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Which MBA Student Loans Is Right For You [Full Guide 2022]

mba student loans

It takes a lot of effort to apply to business school. Applying to schools, writing essays, studying for the GMAT, and preparing for interviews. And there’s also the matter of financing your MBA – enter MBA student loans

Did you know that an MBA at a top-ranked U.S. business school can cost more than $200,000

Even though loans from friends or family and personal savings may be an option, you’ll almost certainly require additional funding. 

The average U.S. MBA student takes out $62,000 in graduate student loans.

Several Merits For The Right MBA Student Loans 

The appropriate loan will give you access to all of the advantages of business school, including networking, job advancement, management training, and a return on your investment.

So what are your alternatives? This guide will explore all the things you need to know to make the right decision. 

Let’s begin. 

What Are MBA student loans?

Student loans for MBA can assist you in paying for your master’s degree in business administration (MBA). They often feature flexible repayment options and low-interest rates and can be used for various expenses, including fees, tuition, accommodation, books, and supplies.

What Are The Terms Of MBA Student Loans?

MBA loans are available from both the government and private loan lenders. While there are some lifetime restrictions, you can usually borrow up to the total cost of your education. 

Most lenders allow you to make payments while you’re still enrolled in school, but you can be allowed to make partial or interest-only payments until you graduate.

Many MBA loans also allow you to postpone payments six months after graduation. This allows you to get a good standing and start a new job without thinking about your loan burden.

Most MBA loans have a five- to 25-year repayment duration.

Types Of MBA Student Loans 

There are two types of loans available for your MBA degree: federal and private.

Federal Student Loans For MBA 

The federal government manages federal loans. As a result, all borrowers have the same interest rates and standard term durations regardless of financial status.

Direct Grad PLUS Loans and Direct Unsubsidized Loans are available to graduate students. Direct Unsubsidized Loans have a 5.28 percent interest rate and don’t need a credit check. You can borrow up to $20,500 per year and $138,500. 

With Grad PLUS loans, you can borrow up to the cost of attendance at a 6.28 percent interest rate, but they run a credit check.

Private Student Loans For MBA

Various private lenders administer private student loans that determine their terms, interest rates, and eligibility criteria. As a result, you can usually get lower rates and more flexible repayment terms from private lenders if you have good credit. 

However, you’ll lose out on federal protections like income-driven repayment plans, forbearance, and loan forgiveness programs. In addition, your interest rate is influenced by various factors, including your debt-to-income ratio and credit score.

How To Start When Searching For MBA Student Loans 

mba student loans

If you decide to pursue an MBA, keep the borrowing costs as low as possible. Before going to private lenders, you should borrow the maximum amount permitted from federal student loans.

You get protections with federal student loans, including the possibility of loan forgiveness, broader qualifying criteria, and more flexibility in loan repayment programs.

This is why maxing out federal loans before taking out private MBA loans makes sense for most MBA students.

How To Select The Most Appropriate MBA Loan

Because not all MBA loans are made equal, it’s critical to shop around and examine numerous possibilities before choosing. Here are some things to consider while you conduct your research:

1. Check The Interest Rates 

Interest rates on federal student loans are standardized, so you know what you’ll get before applying. The government offers some decent rates which you don’t need a co-signer. However, a private lender may be able to offer you a better deal. 

Just make sure to compare before making a final decision. Some private student loan businesses offer both fixed and variable rates. Unless you plan to pay off your debt soon, a fixed rate is usually the best option because it won’t fluctuate with market rates.

2. Check The Qualifications.

Private student loans usually demand a credit check when applying. If your credit isn’t in good shape and you don’t have a co-signer, qualifying and getting a reasonable interest rate might be difficult. 

A credit check is also required for Direct PLUS Loans, but merely to ensure you don’t have any substantial negative credit reports. Direct Unsubsidized Loans are your sole option if you want to bypass a credit check entirely.

3. Consider The Repayment Options 

You can choose from a range of repayment choices with federal student loans, including income-driven repayment programs. Private loans come with various repayment options, but most of them lack an income-driven repayment option.

4. The Fees Can Affect Your Borrowing

You should evaluate costs in addition to the interest rate. For example, private lenders typically don’t impose origination costs, though you may be charged if you pay late. On the other hand, Federal student loans have an upfront loan charge that is taken from your loan payment. 

Fees for federal loans can change from year to year, so keep an eye on the Federal Student Aid website for the most up-to-date information.

5. Other Features You Need To Take Note 

Some MBA loans include additional benefits that you may find appealing. Federal loans, for example, might be the best option if you think you’ll qualify for a loan forgiveness or repayment help program. If not, weigh the various advantages private student lenders offer to see which one is more viable.

The loan’s interest rate should be your primary priority. After all, even a little reduction in your interest rate might save you hundreds or even thousands of dollars throughout your loan. However, if the rates are comparable, consider each alternative in its entirety.

How To Apply For An MBA Student Loan 

The steps are different whether you’re applying for a private or federal MBA loan. Here’s how to apply for government loans:

  • Complete and submit the FAFSA application, asking for personal and financial information.
  • Examine the financial aid award letter you get from your institution once your FAFSA has been processed.
  • Once accepted, you can borrow up to the amount specified in your award letter.

If you have private student loans, however, you will need to do the following steps:

  • Prequalify with several private lenders to evaluate interest rates and other parameters.
  • Choose a loan lender and fill out an online application with information about yourself, your financial condition, and your creditworthiness.
  • You’ll see the final offer once the lender has approved your application, which you can accept or reject.

Top Private MBA Loan Lenders You Should Consider 

From the amount you prefer to borrow to your current credit score and credit history, your circumstances will determine the ideal loan. Therefore, it’s critical to do your homework to determine which loan choice is best. 

Below are some of the MBA student loans alternatives to consider: 

1. CommonBond

MBA loans up to $110,000 each year are available from CommonBond if you want to take out private loans. 

If you set up automatic payments, you can pick between a fixed rate of 6.04 percent to 7.25 percent and a variable rate of 6.15 percent to 7.11 percent (also with automatic payments). Loan payback durations range from ten to fifteen years.

A credit score of 660 or above is required to be eligible for a CommonBond loan. There is no need for a co-signer as the underwriting standards are met, and no prepayment penalties exist. 

MBA borrowers can also take advantage of CommonBond’s forbearance program, which allows you to defer payments for up to a year. This is an excellent option if you have excellent credit.

2. SoFi

SoFi loans begin at $5,000 and can cover up to 100% of the total cost of an MBA program. In addition, you can pick between a fixed or variable APR, just as the other private lenders mentioned. Fixed rates range from 4.30 percent to 11.52 percent (with autopay). 

The terms vary from five to fifteen years. SoFi doesn’t establish a minimum credit score for eligibility. You are not required to make principal payments while in school and can make a $25 fixed monthly payment. 

You can also take advantage of the standard six-month delay term after graduation. If you like, you can add a co-signer to your loan.

3. College Avenue

MBA loans from College Ave cover 100% of the cost of a business degree. A fixed or variable interest rate is available to you. Fixed and variable interest rates vary from 4.24 percent to 11.98 percent APR. The interest rate reduction includes an autopay discount. The repayment period can last anywhere between five and fifteen years.

A formal MBA program at an eligible school is required to qualify for the College Ave MBA loan. Your credit score has an impact on your loan eligibility and size. Creditworthiness is often defined as a score in the mid-600s.

4. Earnest

Earnest provides MBA loans ranging from $1,000 to 100% of entire tuition costs. In addition, a variable or fixed rate is available to you. When an autopay discount is included, fixed rates start at 3.49 percent. With autopay, monthly variable rates start at 1.05 percent. Earnest doesn’t offer repayment conditions in advance.

To be eligible for a loan, Earnest requires a credit score of at least 650. One payment each year can be skipped. A nine-month grace period is also available, longer than the industry standard of six months. 

You can also enlist the help of a co-signer if necessary. Earnest’s online application process is likewise noteworthy.

5. Sallie Mae

Sallie Mae provides MBA loans beginning at $1,000 and up to 100% of the total cost of an MBA program. Like most private student loans, you can pick between a fixed or variable interest rate. 

With an auto-debit discount, variable interest rates range from 2.12 percent to 11.64 percent. Interest rates are fixed and range from 4.75 percent to 12.11 percent (again, with an auto-debit discount). Sallie Mae has a 15-year repayment schedule.

Sallie Mae doesn’t have a minimum credit score requirement. You’ll have a six-month grace period, and qualifying borrowers may be able to make 12 interest-only payments. You can choose to have a co-signer for your loan with Sallie Mae.

Ways To Pay For Your MBA Loans 

mba student loans

1. Refinancing Your MBA Student Loans

Have you already taken out your MBA loans? Then refinancing may be the right option. 

Refinancing your MBA loans may allow you to cut your payment or save money on interest if you have high-interest federal loans like the Direct PLUS Loans or private loans. You refinance your student loans by taking out a new one from a private lender and using it to pay down your existing ones. 

You could get a cheaper interest rate, a longer payback term, or a lower monthly payment with the new loan.

Refinancing your federal loans will prevent you from applying for forbearance or an income-driven repayment plan. So it’s not advisable to refinance your federal loan for a private loan.

Some MBA Applicants Are Exempted 

On the other hand, MBA applicants are an outlier in some circumstances. Your earnings could increase if you get your MBA significantly. For many, acquiring a low-interest student loan would be preferable to keeping a Federal student loan.

Examine whether refinancing is a good idea. Then, with no credit check, you can shop for loans. You can choose the one that works for your current financial situation. 

2. Employer Tuition Assistance Programs 

One of the best things about an MBA school is that many firms provide various tuition aid programs to help you pay for all (or part) of your MBA. These programs are also known as Tuition Assistance Programs.

For example, until your MBA is paid off, your employer can offer to repay $5,000 every year. It’s a win-win situation because it’ll allow you to pursue your MBA and give your company that you’d stay. 

Some firms are also beginning to provide student loan payback schemes. If you already have student loans, these can be pretty useful.

3. Use Your Funds

You might consider using your money after checking into employer help programs. This is particularly true for people who are returning to school after a long break. You may have enough money in the bank to put a significant dent in the cost of your MBA school.

When utilizing your money to pay for an MBA, keep the following rules in mind:

  • First, make sure you have at least a six-month emergency fund.
  • Never withdraw or accept a loan from your retirement account (401k, IRA, etc.).

It’s okay to utilize the other money to pay for education if you follow those criteria. This might drastically cut or pay off the student debt you’d have to take out.

Should You Go For MBA Student Loans? 

Whether your borrow or not depends on your decision, prospects, and goals, so if you examine how much money you’ll need to complete the program and compare it to the typical beginning pay for someone with an MBA in your field.

The median first-year wage for MBA graduates is $73,868, according to U.S. Education Department data examined by the Brookings Institution.

Your graduate student loan debt should be less than your yearly beginning salary. A general rule for undergraduate student debt also applies to graduate degrees. 

Just that you only take into account any lingering undergraduate debt and any additional debt you incurred during graduate school.

The most crucial factor is whether or not you will get hired. If you’re already employed and know you’ll be able to return to your firm once you finish your degree, business school can be a no-brainer. 

However, if you’ve had trouble finding work in the past and believe an MBA will help you, your chances aren’t as good.

Final Thoughts 

Consider federal MBA student loans first while looking for graduate loans. Then, compare the offers you receive from the other private lenders in the marketplace. After that, what’s left is to know where to go for financial assistance. Consult a student loan expert if you don’t know where to begin. These people will help you make the right decision before taking a step. However, you can go through this article and have essential management before taking any step.