Graduate business school can be expensive: Tuition at the top schools can run in the six figures. That’s why taking steps early is essential to determine how MBA loans can help you finance your education.
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Find the Best Student Loans for You
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Sallie Mae is a publicly traded consumer bank that offers private student loans to pay for undergraduate, graduate and professional degrees, among other educational needs. Congress started Sallie Mae in 1972 as a government-sponsored entity that serviced student loans. The lender went private in 2004 and today provides a range of student loan products. Additionally, Sallie Mae Bank offers savings products and other tools to help families plan and pay for college, including a credit card that earns bonus cash back to help you pay off any student loan.
College Ave exclusively offers student loans. Founded in 2014 and based in Wilmington, Delaware, College Ave offers undergraduate, graduate and parent loans for students enrolled at schools affiliated with College Ave in all 50 states and the District of Columbia. College Ave’s advantage is speed, with applications that take a few minutes to complete and instant decisions.
Earnest is an online lender offering private student loans to college and graduate students, as well as student loan refinancing. The company was founded in 2013. Borrowers can choose their own loan terms to fund up to the full cost of their education.
SoFi is an online lender founded by Stanford business school students in 2011. SoFi offered student loan refinancing as of May 2012, and the San Francisco-based company added private student loans in 2019. Choose from undergraduate, graduate, law, MBA, health profession or parent loans with no fees.
PNC offers student loans in all 50 states for students at all stages of postsecondary education, including professional training loans and refinancing. The bank is also engaged in a number of community efforts, including financial literacy programs and PNC Grow Up Great, which supports early childhood education. For eligible undergraduate students, PNC offers opportunities to win $2,000 scholarships toward education expenses.
Education Loan Finance, also known as ELFI, is a student loan program offered by Tennessee-based SouthEast Bank since 2015. The company provides private student loans and refinancing options for private and federal student loans.
Ascent Funding is an online lender offering undergraduate and graduate student loans for those with or without a co-signer at more than 2,200 eligible schools nationwide. Students who are not U.S. citizens or permanent residents or those with Deferred Action for Childhood Arrivals status – aka “Dreamers” – may apply for an Ascent loan. Ascent Funding was founded in 2015 and is based in San Diego.
Citizens Bank was founded in the late 1800s in Rhode Island. Today, it’s one of the largest commercial banks in the U.S. Branches are concentrated in the New England, mid-Atlantic and Midwest regions.
Credible is a loan comparison marketplace that allows would-be borrowers to shop around for student loans and student loan refinancing that meet their needs. The company was founded in 2012 in San Francisco as a tool to empower borrowers to shop rates and products.
LendKey’s digital platform connects borrowers who need private student loans or refinancing loans with nonprofit credit unions and banks. Since 2009, LendKey has helped more than 135,000 people by funding $5 billion in loans. The company offers fixed- and variable-rate loans for undergraduate and graduate students.
Interest rates are typically higher than undergraduate loans, but borrowers may also be able to access more financing to afford the higher cost of graduate school.
For your MBA degree, you can choose federal or private loans.
- Direct unsubsidized loans: These loans have annual and total borrowing limits. They offer certain benefits, such as loan forgiveness programs and income-driven repayment plans, that private lenders do not.
- Graduate direct PLUS loans: Your borrowing limit is higher – up to the school’s cost of attendance minus other financial aid – but the interest rate and loan fee are also higher. You’ll get access to the same federal loan benefits.
- Private MBA loans: Some lenders advertise loans specifically to help MBA students pay for their degrees. Terms can vary depending on the lender, but you can typically borrow up to the total cost of attendance at your school.
- Private graduate loans: Most private student loan companies offer general graduate student loans that you can use for any type of graduate degree. Interest rates, repayment terms and other features will differ from lender to lender, but you can usually borrow whatever you need to pay tuition and other eligible costs.
Find the Student Loan That’s Right for You
Ultimately, the decision of whether to borrow money for your MBA depends on your career goals and prospects. How much do you expect to borrow to get through the program? Compare that amount with the average starting salary for someone with an MBA in your field.
Graduates of full-time MBA programs in 2022 reported a median total compensation of $120,000 – a 50 percent increase after completing their degree, according to the Graduate Management Admission Council.
As a rule of thumb, your graduate student loan debt should be less than your annual starting salary, says Mark Kantrowitz, a nationally recognized financial aid expert and college-planning author.
“Include any outstanding undergraduate debt along with the new debt that you incurred during graduate school,” Kantrowitz says.
The key is whether you’ll get a job, he adds. If you’re already employed and have a secure place to land after you complete your degree, business school may be a no-brainer. But if you’ve struggled to gain employment before an MBA, your prospects may not be as bright.
Pros
- MBA student loans can provide the funds you need to finance your graduate degree.
- Borrowing costs may be offset by higher earnings after graduation.
- Refinancing student loans to a lower interest rate may be possible if you’ve worked to improve your credit.
- Tax benefits may help you get back some of the money you spend on higher-education expenses.
Cons
- Interest rates and fees can be high, particularly for direct PLUS loans.
- Private student loans can be expensive if you have poor or fair credit.
- Some private lenders require you to have a creditworthy co-signer to qualify.
- MBA student loans can increase your overall debt burden.
Before you decide on an MBA loan, take your time to shop around and compare options, because not all loans are created equal. Here are some features to keep in mind as you do your research:
- Qualifications. Private student loans typically require a credit check when you apply. If your credit isn’t in great shape and you have no co-signer, you may struggle to qualify and get a favorable interest rate. Direct PLUS loans also require a credit check, but only to ensure that you don’t have any significant negative items on your credit report. If you want to avoid a credit check, go with direct unsubsidized loans.
- Interest rates. Federal student loan interest rates are standardized, meaning every borrower pays the same rate. “The government offers some good rates for which you don’t need a co-signer,” says Steve Muszynski, founder and CEO of Splash Financial, an online student loan refinance marketplace. “However, you may be able to get a better rate via a private lender.” Just be sure you’re comparing apples to apples. Some private student loan companies offer variable and fixed interest rates. Unless you’re planning to pay off the debt quickly, a fixed rate is usually best because it won’t change with the market.
- Fees. Compare not only interest rates but also fees. Private lenders may charge late fees but not origination fees. In contrast, federal student loans include an upfront fee that is deducted from your loan disbursement. Check the Federal Student Aid website for the latest information on loan fees because they can change yearly.
- Repayment options. With federal student loans, you will get a variety of repayment options, including income-driven repayment plans. Private student loans also offer several different repayment schedules, but most don’t offer income-based repayment plans.
- Other features. Some MBA loans come with other features that could appeal to you. For example, if you think you might qualify for a loan forgiveness program or loan repayment assistance program, federal loans may be the way to go. If not, compare the benefits that private student lenders offer to determine which one makes the most sense.
Put the loan’s interest rate at the top of your priority list, Muszynski says. After all, even a slightly lower rate could save you hundreds or even thousands of dollars over the life of your loan. But also plan to look at each option holistically, especially if rates are comparable.
If you need to borrow money to pursue your MBA, follow these steps:
- Complete the Free Application for Federal Student Aid, or FAFSA. You’ll share information about yourself and your financial situation to see if you qualify for government loans and grants as well as state and school aid. Review the financial aid award letter you receive from your school after it processes your FAFSA, and contact the school for details on formally accepting aid.
- Consider a private student loan. If federal aid doesn’t cover your needs or you don’t qualify, compare private lenders for the best deal. Prequalify with multiple lenders to see interest rates and other terms typically with a soft pull that won’t harm your credit.
- Apply for loans. Choose a lender or lenders and apply online, by phone or in person. Expect a hard credit check, and you will need to provide documents and verify information.
- Sign loan documents. You’ll sign documents to finalize the loan, and the lender will send the funds to your school. Your school will disburse to you any leftover amount after tuition is paid.
Your student loan repayment plan will determine how long it takes to pay off your MBA debt.
For example, the standard repayment term for federal student loans is 10 years, but you can stretch that to 30 years through consolidation, Kantrowitz says. Just keep in mind that consolidating your loans may slightly increase your interest rate.
If you want to pay off your loan faster, you can’t opt for a shorter loan term but can make additional payments or look into Public Service Loan Forgiveness.
With private student loans, repayment terms can range from five to 20 years, depending on the lender. You’ll need to refinance if you want a shorter or longer repayment term after the fact. If you want to pay off the loan faster without refinancing, you can simply make extra payments.
The average debt for an MBA is more than $80,890, and 51% of MBA holders have student loan debt, according to 2022 figures from the Education Data Initiative.
However, your debt will depend on several factors, including your financial situation, your school’s cost of attendance and your degree.
“Consider how much debt you’re taking on and what your job prospects will be coming out of your MBA program,” Muszynski says. “If you borrow $200,000, will you be able to repay that amount of debt, and in what time frame? Running the numbers could be eye-opening.”
Also, keep in mind that you can find ways to reduce how much you need to borrow. Check with your school and websites such as Scholarships.com and Fastweb to see if you qualify for grants and scholarships, which you don’t have to repay.
Before you borrow, try some of these options to pay for your MBA:
- Check your employee benefits. Some companies offer tuition reimbursement programs that cover some or all of the cost of furthering your education.
- Consider crowdfunding. You might be able to raise money toward your tuition and give something back to your donors, such as free consulting.
- Explore distinct scholarship opportunities. This could include scholarships for veterans, entrepreneurs and certain career fields. You could find a match for your personal or professional background. Check with your university about fellowships or grants for your program, and research nonprofits and government organizations for scholarship options.
- Find work-study or campus job opportunities. Many programs have full- or part-time staff positions, such as research associates or teacher assistants, that are open to grad students. This can be an effective way to build on your in-class experience while earning money for school. Reach out to your department’s leadership about job openings.
- Choose an accelerated MBA program. Some schools offer shorter-term MBA programs – typically by mixing in-person and online education – to help you earn your graduate degree in 12 to 18 months. This can significantly reduce the amount of money you need to borrow for school. But do your research to ensure that the credentials are as worthwhile as a traditional MBA.
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