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Students who graduate with a master’s degree carry an average debt of $69,140, according to the Education Data Initiative. Fortunately, there are many ways to pay for grad school, including options that don’t require borrowing.

Keep reading to learn more on how to pay for grad school in 2025, including how to take out graduate student loans, how to qualify for scholarships and grants, and other ways to reduce your total tuition.

Ways to Pay for Grad School Without Taking on Debt

You can pay for grad school without taking on debt by filling out the FAFSA, applying for scholarships and grants, or working for an employer who offers tuition reimbursement. Continue reading for even more strategies to pay for grad school without taking on debt.

1. Fill Out the FAFSA

The first step to seeing if you qualify for financial aid is to fill out the Free Application for Federal Student Aid, or FAFSA®.

Your FAFSA will determine your eligibility for federal student loans, federal work-study, and federal grants. In addition, your college may use your FAFSA to determine your eligibility for aid from the school itself. Here’s a closer look at federal grants and federal work-study programs.

Federal Grants

Unlike student loans, federal grants do not need to be repaid. Grants for college for grad students include TEACH Grants and Fulbright Grants.

The TEACH Grant, or Teacher Education Assistance for College and Higher Education Grant, has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduating.

The Fulbright Grant offers funding for international educational exchanges. Sponsored by the U.S. government, it supports students, scholars, teachers, and professionals to study, research, or teach abroad.

Federal Work-Study Program

Federal work-study for grad students provides part-time jobs to help cover educational expenses. These positions are often related to a student’s field of study or serve the community. Eligibility is based on financial need, and earnings are exempt from being counted as income on the FAFSA, maximizing financial aid opportunities.

2. Figure Out What Your University Can Offer You

After narrowing down your federal options, make sure to consider what university-specific funding might be available. Many schools offer their own grants, scholarships, and fellowships. Your school’s financial aid office likely has a specific program or contact person for graduate students who are applying for institutional assistance.

Many schools will use the FAFSA to determine what, if anything, the school can offer you, but some schools use their own applications.

Although another deadline is the last thing you need, seeking out and applying for school-specific aid can be one of the most successful ways to pay for grad school. Awards can range from a small grant to full tuition remission.

3. Employer Tuition Reimbursement

It might sound too good to be true, but some employers are happy to reimburse employees for a portion of their grad school costs. Employers that have tuition reimbursement plans set their own requirements and application processes.

Make sure to consider any constraints your employer puts on their tuition reimbursement program, including things like staying at the company for a certain number of years after graduation or only funding certain types of degree programs.

4. Become an In-State Resident

If you’re applying for graduate school after taking a few years off to work, you might be surprised to find how costs have changed since your undergraduate days. Graduate students interested in a public university can save tens of thousands of dollars by considering a university in the state they already live in.

Each state has different requirements for determining residency. If you are planning on relocating to attend grad school, be sure to look into the requirements for the state of the school you are planning to attend.

Certain states require only one year of full-time residency before you can qualify for in-state tuition, while others require three years. During that time, you could work as much as possible to save money for graduate school. More savings could mean fewer loans.

Recommended: 6 Ways to Save Money for Grad School

5. Become a Resident Advisor (RA)

Resident Advisors (RAs) help you get settled into your dorm room, show you how to get to the nearest dining hall, and yell at you for breaking quiet hours.

RAs may be underappreciated, but they’re often compensated handsomely for their duties. Students are typically compensated for a portion or all of their room and board, and some schools may even include a meal plan, reduced tuition, or a stipend. The compensation you receive will depend on the school you are attending, so check with your residential life office to see what the current RA salary is at your school.

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6. Find a Teaching Assistant Position

If you’re a graduate student, you can often find a position as a Teaching Assistant (TA) or Research Assistant (RA) for a professor. The position will be related to your undergrad or graduate studies and often requires grading papers, conducting research, organizing labs, or prepping for class.

TAs can be paid with a stipend or through reduced tuition, depending on which school you attend. Not only can the job help you to potentially avoid student loans, but it also gives you networking experience with people in your field.

The professor you work with can recommend you for a job, bring you to conferences, and serve as a reference. Being a TA may help boost your resume, especially if you apply for a Ph.D. program or want to be a professor someday. According to ZipRecruiter, the average TA earns $15.66 an hour, as of November 2025.

Recommended: How to Become a Graduate Assistant

7. Apply for Grants and Scholarships

Applying for grants and graduate scholarships is a smart way to fund graduate school without accumulating debt. Start by researching opportunities specific to your field, school, or demographics. Many scholarships focus on academic achievements, leadership, or community involvement, while grants often emphasize financial need.

An easy way to search for scholarships is through one of the many websites that gather and tag scholarships by criteria. Keeping all your grad school and FAFSA materials handy means that you’ll have easy access to the information you’ll need for scholarship applications.

8. Utilize Military Education Benefits (If Eligible)

Military education benefits can significantly reduce or even eliminate the cost of graduate school for qualifying service members, veterans, and sometimes their families. Programs like the GI Bill® and the Yellow Ribbon Program can cover tuition, fees, and even housing costs at many institutions. Additionally, some branches offer tuition assistance while on active duty, enabling students to pursue advanced degrees with little to no out-of-pocket expenses.

How to Pay for Grad School With Student Loans

Grad students may rely on a combination of financing to pay for their education. Student loans are often a part of this plan. Like undergraduate loans, graduate students have both federal and private student loan options available to them.

Federal Loans for Graduate School

There are different types of federal student loans, and each type has varying eligibility requirements and maximum borrowing amounts. Graduate students may be eligible for the following types of federal student loans:

•   Direct Unsubsidized Loans. Eligibility for this loan type is not based on financial need.

•   Direct PLUS Loans. Eligibility for this loan type is not based on financial need; however, a credit check is required to qualify for this type of loan. As of July 1, 2026, Grad PLUS Loans will no longer be available (Parent PLUS Loans will still be available, however).

•   Direct Consolidation Loans. This is a type of loan that allows you to combine your existing federal loans into a single federal loan.

Federal Student Loan Forgiveness Programs

Federal student loan forgiveness programs either assist with monthly loan payments or can discharge a remaining federal student loan balance after a certain number of qualifying payments.

One such program is the Public Service Loan Forgiveness (or PSLF) program. The PSLF program allows qualifying federal student loan borrowers who work in certain public interest fields to discharge their loans after 120 monthly, on-time, qualifying payments.

Additionally, some employers offer loan repayment assistance to help with high monthly payments. While loan forgiveness programs don’t help with the upfront cost of paying for grad school, they may offer a meaningful solution for federal student loan repayment. (Unfortunately, private student loans don’t qualify for these federal programs.)

Private Loans for Graduate School

If you’re not eligible for scholarships or grants, or you’ve maxed out how much you can borrow using federal student loans, you can apply for a private graduate student loan to help cover the cost of grad school.

Private loan interest rates and terms will vary by lender, and some private loans have variable interest rates, which means they can fluctuate over time. Doing your research with any private lender you’re considering is worth it to ensure you know exactly what a loan with them would look like.

Also, keep in mind that private student loans do not offer the same benefits and protections as federal student loans. It’s best to use all federal funding first before relying on private funding.

Comparing Federal vs. Private Loan Options

Understanding the differences between federal vs private student loans is important when considering grad school loans. Each option offers unique benefits, eligibility rules, and repayment features that can impact long-term costs.

•   Federal loans: These loans are funded by the government and typically offer more borrower protections, such as fixed interest rates, income-driven repayment plans, and potential for deferment, forbearance, or loan forgiveness programs. They usually don’t require a cosigner and are often based on financial need.

•   Private loans: Offered by banks, credit unions, and other private lenders, these loans often have variable interest rates that can be higher than federal loans. They usually require a strong credit history or a cosigner, and their repayment terms and borrower benefits are generally less flexible than federal options.

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Steps to Take Before Applying to Graduate School

Before applying to graduate school, it’s important to consider the earning potential offered by the degree in comparison to the cost. At the end of the day, only you can decide if pursuing a specific graduate degree is worth it. Here are a few steps to take before applying to grad school.

1. Research Potential Earnings by Degree

Perhaps you are already committed to one degree path, like getting your JD to become a lawyer. In that case, you should have a good idea of what the earning potential could be post-graduation.

If you’re considering a few different graduate degrees, weigh the cost of the degree in contrast to the earning potential for that career path. This could help you weigh which program offers the best return.

2. Complete the FAFSA

Regardless of the educational path you choose, filling out the FAFSA is a smart move. It’s completely free to fill out and you may qualify for aid including grants, work-study, or federal student loans. Federal loans have benefits and protections not offered to private loans, so they are generally prioritized first.

3. Estimate Your Cost of Attendance

Estimating your cost of attendance will help you understand the full financial commitment beyond just tuition. This estimate should include fees, textbooks, housing, transportation, and personal expenses, as well as potential increases in tuition over time. By creating a detailed budget upfront, you can compare programs more accurately, anticipate funding needs, and avoid surprises once you enroll.

4. Explore Financing Options

As mentioned, you may need to rely on a combination of financing options to pay for grad school. When scholarships, grants, and federal student loans aren’t enough, private loans can help you fill in the gaps.

When comparing private lenders, be sure to review the loan terms closely — including factors like the interest rate, whether the loan is fixed or variable, and any other fees. Review a lender’s customer service reputation and any other benefits they may offer, too.

The Takeaway

Grad school is a big investment in your education, but the good news is there are grants and scholarships that you won’t have to pay back. Some employers may also offer tuition reimbursement benefits, or you could find work as a Resident Advisor to supplement your tuition costs. If you need more funding to finance grad school, there are federal and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Does FAFSA give money for grad school?

FAFSA provides access to federal financial aid for graduate school, including Direct Unsubsidized Loans and Grad PLUS Loans (through July 1, 2026). Graduate students may not qualify for federal grants but can explore assistantships, scholarships, and work-study opportunities through FAFSA to help cover their educational expenses.

Does Pell Grant cover a master’s degree?

No, the Pell Grant does not cover master’s degree programs. It is a federal grant specifically designed for undergraduate students with financial need. Graduate students must explore other funding options like scholarships, assistantships, and federal loans to finance their education.

Is it worth paying for grad school?

Paying for grad school can be worth it if the degree significantly boosts your career prospects, earning potential, or personal goals. Consider the return on investment, including salary increases and opportunities. Research funding options and weigh potential debt against long-term benefits to determine if grad school aligns with your financial future.

What are the best student loans for graduate school?

The best student loans for graduate school often start with federal options, like Direct Unsubsidized Loans, because they offer fixed rates, borrower protections, and forgiveness eligibility. Private student loans can be a good alternative for borrowers with strong credit who may qualify for lower interest rates and flexible terms.

Can I get scholarships for graduate school?

Yes, you can get scholarships for graduate school. Many universities, private organizations, professional associations, and foundations offer merit-based, need-based, and field-specific awards. You can apply before or during your program, and using scholarship databases or your school’s financial aid office can help you find opportunities that match your background and goals.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SOISL-Q425-047

Borrowing money to pay for school comes at a cost, in the form of interest. In certain situations, interest that has accrued may be “capitalized” on the loan. Student loan capitalized interest is when the accrued interest is added to the principal, or the initial amount borrowed. This new value is then used to calculate the amount of interest owed each day.

Interest capitalization can dramatically increase how much a borrower owes over time. Students who have subsidized federal student loans don’t have to worry about interest accruing while they are in school or during their grace period after graduation. For other types of federal student loans, however, including unsubsidized loans and PLUS loans, borrowers are responsible for paying the accrued interest.

Read on for more information about capitalized interest on student loans, plus ways that can help reduce its impact.

What Is Capitalized Interest On A Student Loan?

When accrued interest is unpaid, it is sometimes added to the principal value of the loan, which is known as capitalized interest. This new loan principal becomes the value that is used to calculate the interest. Because the borrower is now paying interest on top of this new, higher loan balance, future payments will also be higher.

How Does Interest Capitalization Work on Student Loans?

Capitalized interest can happen on student loans in several scenarios. First, it may happen after a borrower graduates from school or after a student loan grace period, and unpaid interest is added to the balance of the loan. Second, it could happen after periods of student loan deferment on Direct loans and the Federal Family Education Loan (FFEL) Program loans managed by the U.S. Department of Education. Private student loans that are in forbearance may also be subject to capitalized interest.

Even though payments are not due during these periods, interest is often calculated and added to the balance of the loan once that period is over. This is the process of capitalization, which will likely increase the student loan balance.

Borrowers utilizing income-driven repayment (IDR) plans may want to pay attention to capitalized interest as well. In these situations, unpaid interest may be capitalized on the loan:

•   If an individual voluntarily leaves an income-driven repayment plan, does not recertify their income and family size annually, or does not have a partial financial hardship

•   If a deferment period ends

•   If a borrower consolidates their loans

In general, unpaid interest is added to the principal of a loan under an IDR plan under the following circumstances:

•   During times of forbearance or deferment

•   While the borrower is enrolled in school and has an unsubsidized loan

•   The borrower has a grace period.

Can You Avoid Student Loan Interest Capitalization?

There are a few ways that borrowers can try to minimize capitalized interest. Once interest is capitalized, there is little a borrower can do about it, so the trick is to avoid scenarios where interest is capitalized in the first place.

How Much Does Capitalized Interest Cost?

The actual cost of capitalized interest varies according to the amount of the principal and interest rate. For instance, if a borrower has $25,000 in student loans with an interest rate of 5.00%, the capitalized interest could be $3,083. This brings the total amount owed to $23,083.

When Does Interest Accrue?

Interest on federal student loans begins to accrue the day the loans are disbursed, and interest accrues daily through the life of the loan. This is likely also the case for many private student loans, but be sure to confirm the terms with the lender before borrowing.

Regardless of whether the student loan is federal or private, the promissory note generally includes all pertinent information on the loan.

Depending on the type of loan(s) a borrower has — subsidized or unsubsidized — they may or may not be responsible for paying for the interest charges accrued while they are enrolled in school and during periods of deferment or forbearance.

Immediately after graduation, most federal loans offer a six-month grace period where borrowers aren’t required to make loan payments. The grace period exists so recent graduates have time to find work. Not all loans have grace periods and even if they do, interest may still accrue during the grace period, but a borrower may not be responsible for paying it during this time.

Understanding Interest During Deferment or Forbearance

Students may be able to temporarily halt their student loan payments with programs such as student loan deferment or forbearance due to economic hardship or job loss, but interest may accrue during these periods.

Borrowers with subsidized loans won’t have to pay interest accrued during periods of deferment because the government covers those interest charges. However, the government pays no interest charges on unsubsidized loans during deferment and does not make interest payments on any loan types during periods of forbearance.

It’s important to understand whether or not the interest will be capitalized on the loan before filing for deferment. This can help borrowers prepare for what lies ahead.

💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fees-required loans, you could save thousands.

Ways to Minimize Capitalized Interest

These strategies may help borrowers reduce or avoid capitalized interest on their student loans.

Making Interest-Only Payments

Consider making interest-only payments while in school, during the loan’s grace period, or during periods of deferment or forbearance. If that isn’t in the cards, try to minimize the amount you borrow.

Applying for Scholarships and Grants

Continue to look for scholarships and grant money while enrolled in school and after receiving your financial aid award. Scholarships and grants are free in the sense that they are not required to be repaid.

Think Carefully Before Taking a Deferment

Graduates should be judicious about taking a deferment. While you shouldn’t feel bad about utilizing these programs when needed, it can be a wiser decision to do so only if it’s totally necessary.

If a borrower puts their loans in deferment, they can try making interest-only payments. Even if they’re not able to tackle the principal at this time, making interest payments might minimize the amount of interest that may ultimately be capitalized on the loan.

The Takeaway

When the accrued interest on federal student loans is unpaid, it may be added to the principal value of the loan under certain circumstances. This becomes the new principal value of the loan and is used to calculate the interest as it accrues moving forward. This is capitalized interest, which only applies:

•  When a borrower withdraws from an IDR plan.

•  When a borrower on an IDR plan does not update their income and family size, or doesn’t have a financial hardship.

•  After deferment on an unsubsidized loan.

In the long term, capitalized interest can make the cost of borrowing more expensive.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

Can interest be capitalized on a student loan if it is deferred?

In some cases, yes. If the loan is a federal Direct unsubsidized loan or a Federal Family Education Loan (FFEL), interest can be capitalized on the loan after a deferment.

Why does my loan interest capitalize?

One of the primary reasons student loan interest capitalizes on certain types of loans is that it accounts for periods of unpaid interest, such as when a borrower is in school or in deferment. Because the interest is still accruing during these times, capitalization gives the loan issuer a way to account for that debt by making it part of the principal balance.

How can I avoid capitalized interest?

To avoid capitalized interest, you can make interest-only payments while you’re in school, during the grace period after graduation, and while the loans are in deferment. If you’re on an income-driven repayment plan, be sure to recertify your income every year so you continue to qualify for the plan.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.