So you’ve come to the point where you’ve bonked your head against the glass ceiling at work. You look up enviously and see everyone who uses that ceiling as a floor either has an MBA or is golf buddies with a VP.
Since there’s no helping your golf game, it’s obvious that your only path to the promised land of expense accounts, gaudy paychecks and executive washrooms is to make like Billy Madison and head back to school.
Heading to grad school mid-career is as jarring as a professional will ever make, but a worthy investment in your future that becomes all the more valuable the earlier you manage to make the leap. Before you go that route, here are five moves to financially prepare for grad school.
1. Shop for your school with extreme care
Cheaper doesn’t always mean better.
Going for an online degree at a fly-by-night, for-profit college may not get you what you want. The same can be said of a traditional institution that lacks a degree that will help you get where you want to be.
Set your goal of what you’d like the degree to accomplish, then research your schools with deep scrutiny, comparing cost, ease of access — will classes mesh with your work schedule? — and the utility of the degree.
Perform a cost-benefit analysis before you forge ahead. Don’t enroll at a particular school just because it sounds impressive. Select your school because you have a specific job in mind, and that institution is the one best suited to get you that job.
2. Don’t leave any money on the table
The sticker shock of an advanced degree can be overwhelming, and it’s depressing to realize you may be spending the rest of your professional life paying it off. But don’t despair. Survey the mountain of money that looms before you, and do everything you can to look for shortcuts to scale it.
Read about federal loan options available for graduate and professional school.The financial aid game is a bit different for graduate school. For one, you won’t need your parents’ financial information to fill out the FAFSA. There aren’t as many federal grants or subsidized loans available for graduate education, but you can borrow more: Up to $20,500 a year in Stafford loans as long as your total (undergrad and graduate) loan debt does not exceed $138,500. For would-be doctors and other health professions, the limits are higher: $47,167 annually with a life limit of $224,000. Of course, with private student loans you can borrow even more — but do so at your peril. The higher interest rates will take a bite out of your lifestyle for years to come.
Scour scholarship sites to see if there are any loose dollars you can shake off the money tree.
If you’ve got willing relatives, consider accepting loans or gifts from them before deciding how much you’ll need to borrow from institutions.
3. Deal with your existing debt
It should go without saying, but if you’ll be leaving work or reducing hours to start graduate school, don’t pack your suitcase with existing consumer debt. If you have credit card balances or car loans, it’s best to pay them off before facing a reduced income. If you can’t wipe the slate clean in time, you may want to take different approach to the usual method of repaying debt: Rather than pay the highest interest rate loans down first, try to pay off loans that have a high monthly payment. This will increase your cash flow when you have less coming in.
If you have existing student loans from college, decide if you will continue making monthly payments or defer them. Deferment can ease your cash flow, but interest will still accrue even though you aren’t making payments, increasing the long-term cost.
4. Start living like you’re broke before you actually are
Whether you bail out from the workforce, trim back your hours or decide to cram your class schedule into whatever few free hours you’ve got while working full time, your disposable income is in for a drastic change. Cut out the fat, such as ongoing expenditures for which you will no longer have time, and nail down a new budget.
If possible, begin living on a leaner budget for a year or at least many months before beginning school and pocket the difference so you’ll have extra cash available for emergencies.
5. Apply for credit cards while you still have a full-time income
You may know your resources are about to dwindle, but credit card companies don’t have to know that just yet. Assuming you’re responsible with plastic, expand your available credit by adding a couple of cards to your wallet before your income drops and credit stops flowing so easily.
Should disaster strike and you need to tap into credit for unforeseen medical expenses or home or auto repairs, it will be nice to have the luxury to put it on plastic. Rather than chase cards with the best rewards, seek out cards with long introductory teaser rates or low fixed APRs. Of course, the hope is you’ll never have to use them, but having some available credit to weather lean times like those in grad school should come in handy.
6. Keep your dirty hands off your retirement account
When you see the dire financial straits you are entering, your first instinct will be to tap all resources at your disposal. That’s fine, but leave your 401(k) out of it. Draining it will severely hamper your retirement prospects for a fleeting short-term windfall.
Resist the urge to take your fund and spend it on either your education itself, or to supplement your living expenses when you head back to school. If you stick with part-time work and employee matching is offered at your workload, do your best to continue keeping up your contributions to get the highest company match. If you leave your job, roll over your 401(k) rather than cash it out and need to pay the obscene penalties and taxes.