You have probably heard the advice before: get funding for your PhD. The advice is sound, but sometimes securing enough funding for your project poses challenges. Should you take out a loan? Or give up the dream?
In the UK, prospective PhD students have the option to apply for full and part-time loans. The goal? To allow up to 3,000 more students per year to study for a doctorate who otherwise would not have the opportunity. It is designed to help students cover costs when other funding runs out. Is it worth it?
Before you do anything, ask yourself these five questions:
Is there another way to pay for it?
Before you take out any loan, especially for a doctoral program, do some digging and find out if there are other ways to pay for your degree.
There are a few obvious possibilities, like research or teaching assistantships that can easily offset your costs, but they are also highly competitive.
You can also look at scholarships and grants. Don't limit yourself to federal or school-based options, either. Do some serious digging. Companies and corporations often offer funding for PhD students in specific areas. The bottom line? You don't know unless you ask.
Consider employer-tuition reimbursement, too, especially if you go into a high-needs field like social services, healthcare, or teaching.
Fellowships, especially university and externally sponsored ones, are other good options worth pursuing. You may qualify for Federal Work-Study, too.
Exhaust all of your possibilities for paying for that PhD before you take out that loan. You may be surprised at what you come up with!
Is my PhD in demand?
If a PhD in English is less likely to get you a job than a PhD in aerospace engineering, then it is probably not worth going into debt for it.
While graduate school -- if done right -- can give you a tremendous salary boost, it may not be worth it if you are up to your neck in debt when you come out.
Think about the amount of debt you have from undergraduate studies -- and your master's degree if you already have one. If you already have a lot of debt before going into your PhD studies, make sure that your PhD will give you more than enough to cover your debt and get you off on the right foot.
If you are in a low-demand field? Rethink what you want to do and why.
What's my ROI?
That's Return On Investment...
Here's a useful strategy: limit your total student debt to no more than the average salary for someone in your field with a similar degree.
That means this: if the average salary of an engineer in your state is $150,000 per year, then that's the most you should borrow.
If you are contemplating a PhD in social work, and the average salary is $50,000 and you already have $30,000 in student loans, then your ROI starts dipping into negative numbers. Stay away.
This calculator might help you!
What kind of loan do I need?
There's a major difference between federal and private loans. Be smart about what you take out, if you take out anything.
In the US, the Department of Education offers Direct PLUS loans to graduate and professional students. You may be eligible to borrow the cost of attendance. Here's what's different about Direct PLUS loans, though: they require a credit check.
If you take out a Direct PLUS loan, you will pay an upfront fee of 4.264 percent, which will be deducted from your disbursement.
As a PhD student, you will face some high interest rates (see below) but you may be eligible for various income-driven repayment (IDR) plans, which will keep your loan payments affordable.
Depending on your field, you may also qualify for Public Service Loan Forgiveness (PSLF).
Private student loans are a different story and you won't qualify for IDR plans or the PSLF program. You may get lower rates and fees, though.
You can find some good deals on private loans with a strong credit report, but you will probably require a co-signer. The best move is to do a bunch of research and talk to a variety of private loan sources. Contact your school's financial aid office to point you in the right direction.
What are the interest rates?
Fineprint matters. Read it. Pay attention to interest rates.
Compare and contrast interest rates, repayment plans, and any incentive plans. While federal loans often have higher rates, they are also often more forgiving and have a wider array of repayment plans that may cancel out any benefit of a lower interest rate on a private loan.
With private loans, watch for adjustable rates, which could outweigh the benefits of low up-front rates.
Your takeaway? Research repayment plans, adjustable loan rates, refinancing options, forbearance benefits, and loan forgiveness opportunities. Make the choice that makes the most financial sense for you!