scorecard4 things to do today to save money if you want to go to grad school in 5 years
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4 things to do today to save money if you want to go to grad school in 5 years

Liz Knueven   

  • To save for grad school in five years, set a clear goal for how much you want to have saved.
  • Consider your current living costs plus tuition, factor in anything you'll earn while in school, and then decide how much you may need to borrow.
  • Consider refinancing any private student loans from your undergraduate degree, and save the difference.
  • Then, start saving in the right place for your time frame — a 529 plan might be the right move if you're starting school in at least five years, but you might be better off with a high-yield savings account if you plan to start sooner.

Going to grad school is a big (and expensive) commitment, but it also comes with a unique set of rewards.

In some cases, earning a graduate degree could increase your earning potential. Or, it could be a chance to delve into something you're passionate about. Either way, it's going to cost. To minimize the expenses you'll need to cover with student loans, saving in advance is the biggest help.

If you're considering graduate school in five years, here's how to start saving.

1. Set a goal, and determine how much you'll need to save

Setting a clear goal on how much you need to save for grad school now will help you plan for later. Determining how much you need to save largely comes down to weighing three costs, says Kevin Walker, a founder and publisher of

First, consider how much you'll need to cover tuition and your normal living expenses. Generally, grad school tuition is easier to predict since your program will likely only be two or three years. "An undergrad program is four or five years, so it's harder to predict where tuition would go. So it should be relatively easy to predict what your [graduate school] tuition expense will be," Walker says.

Next, factor in what you might earn while in school. "Maybe working part-time or even full-time in some cases might be possible for part of that program," he says.

Lastly, think about borrowing student loans, but do so carefully. "Estimate what that monthly payment cost of that borrowing will be after you graduate," Walker says.

2. Check with your employer's HR department for any benefits

Before you start saving, it's worth finding out if your employer could help out with your college costs.

"It has been pretty common for employers to offer a benefit to cover at least some level of graduate school or degree expenses," Walker says.

While there may be some restrictions, it could be a big help if your company will cover some of your educational expenses.

3. Refinance any private student loans to save cash

If you still have student loans from your bachelor's degree, you might find that interest rates have dropped since you graduated. Student loan interest rates have fallen in 2020, and you may be able to find a lower interest rate and save a few dollars each month.

If you have private student loans, refinancing will essentially replace your loan with a new loan, which generally has a lower interest rate. Refinancing your student loans could help you free up a few extra dollars in your budget each month to save.

If you have federal student loans, however, refinancing may not be the best option. "[Federal student loans] can go into deferment for your years as a graduate student," says Walker. "Even though there will be interest accruing on those loans, you won't have to make those payments. If you refinance them into a private student loan, you might not be able to defer those payments."

If you're considering refinancing private student loans, it's better to do it sooner than later. "While you're in graduate school and you don't have as much or any income, your ability to refinance will be severely limited," he adds.

4. Decide the right place to start saving

There are plenty of ways to save for future college expenses, ranging from a typical high-yield savings account to an investment account for college. But the right place to save will really depend on the timing of your plan.

For someone who's certain on their timeframe, saving for college in a 529 plan might be a smart move. While many accounts of this type are opened for children, you can open one for yourself, says Michael Frerichs, the Illinois State Treasurer who oversees two of the state's 529 plans. In some states, contributing to a 529 plan can come with state tax benefits, and withdrawals for qualified expenses are also tax-free.

"If someone is planning to attend graduate school in five years, I would say the 529 plan would be a good option for those savings," Frerichs says. "Most 529 plans provide investment options tailored to shoot different time horizons and risk tolerances. You can invest a little more aggressively if you're five years out and slowly adjust to being more conservative when you're one year out."

For people who may choose to not wait a full five years, or who might change their plans, a high-yield savings account might be the right place to save. There, money is kept liquid and won't be touched by the ups-and-downs of the stock market.