Should I use my savings or take private student loans to fund my degree?

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Prodigy Finance - May, 16 2024

9 min read

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Our mission is to make quality education accessible for all - globally.

How to prepare your finances before Grad school: An overview

Wondering if you should use your savings or take out a student loan? how to pay for college with no savings? Few people have enough money in savings accounts to pay for their international masters tuition outright.

The majority of international grad students have some savings and should continue reading – even if you don’t have enough savings to pay for university.

The question may become relevant while preparing your international grad school finances – or while you’re in the repayment cycle of your student loan.

How do I decide between using savings or a student loan?

What things should I consider before taking a graduate student loan?

  • What kind of loan?
  • Student loans from the government
  • Student loans from banks
  • Student loans from independent credit providers
  • Repayment term?

Saving up is often the best option. It helps students across the global pay for college and build a career for themselves.

A Postgraduate Master's Loan can help with course fees and living costs while you study a postgraduate master's course.

Grad students can apply for federal and private loans. Federal loans are funded by the federal government, and you apply for Federal Direct Loans and Direct Graduate PLUS Loans by filling out a FAFSA®.

What you can spend student loans on

  • Tuition and fees.
  • Room and board.
  • Groceries.
  • Textbooks.
  • Computers.
  • Study abroad costs.
  • Transportation to and from school.
  • Child care expenses.

6 Ways To Financially Prepare For Grad School

  • Shop for your school with extreme care
  • Don't leave any money on the table
  • Deal with your existing debt
  • Start living like you're broke before you actually are
  • Apply for credit cards while you still have a full-time income
  • Keep your dirty hands off your retirement account

‘Should I take a student loan?’ is a thought which plagues many masters degree applicants. You might want to use the money you’ve saved, or you might want to consider some of the best student loans for graduates. The question of taking private student loans or using savings to pay for your masters degree resembles a much more common question:

Should I use savings to pay for credit card debt? How much do I require to study?

According to EducationData.Org a Masters degree in the US can range from between USD 30,000.00 and USD 120,000.00 depending on the course and living expenses needed.

Once you have determined how much you need, you will need to draw up a budget to determine your savings required or if you need additional funding.

If you put some numbers to this question, it becomes easier to understand how similar these questions are.

Use a parallel example to view options

Pretend you have $6000 in credit card debt and $6000 in your savings account.

Current financial logic suggests you use your savings to pay your credit card debt.


You’re likely paying around 18% per month on the credit card and earning something closer to 2% on your savings.

Essentially, you’re spending $1080 on the debt while you’re earning a mere $120 on your savings.

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If you calculate your options based just on the numbers, your best choice is obvious.

But, the world isn’t just numbers.

There’s a reason for savings accounts; you want a secure home in a safe neighbourhood, or you want a buffer in case you lose your job. There are countless reasons and motivations.

Taking out student loans for grad school is something countless people do, but each case is unique and you need to assess your own scenario before you consider what to do.

This isn’t a black or white question with a choice of two answers. There is plenty of grey area in the middle; you don’t need to use all of your savings to pay off all of your debt.

Throwing $5000 from the savings account towards the credit card would reduce the interest (at a theoretical 18%) down to $180, and while this would only be earning $20 on the savings account, you’d be saving $800 a month.

These equations are never that smooth. There are complexities and accumulated interest, and maybe you need to dip into that $1000 because you need to replace the brakes on your car.

Priorities determine the use of savings or international student loans

We can’t tell you, even in this hypothetical situation whether you should put $4000, $4500, or $5000 towards debt. We won’t even tell you whether you should put any of your hypothetical savings towards debt.

Maybe you need that money in the bank because job security isn’t the best at the moment. Maybe a family member is ill.

Whether you would keep your savings or pay off your debt is totally up to you. It’s entirely possible that you won’t sleep well without a large cushion in the bank. Or, maybe, the debt is keeping you awake at night.

The point is that it all boils down to your priorities and the actual figures you have in front of you.

So let’s take it back to a realistic 'savings versus international student loans' question.

Imagine you’ve been admitted to your dream school and they’ve even awarded you a generous scholarship package. Imagine, too, that your company is willing to sponsor a chunk of your tuition and your parents can’t wait to gift some money towards your international degree.

Sure, this sounds rather too good to be true – and for most students, it usually is. But, just imagine that, after piecing together all of these funds you have a choice of using $15K in savings or borrowing the same amount in private student loans. Which is the better option?

The obvious and immediate answer would be to look at the figures and work out some calculations as we did with the hypothetical credit card debt.

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Benefits of a student loan

If money is what’s standing in the way of the life and career you want, then a student loan could help you afford your education without stressing about how you’re going to finance it.

Our student loan payments are made directly to the school.

Getting a higher education is an investment in yourself but unfortunately, it’s also expensive. Here’s why a student loan could be just the tool you need to facilitate your academic life and financial future.

It gives you what you need when you need it
A student loan caters to your specific and unique needs, and the process is quick and easy. It pays your tuition directly to the institution, your accommodation is paid directly to your landlord or res, and the rest of the funds directly into your or your surety signer’s bank account.

It gives you the flexibility to focus
If you are a full-time student, you only need to start paying back the student loan in full once your studies are finished. Until then, the person who signed surety for you will only pay the interest and fees on the loan, giving you the financial freedom to focus on your studies and create the future you want without worrying too much about money. If you are a self-assured student, we offer you affordable and flexible monthly repayments.

It’s easy to qualify
To qualify, you need to be 18 years or older and either be accepted to or studying at an accredited institution. If you’re a full-time student, you’ll need someone to co-sign as surety. You can also check if you qualify for a student loan and get an instant quote by clicking on ‘DO I QUALIFY?’.
Get an online quote before finalising your student loan application

The interest rate is lower
Compared to a personal loan or paying for your studies with a credit card, you can get your student loan at a lower, personalised interest rate, paying as little as 7%* interest per annum.

It pays for more than just tuition
In addition to tuition fees, your student loan could also be used to pay for your accommodation, as well as the textbooks and equipment needed for your studies.

Applying is easy
If you’re almost certain that you’ll find a fantastic job and do so quickly, you may want to hold onto as much of your cushion as you can until you do so.

But, the world is still not black and white, and neither are these equations.

You’ll still need to consider your priorities – and some questions that relate to life outside of your bank balance. ‘Should I use a savings account or a student loan?’ is a question for which there is no one-answer-fits-all approach.

If you decide to take a student loan, take a look at some of the best student loans for graduates offered by Prodigy Finance.

Useful questions for savings vs loan decisions

There are dozens of queries that can help you with these decisions, but you should probably start with these.

Is there job security in your field?

If there is a high and rising demand for the skills you’ll have after graduation, you can really spend some time thinking through the international student loan versus savings question.

If you’re almost certain that you’ll find a fantastic job and do so quickly, you may want to hold onto as much of your cushion as you can until you do so.

Will you get a high-paying job?

If you think you would be able to make higher payments or repay your international student loan sooner because of your earning potential, a savings balance may allow you to be picky about the position you accept after graduation. In that case, you might want to start looking at some of the best student loans for graduate students.

Where are your savings?

International students, especially those from developing countries, know that anything can happen when it comes to currency exchange.

If you have a bank account in a strong, relatively stable currency, you may want to hold on to that. If your account is in a country that’s recently dealt with depreciation against stronger currencies, you may want to use as much of this money as possible to avoid double losses later on. A fluctuating exchange rate can be a huge influence in your decision of using your savings or taking student loans for a masters degree.

Do you have a safety net?

If you can avoid trading in the last of your safety net for those first few months when you’re still looking for a job or settling into one, you probably want to do so.

There are moving costs and emergency expenses to consider. It’s worth remembering that in any of these cases, you can take an international student loan and repay it early using your savings, as long as your loan provider allows for early repayment. (Prodigy Finance does.) In such a case, taking out loans for grad school might not be a bad idea.

But, these are merely theoretical questions, answers, and situations; none of this should be taken as financial advice. You'll need to establish your priorities and consider your individual goals before using your savings or finding the best student loans for graduate students.

Considering your options? Why not see why these international MBAs chose student loans:

If you have the choice between using savings or taking private student loans, you should consult a trusted (and registered or licensed) financial manager. A masters degree is an investment, after all, even if it feels like an expenditure at the moment.

If you do choose to go after some of the best student loans for graduate students, one question you might ask yourself is, ‘What can I spend my student loan on?’. Well, you can use your student loan to cover your school tuition and fees, plus all other expenses included in the cost of attendance at your school. These expenses include paying for books and supplies, transportation costs, and housing utilities, among others. However, it’s important to budget and spend your loan wisely to cover your necessary living expenses.

Do you have to pay student loans in grad school?

You usually have the option of deferring payment on your student loans while you’re in graduate school. This means you will not have to pay off your student loan while you’re still in grad school. With Prodigy Finance, you only start repaying your loan 6-months after classes end.

Interested in international student loans?

Prodigy Finance offers international student loans to masters students pursuing business, engineering, law, public policy, and health science degrees. We don't need co-signers or collateral for any of our loans.

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