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The financial burden of graduate education

This article first appeared in the St. Louis Beacon, March 2, 2011 - After graduating from law school at Washington University in St. Louis in the spring of 2009, Jennifer Belmont Jennings owed the federal government $170,237.87 in student loan repayments. She borrowed $157,000 in student loans to pay for three years of law school and accrued an additional $13,000 in interest while in school.

When she first started calculating her repayment options, she said she "experienced the first feelings of what it may feel like if you're having a heart attack." Since graduation, Jennings has been able to repay $51,670.29 of her student loan debt. Her current balance is $135,308.60, and she's accumulated nearly $17,000 in additional interest since graduating.

Jennings' experience reflects the dilemma many recent college graduates face. Not only is the cost of education rising, but graduate students also face high interest rates and a general lack of scholarships, in comparison to undergraduate students.

Options for financing an education can vary from individual to individual and from university to university. Some universities offer scholarships and merit-based awards only to undergraduate students while others offer graduate students partial or full tuition.

Graduate and working-adult students may pursue scholarships from private organizations, grants, fellowships and other external awards. "Many students are aggressive in finding their own source of money," said Sheri Notaro, associate dean of the Graduate School of Arts & Sciences, at Washington University. While many sources of financial aid exist, many students couldn't pursue their degree without help from their university or from student loans.

Though he did not receive as much aid as he would have liked, Nathaniel Brown was able to pursue a combined degree in bioethics from Saint Louis University. Without financial aid, pursuing both degrees -- a Ph.D. in humanities and an M.D. -- simultaneously would not have been possible, he said.

Several universities offer research or teaching assistantships so graduate students can fund their education by contributing academically to the university. At Wash U, Ph.D. students in the Graduate School of Arts & Sciences are supported with full tuition remission and, usually, a living stipend through an assistantship. Master's degree students are also typically given some financial support from the university.

Although other universities may not offer the same financial support as Wash U, support could come from a working-adult student's employer. Paul Carney, vice president of Enrollment Management and Student Affairs at Webster University, said tuition reimbursement is the primary source of financial aid for working students. "I think people may be taking advantage of (these programs) sooner due to being underemployed; it may be more of an option now," Carney said.

Reliance on student loans

For many students, federal student loans are a major component of paying for higher education. According to FinAid! The SmartStudent Guide to Financial Aid, graduate and professional students tend to borrow significantly more than undergraduates. The typical debt for a graduate degree ranges from $30,000 to $120,000, and graduating with debt is usually unavoidable for students in law, medicine or business, according to FinAid.

To illustrate the magnitude of student debt, FinAid estimates more than $1.17 trillion in loans have been made since the program began, and more than half of all federal students loans are still outstanding.

Mark Lenihan, a first-year law student at DePaul University, is using student loans for the first time and is worried about repaying them. Because his mother teaches college, he got a bachelor's degree from Rockhurst University free of charge. Though he does have a scholarship from DePaul, "the idea of spending so much for three years of education and living expenses was terrifying," he said. He understands that obtaining his degree is an investment, and he hopes his investment pays off in the future, though "there are no guarantees."

Student loans are "definitely affecting the way I live my life," said Erin Whitman, who attended graduate school at Wash U from August 2008 to August 2009 for a master's in social work. "My loans from graduate and undergraduate school make up a large chunk of my expenses each month," she said. After completing her degree, Whitman was approximately $60,000 in debt. Over half of this debt ($34,000) came from one year in graduate school, even with a scholarship.

Whitman, who currently has $51,000 in outstanding debt, is on a standard repayment plan. She is in the process of consolidating her Stafford loans from graduate school into Direct Loans and will be on an Income Contingent plan. The federal student aid program (FSA) provides online calculators for borrowers to determine what their monthly costs would be under different repayment plans. These calculators can also determine the amount of interest a borrower would acquire under a consolidation plan and the amount of monthly payments.

Loan debt includes not just the money borrowed, but the interest accrued. Each type of federal loan has a different interest rate, and these rates are typically higher for graduate students than for undergraduate students.

Undergraduate students qualify much more often for subsidized loans, meaning interest is not charged while the student is still in school. Graduate and professional students typically qualify for unsubsidized loans, and interest accrues while the student is in school.

For unsubsidized or subsidized Stafford loans for graduate or professional students, the interest rate is 6.8 percent -- in contrast to 3.4-4.5 percent for undergraduate subsidized loans. PLUS loans are only for parents of students or for graduate/professional students, and the interest rate is 7.9 percent.

For most students, loans are essential. Reducing high interest rates could help reduce the loan burden for recent graduates. "When you do the math you'll see that a few percentage points in interest ... would correlate directly into thousands of dollars of savings each year," Jennings said. "A 2 or 3 percent reduction is significant."

If she had understood the magnitude of her financial decisions earlier, Jennings said she would have done more to pay off loans while still in school and may have made a different choice in degree programs. She also believes that universities do not do enough to inform students about the difficulty of repaying student loans. "Education is the one thing everyone tells us from the time we're little you have to have, it's essential to do anything, that (student loan debt is) good debt," she said.

"Good debt or bad debt, it's still debt."

Next: Retooling the job search.

Erika Miller, a student at St. Louis University, is an intern at the Beacon.

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