Many families list education as a core financial goal and strive to save as much as possible to cover ever-increasing higher education costs. SoFi finds that SoFi finds that 83% of parents pay a portion of their child’s education bills.
Watching your graduate accept their diploma is a proud family moment — and especially meaningful for parents who have helped and supported them (financially and emotionally) throughout the journey.
But today, a bachelor’s degree isn’t always the end goal. Many students continue their studies at the graduate level with a master’s degree, doctorate degree, or professional school. In fact, graduate school enrollment increased by 3.6% in 2020 and another 4.4% in the spring of 2021.
And yet, this pursuit of higher education brings about a poignant question: Should I pay for my child’s graduate school?
Below are some mindful considerations to help inform your decision.
How Much Does Graduate School Cost?
Graduate programs come in all shapes and sizes.
Given the array of programs and institutions there’s no universal average cost, but here are some average costs for popular programs in the United States:
- The National Center for Education Statistics found that the average total cost for an MBA is $38,628. But if you’re aiming for top schools, two-year programs can run well over $100,000.
- Medical school has a hefty price tag of $54,698 per year, according to Education Data. As a four-year program, the total averages out to $218,792 per student.
- Wanting a law career? According to ADA data, before your child sees their day in court they’ll pay roughly $44,600 per year — or about $133,800 for a JD degree.
- Education Data also notes a master’s in education averages about $55,200 in total.
So, no matter the program your child is drawn to, it will likely cost tens of thousands of dollars (or more) to fund.
Since you’ve already contributed at least that much to get the first degree, what should you think about before committing to paying for the second or even the third?
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1. Be Honest with Yourself, Your Child, and Your Budget
Parents always want to help their children, which could leave you feeling obligated to offer financial assistance if you have the resources.
When it comes to paying for graduate school, though, there are no haves, shoulds, or musts. Post-graduate education may be an endeavor your child is passionate about, but that doesn’t mean you should sacrifice your financial future to build theirs.
If you’ve saved for years to cover undergraduate expenses, you may not have room in your financial plan to fund another degree — and that’s more than okay. Maybe you already redirected your savings from education to retirement when your child went off to school, or maybe you’re committing those extra funds to other financial goals like paying off debt, buying a retirement home, or saving for a wedding.
Before committing to paying for graduate school, understand how you feel about it and what you might have to give up to pay for it. Ask yourself:
- Is paying for graduate school a priority for me? Why or why not?
- Do I have ample room in my cash flow plan to help out?
- Are there other ways I can support my child, like inviting them to move back home, minor financial assistance, or helping them with certain living costs while they’re in school?
Having these conversations up front will help you evaluate the situation and determine the best course of action.
2. Have Career Conversations Before Committing Funds
Graduate school is expensive, so before writing a check, it’s essential to have open and honest conversations with your child about what an advanced degree means to them and their larger career goals.
You might ask questions like:
- How will you leverage this graduate degree in your career?
- What would your career look like without this degree?
- What are everyone’s fears about this commitment? What are everyone’s best hopes?
Some professions require advanced degrees. These include the medical field (doctor, dentist, nurse, anesthetist), college professors, and other industry specialists (historian, anthropologist, economist). That said, not all professions do.
Talk with your child about how they will apply their degree to their career and personal development. Is the degree necessary or simply nice to have? Are they ready for the rigors of graduate study? Have they considered all their options?
Remember, even if their chosen career path requires graduate study, it doesn’t mean you have to contribute to their schooling. Another question you may ask is:
- Is there potential for income increases or other career advancement opportunities?
Successfully completing graduate programs like MBAs, graduate nursing programs, and computer sciences can offer lucrative opportunities like a better title, more competitive salary, and wider career advancement paths.
The Bureau of Labor Statistics also found those with more education tend to have higher weekly earnings. The median weekly earnings for a full-time worker over 25 with a bachelor’s degree is $1,305. For someone with a master’s degree, it jumps to $1,545. And those with doctoral degrees earn the most at $1,885 per week.
That’s a 30% difference between workers with bachelor’s degrees and doctoral degrees! In some cases, the extra letters after your child’s name could offer many long-term financial benefits.
Be sure your child has done their research and thought deeply about why they want to attend graduate school, then ask:
- Why is this graduate degree important to you? What would you like me to understand most about your pursuits?
The best ways to spend money is to open up possibilities, expand your horizon, and exemplify your values. This is a valuable lesson to teach your kids, especially when such large amounts of money are at stake from parental contributions or student loans.
Explore your child’s passions about their degree and why they’re excited to pursue it. These conversations can help ensure both of you spend money in ways that align with your goals and values.
While these conversations may seem more advanced than talks you had before their undergraduate degree, trust that your child is ready to have them. It’s more than okay for parents to ask detailed questions before committing funds to a graduate degree.
3. Don’t Sacrifice Your Retirement Nest Egg
Many parents with children considering graduate school are in their peak earning years — and building wealth in your 50s is critical for your long-term financial health.
This means it’s important to take advantage of present opportunities and properly save for your future.
Just like saving for college the first time around, your retirement plan should take top priority. You’re even closer to retirement now, so you should distill extra savings and investing endeavors into your nest egg.
If paying for graduate school detracts from your retirement savings (like taking a loan from your account, contributing less per month, or pausing contributions), it’s likely best not to take on that added responsibility.
How can you more intentionally fund your retirement accounts?
- Reallocate your education savings to your retirement accounts — your future self will thank you.
- Aim to max out your 401(k) — you can save up to $20,500 in 2022.
- Use leftover funds in your cash flow to strengthen investments or take advantage of unique financial strategies like Roth conversions, realizing long-term capital gains, buying or exercising stock options, and more.
4. Find Generous Ways to Help Your Child Through Graduate School Besides Tuition
Footing the tuition bill is not the only way you can support your child in their education path. There are several ways to offer help that cost less but are still meaningful.
1. Consider using any leftover 529 funds.
After helping your child through their undergraduate program, the likelihood of having a significant balance in your 529 account is slim. But if you do have any leftover funds, you could consider using them to pay for qualified costs like tuition, books, and supplies. Since withdrawing earnings from a 529 plan for non-qualified education expenses incurs a 10% penalty, helping your child fund their graduate dreams is an excellent option.
2. Contribute to extra expenses like housing, food, and other living costs.
Whether your student attends school full- or part-time, money may be tight and presents a wonderful area to contribute. Maybe you’d like to help them upgrade their meals from Ramen to home-cooked dinners by providing a food allowance, sending them their favorite meals, or having them over for dinner regularly. Perhaps you’d like to improve their living situation and offer to chip-in for rent, invite them to live with you, or cover their internet or phone costs. Even a small care package with thoughtful items can let your children know you’re thinking about them and can be a connective way to stay involved.
3. Create a graduate school allowance.
While you may not be comfortable covering graduate tuition costs, you might consider giving your children a monthly allowance to use as they see fit. This can still provide financial support, just on a more manageable scale. Instead of one-time purchases, regular payments could also ease your child’s cash flow and monthly budgeting challenges. If you go this route, it’s a good idea to set clear boundaries for what you are and aren’t willing to pay for.
5. Common Ways Your Child Can Pay for Graduate School
Lastly, there are ways young adults can also find to pay for their graduate degree. Below are four funding opportunities you and your child can consider:
1. Student Loans
Given the cost of graduate school, your child may need to take out additional student loans. There are several options like Grad PLUS loans, federal direct loans, and private loans. It will be vital for your child to make a plan for their loans before taking them out. Consider loan terms, interest rates, payment plans, and other opportunities. Early planning will help ensure they aren’t surprised after graduation when payments become due.
2. Scholarships and Grants
Many graduate programs offer scholarships and grants, though these tend to be more competitive. Be sure your child investigates any scholarship or grant opportunities.
3. Company Benefits
Is your child working full time? Does their company offer a tuition reimbursement benefit? Some employers will commit a certain amount of money towards their employees’ advanced degrees. In exchange, the company may require a specific commitment from their employee (like a set number of years needed to stay with the company without paying the benefits back).
4. Part-time Work
While a part-time job won’t cover the entire bill, it may help your children pay loans back faster and create a cash flow cushion.
Work With a Trusted Financial Team
Paying for your child’s graduate school is a significant financial and personal investment.
Before considering covering tuition, make sure your financial house is in order. This means your retirement savings are on track, your debt is manageable (or gone), you have a healthy emergency savings fund, and are investing for your future goals.
Remember, there are several ways to support your child as they enter this next life and career phase. At Abacus, we help expand what’s possible with your money and empower you to find your most authentic life.
To explore more ways you can financially support your child through graduate school, set up a time to talk with an Abacus advisor today.
