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Looking to Save for Grad School? Here's How

Loan demand soars, but there are numerous glimmers of hope for getting school funding.

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Universities desperate for cash are raising tuition for their graduate programs so that the average in-state public program now costs about $30,000 a year (including living costs). Private colleges average about 30 percent more per year.

Meanwhile, economic troubles have forced cutbacks among many of the traditional sources of grants and other free money for graduate students. Universities themselves had been one of the biggest funders of graduate student aid, providing tuition assistance to about two thirds of Ph.D. students and 20 percent of master's students. No more. The majority of public universities are reducing graduate student support because of budget cutbacks. And even the richest, most generous private universities are reducing opportunities for graduate students. Yale, suffering from a plunge in its now $16 billion endowment, announced in early 2010 plans to reduce the number of graduate seats by more than 10 percent. 

[Browse the Paying for Graduate School Guide.] 

Employers, who had subsidized tuition for about 25 percent of master's students in recent years, have been pulling back as well. Boeing, for example, which long offered generous tuition benefits to its workers, has announced that starting this year, it will underwrite tuition for "strategic" courses only. The percentage of executive M.B.A. students receiving support from any employer has been falling, business schools report.

The unhappy result for many graduate students—especially those in professional schools—is that they have little choice but to use loans to fund their studies. Nearly 90 percent of medical students, for example, need student loans. About three quarters of those pursuing a master's in architecture borrow. Even one third of all Ph.D. students end up having to borrow each year.

Still, thousands of graduate students are taking advantage of more hopeful developments to fund graduate school without going broke. Some are applying to new federal and school programs offering more science research grants and forgivable loans. And some students, such as former para­legal Xenia Tashlitsky, are smartly exploiting the intensified competition for students among some graduate programs. Tashlitsky applied to several law schools to give herself plenty of options. When the acceptances rolled in, she could have attended some big-name schools like Cornell University or the University of Chicago—if she'd been willing to borrow more than $100,000. Or she could take a chance on a brand-new law school being started by her alma mater, the University of California–Irvine, which was luring pioneer applicants with the promise of free tuition. "It might not have made its name yet across the country," Tashlitsky admits, but UCI has recruited some top professors. She believes the staff will work hard to help the students who gambled on the unproven school. "What happens to this class is going to establish the reputation of the university," she says. Since she wanted to live and work in the area eventually, she opted to stay close to home and start her career without the pressure of big debt payments.

While most graduate students aim for grants or scholarships, school officials point out that discounts, tuition waivers, or assistantships can be easier to land and have the same—or even better—impacts on a student's checking account and career. Financial aid counselors and savvy graduate students like Tashlitsky say there are at least 10 techniques to cut tuition costs and debt loads.

1. Go for research: Most Ph.D. students get at least some grants or assistantships to fund their studies. Many science and technology-related fields are bucking the budget-­cutting trend and enjoying increases in graduate funding. The Obama administration has increased funding for National Science Foundation grants, for example.

2. Encourage schools to compete for you: Apply to a few schools where your grades, test scores, and selling points are better than those of current students. Even top-10 ranked M.B.A. programs, such as the University of Chicago Booth School of Business, "compete very aggressively for the best candidates. That could be in the form of merit grants or outreach by faculty or alumni," says Rosemaria Martinelli, associate dean of student recruitment and admissions. (She recommends, however, that even wooed students choose their program based on fit, not price.)