This is the college degree that actually pays off, study finds

A new report from the Wall Street Journal found the graduate degree that's most likely to pay off in the form of higher earnings. (iStock)

Graduate school can come with a high price tag, but for students in one course of study, it's well worth the investment.

A new analysis by the Wall Street Journal found that earning a master's of business administration is a good way to ensure you quickly earn more money than you borrowed to pay for school.

At about 98% of universities that offer MBA programs, students typically had higher earnings than debt just two years after graduating. In contrast, just 6% of law school programs had graduate students with higher earnings than debt within the same time frame.

Still, the cost of graduate school tuition can pose a barrier for prospective students, regardless of how much they expect to make upon graduating. In many cases, it's necessary to borrow student loans to finance post-secondary education.

Keep reading to learn more about your options for paying for graduate school, including federal and private student loans. If you decide to borrow private loans to finance your MBA program costs, visit Credible to compare interest rates across multiple lenders without impacting your credit score.


How to pay for graduate school

Borrowing money to pay for graduate school is slightly different than taking out loans for an undergraduate program. The federal government sets different loan limits and interest rates for these loans, which means that many students turn to outside sources like private student loans to finance their education. If you want to increase your income by earning a graduate degree, consider these financing options:

Consider your student loan options in each section below.

Apply for federal aid by filling out the FAFSA

The U.S. Department of Education awards more than $120 billion annually worth of financial aid, including loans, grants and work-study programs. Applying for federal aid is a good place to start when borrowing money for college, since these types of student loans offer low, fixed rates as well as borrower protections. These include income-driven repayment plans (IDR), administrative forbearance and student loan forgiveness programs.

To determine your eligibility for federal loans and grants, you'll need to fill out the Free Application for Federal Student Aid (FAFSA) form. According to the Federal Student Aid (FSA) website, most borrowers can finish the application in under 30 minutes.

The downside to using federal Direct loans to pay for grad school is that the total cost of attendance may exceed the loan amount. The Direct loan program borrowing limit for graduate and professional students is $20,500 per year for the 2021-22 academic year, which may not be enough to cover tuition, fees and other expenses.


Bridge the gap with federal PLUS loans or private loans

When a student borrower reaches the federal Direct loan limit in any given year, they may turn to federal grad PLUS loans or private student loans. Here's a quick rundown of the differences:

  • Direct PLUS loans have relatively high interest rates that are dependent on the year a borrower takes out their loan. For the 2021-22 academic year, the PLUS loan interest rate is 6.28% with a loan fee of 4.228%.
  • Private student loans are issued by banks, credit unions and online lenders rather than the federal government. Interest rates vary between lenders and are heavily dependent on a borrower's credit score.
  • A borrower may be able to secure a lower rate and better repayment terms on private grad school loans compared to grad PLUS loans if they have good credit or a creditworthy cosigner. But private student loans are ineligible for federal protections like IDR plans, federal deferment and student loan forgiveness.

When comparing your options for graduate student loans, it's important to know the details of each borrowing method. Thankfully, most private student lenders let you see your estimated credit score with a soft credit check, which won't hurt your credit score. That way, you can determine if federal or private loans will be better for your situation.

You can browse private graduate student loan interest rates from real private lenders in the table below, and visit Credible to compare rates across multiple lenders at once for free.


Already graduated? Consider refinancing your loans

Student loan refinancing is when you take out a new private loan to repay your college debt. Refinancing to a lower interest rate can help you pay off your loans faster, reduce your monthly payments and save money on interest over time.

Refinancing to a shorter term can help you lock in a low rate and pay off your student debt faster. A recent Credible analysis found that well-qualified borrowers who refinanced to a shorter loan term were able to save nearly $17,000 in interest charges and pay off their debt 41 months faster.

It may also be possible to lower your monthly student loan payments by refinancing to a longer-term loan. Borrowers who used Credible's marketplace to refinance using this strategy lowered their monthly payments by more than $250, all without adding to the total cost of interest over the life of the loan.

Keep in mind that refinancing your federal student loans into a private loan would make you ineligible for those borrower protections mentioned earlier.

Not sure if refinancing is right for you? See your estimated student loan refinance rate on Credible without impacting your credit score, then use a student loan refinance calculator to see if this repayment option is worthwhile.


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