How to pay for grad school: Going back to school as an adult

Whether you’re looking to advance your career or start a new one, furthering your education can be a rewarding next step in your personal and professional development.

We can help you think through your options with your full financial picture and goals in mind. Here are some key considerations if you’re concerned about paying for college as an adult student.

In this article

1. Find out if your employer supports you
2. Get credit for your life experiences
3. Be aware of the costs that go beyond tuition
4. Know that financial aid is available for adult students, too
5. If you’re a veteran or military personnel, take advantage of targeted programs
6. Understand your options for covering expenses
7. Take advantage of credits and deductions
8. Questions to discuss with us

1. Find out if your employer supports you

Continued professional development can play a significant role in your success as an employee. If you're considering returning to school to expand your skills for your current career, check if your employer offers tuition reimbursement benefits and/or retirement plan matches for student loan payments. If they do, understand the details and potential tax consequences of the program.

2. Get credit for your life experiences

If you’re going back to school because you're completing a degree or changing careers, look for schools that have a prior learning assessment program, which will allow you to get academic credit for your career or military experience. Some schools use standardized tests known as the College-Level Examination Program, or CLEP, to award credits, while others use different assessment criteria. Whatever the method, the process could allow you to test out of certain courses, potentially saving you a lot of time and money in getting your degree.

3. Be aware of the costs that go beyond tuition

Even for traditional college students, the cost of a college education involves many factors: Public or private? In-state or out-of-state? In person or online? Two or four (or more) years? There is also the additional expense of books, supplies and transportation. 

However, adult students paying for college may need to factor in other considerations, including:

• Potential loss of income: If you’re going back to school full-time, you may need to account for the loss of income from your current job.
• Potential childcare costs: If you have a family, there may be new childcare expenses (though student-parents can apply to use federal financial aid to help pay for childcare).

4. Know that financial aid is available for adult students, too

Financial aid programs are not just for students going into undergraduate programs straight from high school. In fact, there is no age limit on federal student aid, meaning any adult student can apply for financial aid.  

As with all students, the first step in obtaining aid is filling out the Free Application for Federal Student Aid (FAFSA). The FAFSA will collect information on your family’s financial situation to assess need, but you should complete the application even if you think your income is too high to receive financial aid. Multiple factors determine eligibility, so don’t assume you won’t get any aid. FAFSA is also used to obtain a variety of non-need-based federal loans, and many schools also require it to obtain merit-based aid.

Learn more: College financial aid basics

5. If you’re a veteran or military personnel, take advantage of targeted programs

Military veterans, active-duty personnel and future military personnel are eligible for numerous programs aimed at helping pay for higher education. Some of the more popular programs include: 

• Reserve Officer Training Corps (ROTC) Scholarships
• Department of Veterans Affairs Education Benefits (GI Bill)
• Tuition assistance programs
• Limited interest rates, no accrual of interest and deferment of student loans
• Scholarships from organizations such as the American Legion, AMVETS, Paralyzed Veterans of America, Veterans of Foreign Wars

6. Understand your options for covering expenses

Even if you qualify for federal or institutional financial aid, you’ll likely need to tap into other sources to cover the costs of going back to school. Here are some options: 

• 529 plan: You can open an account and designate yourself as the beneficiary. Or, if your child has a 529 plan and their educational expenses are less than expected, you can designate yourself as a new beneficiary and use the funds for your education expenses without facing any tax penalties. 
• Personal savings: If you have money in a personal savings account, you may want to consider using these funds to pay for your education. 
• Private student loans: These loans, which originate with commercial lenders rather than the federal government, aren’t subject to the same limits as federal loans. However, they often have less flexible repayment options and higher interest rates.
• Cash-value life insurance: If you have cash-value life insurance, you may have enough saved up to take out a partial surrender or a loan without additional taxes or penalties. However, doing so will reduce the net death benefit on the policy unless the loan is repaid. With this option, it’s critical to understand how much you can take out without taxes, penalties — or putting your insurance at risk. 
• Roth IRA: You can use a Roth IRA to pay for college tuition and qualifying educational expenses before you reach retirement age without IRS penalties if you follow certain requirements. But talk to your financial advisor before doing so. Using your retirement funds might impact your long-term retirement saving objective. Additionally, you’ll still pay income tax on the portion of the distribution that would otherwise have been subject to income tax.

7. Take advantage of credits and deductions

Though going back to school as an adult is a significant investment, there are several federal tax incentives to help ease the financial burden:

• American Opportunity Tax Credit: If you’re enrolled at least half-time, this credit is worth up to $2,500 per student for tuition and related qualifying expenses for the first four years of undergraduate education. There are income limitations, and the credit is not available if married, filing separately.
• Lifetime Learning Credit: This credit is worth up to $2,000 per tax return (not per student) to cover the tuition and fees for higher education courses taken throughout your lifetime. Like the American Opportunity Credit, there are income limitations, and both credits can't be claimed in the same year for the same student. 
• Student loan interest deduction: If you graduate with student loans, you may be able to deduct up to $2,500 of the interest you pay on qualified education loans¹ each year depending on your household income.

Learn more: Tax strategies for college savings and gifting

A new degree is within reach — let’s discuss your options

If you’re thinking about going back to school, we can help you navigate the financial process while keeping you on track to reach your other long-term financial goals.