Updated on December 3, 2007.

MANY ADULTS DREAM of going back to school for a graduate degree but are paralyzed by the financial trade-offs. Sure, it could enhance their career and possibly lead to a fatter paycheck further down the line. But in the meantime, tuition is expensive, and if it means stepping out of the work force for a few years well, then, taking the financial plunge can be daunting.

Just how much you'll have to cough up for an advanced degree obviously depends on the type of degree you want to pursue. A two-year master's in theology will set you back roughly $5,000 a year for tuition and fees, while a two-year MBA costs an average of $7,200 a year, according to 2003-2004 data, the latest available, from the National Center for Education Statistics. (The average grad-school tuition runs roughly $11,600 annually as of 2005-2006.) And these figures don't include other expenses like room and board and books.

Compounding the problem is that, unlike a frat boy who has little to worry about other than pizza, parties and final exams, you probably have real-life expenses like a mortgage, a car loan and maybe even a family to support.

But don't let these challenges keep you from pursuing a dream. Between financial aid, some tax perks and maybe a little help from your employer, you can get a graduate degree without drowning in debt. Here's how to do it.

Apply for Financial Aid
Since adults generally have higher incomes than undergrads, most assume they won't qualify for financial aid. But that's not always the case, says David Cooper, managing director of Sallie Mae, a national student loan provider. Depending on financial need, someone could qualify for low-rate student loans and even some grants. "It may be that you don't qualify, but you'll never know until you apply," Cooper says.

Graduate students, who are deemed "independent" for financial-aid purposes, most likely won't find much in the way of grant money. Most collegiate financial-aid offices are reluctant to fund students they think will be able repay loans after they graduate, explains Kalman Chany, author of "Paying for College Without Going Broke." But don't despair. Graduate students are eligible to take up to $20,500 a year in Stafford loans (of which $8,500 a year can be subsidized, meaning interest won't start to accrue until six months after graduation). That's much more than undergraduate students can borrow.

The key to getting a decent financial-aid package is making sure that the financial-aid office fully understands your situation, says Verna Hazen, financial-aid director at the Rochester Institute of Technology in Rochester, N.Y. Typically, financial-aid eligibility is based on income for the year before an applicant plans to start school. So if there will be a significant change in your family income for the next year say you plan to quit your job or switch to part-time until you complete your degree make sure the financial-aid office knows this. "The government does allow us to reconsider financial-aid eligibility on a case-by-case basis, but we don't do that automatically," Hazen says.

Many universities also have programs geared toward midcareer students and are willing to offer them financial incentives. RIT's Professional Reemployment Education Program, for example, offers a 60% tuition discount to people who've been laid off and are looking to retool for a career change. Other institutions offer graduate assistantships. So be sure to contact your academic department and ask about your options.

Exploit the Tax Breaks
Even if you aren't eligible for federal grants, you still can get some free money out of the government by taking advantage of higher-education tax breaks, of which there are three to consider.

The first is the Lifetime Learning Credit, which covers 20% of the first $10,000 you spend on education per year. This means you can claim a credit of $2,000 if you've spent $10,000 on tuition, $1,000 if you've spent $5,000 and so forth. It's a benefit that reduces your tax bill dollar for dollar, but unfortunately phases out if your modified adjusted gross income (MAGI) is between $45,000 and $55,000 ($90,000 and $110,000 if you're married, filing jointly).

If your MAGI is below $65,000 ($130,000 if you're married, filing jointly), another option is a tuition-and-fees deduction of up to $4,000. Both the Lifetime Learning credit and the $4,000 deduction can be used for qualified tuition and other fees, like registration and various program fees, but can't be used for room, board or other expenses. The Lifetime Learning Credit and the $4,000 tuition and fees deduction are mutually exclusive, so you'll have to crunch the numbers to see which one is best for you.

Beyond these two tax breaks, you may be able to deduct additional school-related expenses if you're pursing a degree that enhances your current job (or the job you left to attend grad school). To do this, you'd total your costs and list them as a miscellaneous deduction on Schedule A of your tax return. This break is subject to the 2% floor for miscellaneous deductions, which means you can deduct only expenses in excess of 2% of your adjusted gross income (AGI). That said, this deduction can include the cost of books, room and board, and travel.

Looking to change careers? In some cases it might be worth to try to get some sort of entry-level job and then apply to graduate school, just so you can take advantage of this deduction, says Randy Gardener, a CPA and a professor of tax and financial planning at the University of Missouri at Kansas City. Unfortunately, this strategy can't be applied to coursework that's required as a minimum education requirement for a job. So if you want to become a lawyer, you can't take a job as a paralegal and then enroll in law school because the Bar exam is a minimum education requirement for becoming a lawyer, Gardener explains. However, MBA degrees always qualify for the miscellaneous deduction, he adds. For more on miscellaneous deductions, read IRS Publication 529.

Finally, since the tax year and the academic year are different, it's possible to get two years' worth of deductions even if you're going to a one-year program, says Chany. "When you receive your bill [for the Spring semester] at the end of December, wait until January to pay it off," he says. This way, you've incurred education expenses for one additional tax year.

Ask Your Employer to Pay Up
A study released by human resources consultant Hewitt Associates in 2007 found that 87% of the employers surveyed reimburse their employees for educational expenses. And 22% those employers don't have a dollar maximum on reimbursements. (The median annual maximum is $5,000 a year.)

Better yet, thanks to the tax code, up to $5,250 of employer-provided educational assistance is tax free, even if it pertains to classes that aren't related to your current career track. And if you're pursuing a job-related degree, all of your employer's reimbursement will be tax-free, thanks to a provision in the Internal Revenue Code called a "working condition price benefit," Gardener says. For more on tax benefits for work-related education, read IRS Publication 970.

Unfortunately, most employers are likely to reimburse you only for courses related to your job position. After all, who wants to pay for you to change careers and employers? But some companies have less rigid requirements. For example, H&R Block, based in Kansas City, reimburses its employees for courses related to a job position within the company that the employee aspires to.

And what if you're laid off? Negotiate tuition reimbursement as part of your severance package, suggests Gardener. This way, you'll walk off with some tax-free money and your employer shouldn't mind it's a deductible expense for them either way.

Explore Education Alternatives:
The Corporate U
While they might not have a good football team, more than 2,000 companies today run internal "corporate universities" to train their employees, says Matt Lippincott, vice president of marketing for Corporate University Xchange (CorpU), which helps companies in the U.S. and abroad to create corporate universities. Classes in these universities are free for company employees, he says. The differences between traditional college or university classes and Corporate U classes are that the latter focus on providing industry and job-specific skills, are directly related to specific job functions, and tend to involve more practical exercises, he says. And while at a traditional university you'll get a diploma at the end of your studies, most corporate universities aren't degree-granting institutions, Lippincott says.

The good news: More than 700 of the classes offered at corporate universities have been evaluated and accredited by the American Council on Education (ACE), which means traditional universities could approve them for credit if you enroll in a university degree program, says ACE senior vice president Terry Hartle. That could save you thousands of dollars in tuition.

For example, Delta U., the corporate university of Delta Air Lines, has a strong relationship with Embry-Riddle Aeronautical University, where its employees enroll in aeronautical degree programs at a reduced tuition. Delta also has agreements with Kaplan University and Columbia Southern University that provide tuition discounts for online degrees for employees and their family members. And, all three universities accept ACE credit hours for training taken at Delta, which can significantly reduce the cost of completing a degree, says Delta spokesperson Susan Elliott.

Online Degrees
This past fall, over five million students enrolled in distance education programs, including online universities or courses that are part of a traditional university program, according to Mike Lambert, executive director of the Distance Education and Training Council (DETC), an accrediting agency for distance education programs.

The lure of online education is clear: You study on your own time, at your own pace, in your own home or office. And, financial aid is becoming more available. Since July 2006, accredited online institutions are eligible for federal student loans and grants, Lambert says. Students enrolling with distance institutions that participate in federal student loan programs are also able to get federal tax benefits and loan deferment privileges, he explains.

Also, keep in mind that most online programs come at a very reasonable price, Lambert says. The MBA program at Ellis University, for example, costs a total of $24,660, compared with $36,000 in average total costs for a traditional two-year MBA program. That's a good deal, considering the program's courses were designed by educators from elite institutions such as Columbia Business School, Stanford University, the University of Chicago, Carnegie Mellon and the London School of Economics names you can certainly slip into your resume or mention to a prospective employer.

CHEA, which has a searchable database of accredited colleges and universities.