If you are wondering whether your credit history will affect the financial aid you receive for your Master’s degree, think of it this way: your credit history is a ranking system of adulthood purchasing power and financial standing. In the old west, it was determined by a merchant’s overall opinion of a customer. If the merchant liked a guy, or thought he was rich at least, he got credit. If a merchant didn’t like a guy, or heard he had financial trouble, he didn’t get credit. End of story. Our contemporary system of credit has evolved from opinions and rumors into sophisticated formulas based on probability algorithms and debt to income ratios. As a prospective graduate student, you have likely many times experienced the benefits or shame of our credit system.
Grad School, Credit Scores and Financial Aid: The Basics
Now, as you pore over GRE books and contact old undergraduate professors for recommendations, you wonder how you can afford it. You did your undergraduate degree on loans and grants, but your finances weren’t nearly as complicated at eighteen as they are at thirty-two (the average age of a graduate student in the US). The first time around, you filed your FAFSA, signed a few promissory notes, and then headed off to the dorms. Now, you have a mortgage, car payments, oh, and that starter marriage that lasted eighteen months and then set you back several grand in therapy. Will you even be able to get financial aid?
Federal Financial Aid
As you will remember from your undergraduate work, you will need to begin by filing your FAFSA. This will determine your eligibility for government grant/loan programs like Stafford, Pell, and Perkins. These can be enormous resources. Graduate students can borrow up to $20,500 in Stafford loans alone. The good news is, these are all need-based and are not affected by your credit score. The bad news is, they are affected by a default status on prior student loans. If you have fallen on financial trouble in the past, it is likely you may have defaulted on any undergraduate loans you have. If you are in default, contact your lender for rehabilitation programs. These programs give you an easier payment amount, and then after about nine consecutive on-time payments, bring you out of default status, allowing you to be eligible for federal financial aid.
When your school calculates an aid package based on your FAFSA results, they will recommend a handful of private loans to make up the difference. These are, unfortunately, affected by your credit score. Depending on the severity of your credit history, you may still be approved for loans such as GradPlus or other loans, but with a higher interest rate. Some lenders will take into account your field of study and base a credit decision on likely future earnings. In this way, studying for an MFA in Creative Writing, for example, may be less likely to garner loan approval than studying business or law. For information about programs which lead to potentially lucrative careers, check out Top 10 Best Online Master’s in Computer Science Degrees.
If you are concerned about your credit history affecting your graduate financial aid, waiting a year or two may help. Make lifestyle changes to reduce expenses and pay down debt before you begin applying. This will allow you to get the most financial aid and the most out of your graduate experience. If you have worked to pay down your debt, your credit history may not affect the financial aid you receive for your Master’s degree.