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How to Use Graduate School as a Path to Student Debt Freedom

More college may be the answer to some student loan nightmares.

Written By: Michael P. Lux, Esq.

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Graduate school might be a reasonable option for borrowers with a student loan mess.

The idea of borrowing more money to fix the problem of too much student debt sounds dumb. After all, you wouldn’t run up more credit card debt to fix your high credit card bills.

However, many borrowers may benefit from additional education, and yes, more student debt.

More Opportunities for Employment

Some students don’t realize their major was a bad idea until it is far too late.

If you are struggling to find a job, a graduate degree in a more marketable field could provide an edge. Obviously, this won’t be the case for all majors and all graduate degrees, but it is worth exploring.

For example, suppose you go back to school and get an M.B.A. from a top business school. Your previous studies combined with your newly earned business expertise might lead to terrific job opportunities.

The critical detail in this analysis is finding the right graduate degree. Those considering graduate school should carefully investigate a school’s employment numbers and the marketability of the degree. If your undergraduate degree isn’t paying off, use those hard-earned lessons to find a graduate degree that does pay off.

Extra Debt is Less of a Risk

If you are already in a student loan nightmare, adding more debt sounds terrifying.

However, the extra debt may not cause any more pain.

One of the big advantages of graduate school is that the federal borrowing limits are significantly higher than the undergrad limits. If you are already dependant upon an income-driven repayment plan and student loan forgiveness, having more debt could simply mean more debt gets forgiven at the end.

There is still a risk. Borrowers should still be wary about the additional debt load and potential tax consequences if forgiveness happens. Forgiveness is no guarantee, and more debt means a more considerable student loan burden.

Converting Private Debt to Federal Student Loans

Many borrowers facing a student loan disaster have a lot of private student loans. They may also be working really hard to keep up with their bills.

Graduate school presents a unique opportunity to essentially convert private debt into federal student loans.

Suppose you work during the summer before each year of graduate school and earn $10,000. Traditionally, many students would use that $10,000 towards tuition for the upcoming year to reduce how much they have to borrow. Instead, borrowers could use that $10,000 to pay down their private student loans. In the fall, they need to borrow an additional $10,000 to pay for tuition. This slight difference means converting risky private debt into more manageable federal debt.

The Mistake to Avoid

Accumulating extra student debt is a risky path out of a student loan nightmare.

Robert Farrington of The College Investor notes that it is an especially bad idea to use extra classes to get a deferment. In general, deferments are usually a lousy option, but borrowing more money just to qualify for a deferment is a colossal mistake.

Farrington thinks borrowers should focus on the return on investment of additional classes.

Final Thought: Doubling Down on Student Debt

If your college degree was a bad investment, running up more student debt might not seem like the answer.

For many borrowers, more debt will only lead to more problems.

However, there are times where additional student loans may be necessary to get to debt freedom. Borrowers that carefully research graduate school and employment opportunities may be pleasantly surprised with the results.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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