering where to borrow for college.

  • Why we like it:
    • Aside from its do-good ways, CommonBond also saves money for its borrowers. It offers for the most part, the lowest rates of any lender under consideration, plus the benefits found at most online-only lenders: a straightforward loan application, flexible repayment terms and responsive customer service.
    • Although it’s not the only lender to offer you the ability to pause your payments once you leave school, it’s also worth noting that CommonBond gives its members up to 12 months of forbearance. That could come in handy if you lose your job or fall on hard times once you’re out in the real world.
  • Room for improvement:
    • CommonBond offers low rates, but it also charges a 2% origination fee. Aside from matching Sallie Mae’s 12-month path to cosigner release, eliminating the fee is CommonBond’s biggest bugaboo. If you decide the lender is right for you, ensure you calculate the added cost of this 2% fee, which is a one-time charge based on your loan amount.
  • Fine print to watch out for:
    • Unlike federal student loan options for deferment and forbearance, CommonBond (like other private lenders) isn’t mandated to grant you a pause on your repayment. You would need to prove that your circumstances are dire enough to be considered.

LEARN MORE Secured

on CommonBond’s secure website

#3 College Ave

Founded by former Sallie Mae executives, College Ave is another online-only lender looking to disrupt the student loan industry. It lends to undergraduates, graduate students and parents, plus students attending career schools.

  • Why we like it:
    • College Ave is the only lender among the 10 we surveyed that offers four repayment term options (5, 8, 10 and 15 years). Interestingly, the company says 79% of its borrowers choose plans of 10 years or less, keeping additional interest from accruing during the life of repayment.
  • Room for improvement:
    • We penalized College Ave in our rankings for its slow path to cosigner release. If you agree to borrow on a 10-year term with the lender, you won’t be eligible to apply to remove your cosigner until after the five-year mark. All the other lenders we reviewed offer release within 12 to 48 months.
  • Fine print to watch out for:
    • College Ave contends it takes just three minutes to apply for a loan, but that merely determines whether or not you (and/or your cosigner) are eligible. After prequalifying, you could proceed to the more detailed application process.

LEARN MORE Secured

on College AVE’s secure website

#4 Citizens Bank

Citizens Bank is a large traditional bank with over 1,100 branches across 11 states. It offers student loans to undergraduates, graduate students and parents, as well as student loan refinancing.

  • Why we like it:
    • You might need to apply for a student loan at the start of each term. With Citizen Bank’s multi-year approval, however, you could choose to borrow additional money for another term without having to fill out a new application.
    • Also, if you or your cosigner have a qualifying bank account or loan from Citizens Bank, you could be eligible for a permanent 0.25% interest rate reduction on your student loan.
  • Room for improvement:
    • The primary drawback is the 36-payment requirement to apply to release a cosigner. Aside from that, Citizens Bank offers competitive rates, a variety of loan terms and interest-rate discounts that are in line or possibly better than many of the other private student loan companies.
  • Fine print to watch out for:
    • To qualify for cosigner release, you must also submit income statements to prove you can handle repayment on your own.

LEARN MORE Secured

on Citizens Bank (RI)’s secure website

#5 Wells Fargo

You’ll likely recognize Wells Fargo, as it’s one of the largest banks in the U.S., but you may not have realized that it offers student loans. It has several different programs, with offerings for community college students, undergraduates, graduates and professional school students.

  • Why we like it:
    • Like many other lenders, Wells Fargo offers a 0.25% interest rate discount if you enroll in autopay. Also, you can get a permanent 0.25% to 0.50% interest rate reduction if you or your cosigner have an eligible Wells Fargo student loan, consumer checking account or Portfolio by Wells Fargo relationship.
  • Room for improvement:
    • Put simply: You’re put in a box. You have to choose a 15-year term for your student loan. If you stick to making your required payment amount, you could wind up paying more in interest than if you took out a shorter loan elsewhere.
  • Fine print to watch out for:
    • Be sure that you make your first full payment on time. If it’s late, you’ll need to make 48 consecutive full payments (rather than 24) before you can apply to release a cosigner.

LEARN MORE Secured

on Wells Fargo Bank’s secure website

Determine if a private student loan is right for you

Using our rankings, you might be able to identify the private lender that offers you the best overall loan. However, it’s worth taking a step back to consider all your options before committing.

To do this objectively, come up with the list of criteria that matter most to you. They could vary from the eight criteria that we employed above — your list might emphasize a lender’s customer service, for instance.

When you’re comparing lenders with your criteria in mind, be prepared to weigh them as you see fit. You might not have a cosigner and therefore don’t care if a lender offers a fast path to cosigner release. In that case, you might look past top-ranked Sallie Mae — and its industry-best 12-month policy — to prioritize a lender that offers the lowest rates to independent borrowers.

Finally, confirm that you’re eligible to borrow from most private student loans banks, credit unions and online companies. You might find yourself disqualified, for example, if you’re an international student without a U.S. permanent resident cosigner. Lenders also generally require undergraduates to be 18, to attend school at least half-time and to have solid to strong credit — or to apply a cosigner who does.

Alternatives to private student loans

Almost always, federal student loans should be a borrower’s first choice if he or she has to borrow money. In part, this is because federal loans give you access to forgiveness programs, special repayment plans and guaranteed options to defer payments or put your loans in forbearance.

Also, if you haven’t built credit of your own and don’t have a creditworthy cosigner, federal student loans could be your only option. Most don’t have a credit requirement, and the federal loans for graduate or professional students and parents that do have a credit check don’t vary their interest rate based on your credit.

By contrast, even with a creditworthy cosigner, you may wind up with a higher interest rate if you take out a private student loan. Advertised interest rates can climb into the double digits, while 2018-2019 undergrads could access federal direct subsidized and unsubsidized student loans at 5.05%.

However, there may be times when a private student loan makes sense or could be a necessity. For example, undergraduate federal student loans have annual ($5,500 to $12,500) and aggregate (up to $57,500) borrowing limits that may not be enough to cover all your educational expenses.

Even if your unsure about whether you’re going to take out federal or private loans, complete the Free Application for Federal Student Aid (FAFSA) annually. In addition to being a requirement for federal loans and work-study aid, you may need to submit the FAFSA to qualify for some grants and scholarships.

Secure as much gift aid as you can before resorting to loans of any kind. After all, grants and scholarships don’t need to be repaid.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at louis@magnifymoney.com

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College Students and Recent Grads

Guide to Graduate Student Loans & Grants in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Source: iStock

Graduate school funding is a bit trickier than undergrad funding. Your options for loans and grants become more limited. And while work-study opportunities may be attainable and provide great experience, they often eat up a lot of time and offer low compensation.You do have options, though — whether you’re a grad student or a parent. This guide will take you through them all in detail.

Part I: Financing Options for Grad School

As far as federal options, there are two types of graduate student loans: Direct Unsubsidized Loans and Direct PLUS Loans. Each financing option looks different, and you may need a combination of both loans to fully fund your education.

Federal graduate student loan options and programs

Loan TypeHow much can I borrow?What are current rates?Origination FeeRepayment OptionsWhere can I apply?
Direct Unsubsidized LoansUp to $20,500. Medical students may be able to borrow more if they ask their school.6.60%1.066% if you take your first disbursement prior to Oct. 1, 2018.
1.062% if you take your first disbursement between Oct. 1, 2018 and Oct. 1, 2019.
Standard, Graduated, Extended, IBR, PAYE, REPAYE, ICR, PSLFIf you are eligible, Direct Loans are typically included in your financial aid package after you fill out the FAFSA.
Direct PLUS LoansCost of attendance after any other financial assitance has been applied.7.60%4.264% if you take your first disbursement prior to Oct. 1, 2018.
4.248% if you take your first disbursement between Oct. 1, 2018 and Oct. 1, 2019.
Standard, Graduated, Extended, IBR*, PAYE*, REPAYE*, ICR*, PSLF*

*Does not apply to Direct PLUS Loans issued to parents.
After you have filled out the FAFSA, you can apply here

Eligibility requirements

In order to qualify for any federal student aid, you need to meet certain requirements. Specifically, you must…

  • Have a high school diploma, home-school high school education, GED or other certification of equivalency.
  • Be a U.S. citizen or permanent resident.
  • Have a Social Security number. This requirement is waived if you are from the Marshall Islands, Palau or Micronesia.
  • Register with the Selective Service, if you’re a male age 18-25. If you do not do so during this time frame, it can impact your ability to access federal financial aid later in life.
  • Be enrolled or accepted into a school with the aim of obtaining a degree, certificate or other recognized educational credential.
  • Maintain good grades. Standards for this requirement vary from school to school.
  • Certify that you aren’t currently in default on any federal student loans, that you owe money back on a grant, and that you will only use the money for educational endeavors. This certification happens on the FAFSA application.

If you meet all of these requirements, you now have to look at specific qualifications for each type of student loan.

Direct Unsubsidized Loans

In order to qualify for a Direct Unsubsidized Loan, you must be attending a participating educational institution and be enrolled at least half-time in a program that will lead to a degree or certificate. There is no need to demonstrate financial need in order to qualify for a Direct Unsubsidized Loan.

Direct PLUS Loans

Direct PLUS Loans have very specific credit standards. Qualification requirements include:

  • Must be pursuing a degree or certificate at the graduate or professional level and be attending school at least half-time — or be the parent of a student who is doing so.
  • Cannot have a debt that is currently 90 days delinquent with a balance of over $2,085.
  • Cannot have an item worth over $2,085 sent to collections or written off in the two years prior to your application.
  • Cannot have any of the following appear on your credit report in the past five years: default determination, bankruptcy, foreclosure, tax lien, repossession, wage garnishment or a write-off of other student loan debt.

These standards apply to both student and parent borrowers. If you cannot meet them, you can still borrow money by finding a cosigner who does meet these standards.

You may also be able to qualify if you can prove the blip on your credit report was caused by extenuating circumstances. In order to do this, you’ll need to complete credit counseling to the satisfaction of the PLUS program.

Pros and cons of federal grad school loans

There are times when taking out federal loans will be advantageous to you as a grad student and times when other options may make more sense. Let’s drill down into the pros and cons.

Pros:

  • Federal graduate student loans give you access to a number of repayment options, including some that adjust your monthly payments based on your current income.
  • Some debt forgiveness programs, such as Public Service Loan Forgiveness, only apply to federal loans
  • Credit requirements are typically more lenient than they are in the private sector.

Cons:

  • The fact that there are origination fees on Direct Unsubsidized Loans and Direct PLUS Loans is a major negative, as it will cost you money to borrow the money in the first place.
  • Interest rates on Direct PLUS Loans could be bested by private loan rates if you have a good credit history. You may be able to save money by going to a private lender in specific circumstances.
  • Direct Unsubsidized Loans and Direct PLUS Loans require at least half-time enrollment. If you are pursuing a graduate-level degree while working a day job, this may present a problem, depending on how many credits you are able to take on.

Federal grants and programs for grad school

While loans are money you will have to pay back, grants and work-study programs are sources of funding that you won’t need to repay. It’s essentially free money, and at the graduate level, you have a few federal options.

TEACH Grants

The Teacher Education Assistance for College and Higher Education (TEACH) Grant is a program that pays for part of your education as long as you promise to use your degree in a high-need, low-income area for four of the eight years following the completion of your education. You can also teach at a Bureau of Indian Education school during this time period to qualify.

High-need fields include:

  • Bilingual education
  • English language acquisition
  • Foreign languages
  • Math
  • Science
  • Special education
  • Reading specialists
  • Regional needs, which are updated annually

If your grant were disbursed today (or anytime between Oct. 1, 2018, and Oct. 1, 2019), the maximum amount you could qualify for would be $3,752.

If your school participates in the TEACH program, it will have specified which programs qualify for the grant. Get in touch with your financial aid office to find out if your program is eligible.

While you’re there, make sure you are eligible by checking your school’s academic requirements for qualification.

If you do not teach in a high-need field in a low-income or Bureau of Indian Education school for four of the first eight years after your graduation, your grant will turn into a Direct Unsubsidized Loan, which will have to be repaid.

After you have confirmed with your school that you are enrolled in an eligible program, you will need to fill out the FAFSA. You will also need to sign a letter of agreement and complete program-specific counseling.

Pell Grants

It is extremely rare for a grad student to qualify for a Pell Grant. In fact, for eligibility purposes, you’re not allowed to be pursuing a graduate degree.

The only time Pell Grants are available after undergrad work is when you are pursuing a post-baccalaureate teaching certificate. Even then, your certificate program must meet the following requirements:

  • It does not lead to a degree.
  • It is a prerequisite in your state in order to work as a primary or secondary school teacher.
  • It comes from a school that does not offer a bachelor’s degree in education.
  • It must be a post-baccalaureate program.

And as a student, you must also be enrolled at least half-time, pursuing your initial teacher certification/licensure within your state.

For the 2018-2019 school year, the maximum award you can receive is $6,095. The amount you get will be based on financial need.

To apply for a Pell Grant, all you have to do is fill out the FAFSA.

If a financial need is demonstrated when you fill out the FAFSA, you may be offered a work-study position. If your school participates, you’ll be given an hourly or salaried job where you are paid at least monthly. Your financial need will determine the number of hours you receive.

The kind of job you are assigned will depend largely on your school. You may find yourself in one of these fields:

  • Community service
  • Positions at your school
  • Fields relevant to your course of study

If you end up with a position on campus, you’ll likely be working for the school. If you are working off-campus, you’re more likely to be assigned to a position serving the public good or working in a position relevant to your future career.

You’ll make at least minimum wage, though as a grad student you may have some desirable skills that could land you a position with a pay boost.

Your school is obligated to issue you a paycheck at least once per month. The money will be paid directly to you unless you set up direct deposit payments, or you are applying your earnings toward tuition, fees or room and board.

Grants are a form of financial aid that you don’t have to pay back under most circumstances. However, if you don’t hold up your end of the educational bargain, you may have to return money that was paid to your school, or money you received as a refund check from your school.

You could end up owing money back for your federal grant if:

  • You don’t meet TEACH program guidelines as outlined above.
  • You drop out of school partway through the semester.
  • You reduce the amount of credits you are taking after the grant has been issued.

If you are disappointed by your FAFSA options, you should know that there are other ways to find funding for your graduate-level education. Be sure to review these resources prior to taking out loans.

Federal grants at the graduate level are admittedly thin. If you’re looking for other ways to pay for school that don’t involve student loans, here are some additional federal agencies outside the Department of Education that may be able to help.

ROTC scholarships

ROTC scholarships will pay for your education. You’ll also get a stipend for the time you spend at drill on weekends and may have your books covered as well.

In exchange for all of this money, you will be obligated to serve either on active duty or in the reserves after you have completed your education. Because you have a college education, you will enter the military as an officer.

Post-9/11 GI Bill

If you served in the military for at least 90 days after Sept. 10, 2001, and remain on active duty, or were honorably discharged due to disability after serving 30 consecutive days after the same date, the Post-9/11 GI Bill may cover your tuition and fees.

If a smaller portion of your service happened after Sept. 10, 2001, you may be eligible for prorated benefits.

All in-state tuition and fees will be paid at public schools, and up to $23,671.94 will be paid at private schools. This number changes annually.

If you still have a gap between how much the school charges and how much the Department of Veterans Affairs (VA) will pay under the latest version of the GI Bill, check to see if your school has opted into the Yellow Ribbon Program. Schools that do so reduce the tuition of veterans to meet the maximum VA payout, leaving you with no additional money to pay.

Yellow Ribbon schools may also provide funding equivalent to a Basic Allowance for Housing in addition to a stipend for books.

In certain cases, benefits may be transferable to minors, so if you are a parent who has unused GI Bill benefits, you may be able to give them to your child as they enter grad school.

AmeriCorps

AmeriCorps is a volunteer opportunity with some perks for college students. When you volunteer, you earn money for school through the Segal AmeriCorps Education Award. The amount of money you earn depends on how time-intensive your service is.

For example, currently, if you volunteer in an approved position for more than 1,700 hours over 12 months, you would qualify for an education credit worth $6,095 for the 2018-19 school year. You can only earn up to two full-time education credits. You can find further examples of how much you can earn on the Segal Award Eligibility page.

As a member of AmeriCorps, you may find yourself in one of the following positions or something similar:

  • Relief efforts after a natural disaster
  • Tutoring K-12 students
  • Building affordable housing
  • Working with local nonprofits and community groups

If you have served as an AmeriCorps member after Oct. 1, 2009, and are age 55 or older, you may have accrued educational benefits that you can pass on to your child, stepchild or grandchild. You can learn more program specifics here.

Other sources of federal grants for grad school

Higher education agencies in your state

Another great place to look for funding is the agency that handles higher education in your state. These state-level organizations typically offer grants. You’ll likely be prompted to visit your state’s website at the end of your FAFSA application, but if you want to learn more about available programs now, you can find yours here.

Your school’s financial aid office

Your school likely has endowments and partner employers — both of which might offer scholarship and grant opportunities. To find out what’s available at your school, schedule an appointment with the financial aid office.

Industry and professional organizations

Many industry and professional organizations offer some type of scholarship program for those studying in the field. Applying for these scholarships won’t just help you pay for school if you’re awarded — if you win one, it will look phenomenal on your resume.

Some of these organizations will require membership prior to application. While membership fees can be expensive, many such groups provide student-level memberships at a steep discount.

Private graduate student loans: A last resort?

Private graduate student loans are issued directly by lending institutions without the backing of the U.S. Department of Education. You can look to banks, credit unions or online marketplace lenders to access these loans.

Pros:

  • If you have a good credit history, you may be able to obtain a loan with lower rates than those currently offered through federal programs.
  • You may be able to access more capital than you would with federal loans, depending on your credit history and the type of federal loan.
  • You can shop around for different options. Some lenders don’t charge origination fees, and some are willing to work with you in cases of hardship.

Cons:

  • You will not have access to advantaged repayment programs like PAYE, REPAYE, IBR, ICR and PSLF (which are all covered in sections below).
  • If you do not have a good credit score, interest rates may be higher than federal loans, or you might not be able to get a private loan at all, depending on your credit report.
  • You have to shop around for different options. Some lenders will not work with you in cases of hardship, and factors like variable versus fixed interest rates may throw you for a loop if you’re not careful.

Questions to ask before you borrow private loans for grad school

Before you take out any graduate student loans, you’ll want to get answers to these questions:

This may vary, depending on your income and credit history.

This will typically be a range. If you have good credit, you may qualify for the best rates. If you don’t, you’ll be looking at the higher end of the spectrum.

Variable interest rates currently tend to start out lower. They may even stay lower for a set amount of time, but eventually they will move in accordance with the market. You may get lucky and have rates go down, but rates have been on the increase in recent years and are expected to continue to rise in the near term.

Fixed rates start out higher than variable rates but stay unchanged throughout the course of your loan term.

Shorter loan terms sometimes mean higher monthly payments, but you’ll usually end up paying less in the long term because of the way interest accrues over time.

If you can’t afford the monthly payments, though, you could end up paying late fees or damaging your credit. Longer loan terms may mean paying more interest by the time you’re through, but they also have the potential to lower your monthly payments.

Some lenders provide payment plans that allow you to defer payments until after graduation. Other payment plans start your payments immediately. Still others require interest-only payments while you’re in school, with principal payments being added after graduation.

Common fees to take note of are:

  • Application fees
  • Origination fees
  • Late fees
  • Prepayment penalty fees

Eligibility requirements to inquire about include credit requirements, citizenship/naturalization requirements and income requirements.

You’ll want to know if your lender offers any type of deferment in times of financial hardship. Some lenders will even work with you to help you find a new job or temporarily reduce monthly payments while you are in specific employment conundrums.

Compare private sector graduate school loan options here. >

Private LoansFederal Loans
Not eligible for advantaged repayment options (REPAYE, PAYE, ICR, IBR, etc.)Eligibile for advantaged repayment options
May or may not have origination fees Have origination fees
Potentially stricter credit requiremntsPotentially looser credit requirements : (depending on which private lender you're coparing them to) No credit requirements if we leave out PLUS loans
Interest rates potentially lower for those with good credit — can be much higher for those with bad creditInterest rates likely higher for those with good credit (with the possible exception of Perkins Loans)
Often offer an option of variable or fixed ratesOnly fixed rates for the products we are discussing
May require half-time enrollmentDefinitely require half-time enrollment
Will probably need a co-signer if you're a young borrower — especially wihtout a jobTypically won't need a co-signer

Part II: Repaying Grad School Debt

There is a slew of different repayment options, depending on which type of loan you take out. Whether you start repayment during your studies or after, here are some things you can do to prepare:

Federal grad school debt

Students are not required to make payments until six months after their graduation — or nine months if you have a loan from the now-expired Perkins Loan program. But just because you don’t have to make payments during this time period doesn’t mean you shouldn’t.

When to start repaying your federal grad school loan debt

The types of federal loans available to you as a graduate student accrue interest while you’re in school and during your grace period/deferment. You are not required to pay that interest immediately, but the unpaid interest will be added to your principal balance.

By making interest-only payments while you’re in school, you prevent the interest costs from multiplying upon themselves, saving you money.

You can pay toward the principal while you are in school as well, if you so choose, as there is no prepayment penalty on federal student loans.

Parents who have PLUS loans are typically required to start repaying immediately after the loan is disbursed. You can, however, request a deferment for the period during which your child is in school. It would be wise to at least make interest-only payments during this period if you choose to go this route.

Federal loan forgiveness and repayment assistance programs

Federal loans give you access to many advantaged repayment and forgiveness programs. Keep in mind that while many of these repayment plans are designed to make your monthly payment lower, they have the potential to cost you more over the course of your loan — especially if they don’t end in forgiveness — as interest will be charged over a longer period.

Income-Based Repayment (IBR)

If you took out your first student loan prior to July 1, 2014, and your student loan payments are more than 15% of your discretionary income, this program allows you to pay a maximum of 15% of your discretionary income for 25 years. After that point, your remaining debt is forgiven.

If you took out your first student loan after July 1, 2014, the capped percentage is 10%, and you will only have to pay it for 20 years.

Learn more about IBR here.

Income-Contingent Repayment (ICR)

If you opt into the ICR plan, you would make payments for 25 years. After 25 years, your remaining debt would be forgiven.

Your monthly payments would be the lesser of these two options:

  • 20% of your discretionary income
  • What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income

Learn more about ICR here.

Pay As You Earn (PAYE)

Take your income and subtract 150% of the poverty level in your state. If your monthly student loan debt payments are more than 10% of the difference, you may qualify for PAYE. Use this calculator to see if you qualify.

Your monthly payments will be limited to 10% of your income and will never exceed what you would pay on a 10-year Standard Plan. After 20 years, the remainder of your debt will be forgiven.

You only qualify for this plan if your first student loan was disbursed after Oct. 1, 2007, and you have received at least one disbursement since Oct. 1, 2011.

Learn more about PAYE here.

Revised Pay As You Earn (REPAYE)

REPAYE does not have the same timing restrictions of PAYE. In fact, the date you took out your loans is irrelevant. There are also no income restrictions.

However, while you will only have to pay 10% of your discretionary income, there is no protection stating that your payments will not exceed those of a 10-year Standard Plan. You could end up paying more with this program — especially with a higher income.

Remaining balances on graduate school loans will be forgiven after 25 years.

Learn more about REPAYE here.

Public Service Loan Forgiveness (PSLF)

The future of this program is uncertain, but it is currently still open.

Under PSLF, you make payments for 10 years while you’re working 30-plus hours per week and considered a full-time employee by your employer. This job must be in a position of service (see list below), and the remainder of your loan balance will be forgiven. Your 10 years of payments should be made under IBR, ICR, PAYE or REPAYE.

Qualifying public service jobs include positions at:

  • Governmental organizations
  • 501(c)(3) organizations
  • Non-501(c)(3) organizations providing one of these services:
    • Public or school library services
    • Emergency management
    • Service on behalf of the U.S. military
    • Public education
    • Early childhood education
    • Law enforcement
    • Public interest legal services
    • Public services for the disabled or elderly
    • Public health

Learn more about PSLF here.

State programs

States have regional needs in a number of different fields, including medicine, education, social work, veterinary sciences, law and more. Across the country, there are programs offering to pay off portions of your debt if you agree to live and work in high-need communities.

Repaying private grad school debt

Different lenders will require different repayment terms from their borrowers. Be sure to understand what is expected of you before signing on the dotted line. Ask questions like:

  • Will I be required to make payments while I am in school?
  • If so, are they interest-only payments?
  • Will there be a grace period after graduation?
  • Do you have any deferment options in case of economic hardship?
  • What is the maximum time allowed for deferment?

When you should start repaying private grad school debt

The sooner you can pay off debt, the better. If your loan requires you to make principal and interest payments, make them without delinquency.

If your lender gives you the option of making interest-only payments while you’re in school and/or in a grace period, it’s a smart financial move to to save you significant interest.

Before you make any payments prior to your due date, make sure there is no prepayment penalty. Otherwise, a good portion of the money you think you’re throwing at your debt could end up going toward fees instead.

Learn more: Refinancing grad school debt

If you can get a lower interest rate on your student loans by refinancing, you may be able to save money as long as you pay off your debt in the same amount of time.

In order to avoid ruining your credit score, you may also want to refinance if you can’t afford your monthly payments. Find out more about potential advantages to refinancing here.

Type of LoanFederal Private
Pros
  • May be able to secure a lower Interest rate
  • Lowering monthly payments may help keep you from defaulting on your loans — but be sure to check all available repayment and deferment programs before refinancing in the private sector
  • May be able to secure a lower interest rate
  • Lowering monthly patments may help keep you from defaulting on your loans
Cons
  • You lose all potential access to advantage repayment programs and forgiveness
  • May have to pay application or origination fees
  • If you refinance for lower payments over a longer term, you will likely pay more in interest over the course of your loan
  • May have to pay application or origination fees
  • If you refinance for lower payments over a longer term, you will likely pay more in interest over the course of your loan
The rates and fees mentioned in this article are accurate as of the date of publishing.

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Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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