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If the summer heat wave has you staying inside more, or you just have more time in general, you might be using this time of year to get your finances in order before the back-to-school season begins. Those planning to attend business school in the fall, for example, will likely want to plan ahead for these expenses.
Earning a Master of Business Administration (MBA) degree can be faster and less expensive than a bachelor’s degree, but after paying for four years of undergrad, many people can’t afford this extra education out of pocket.
however, Federal and/or private student loans Can be used primarily to help cover tuition and other education-related expenses. Ideally, you can get a great job paying comfortably after school. Starting salaries average 22-40% higher than graduates with an MBA, Graduate Management Admissions Council.
Still, taking out student loans is an important decision that shouldn’t be taken lightly. There are pros and cons to both federal and private student loans for financing your MBA, which you should weigh before going through. Here, we’ll examine some of these and other MBA financial considerations in more detail.
You can start by exploring your private student loan options here to see what you qualify for.
How much does an MBA usually cost?
On average, the total cost of an MBA is $61,800, according to Education Information Initiative. Yet costs can vary greatly by school. Harvard Business School, for example, is nearly twice as expensive, notes the Education Data Initiative.
Using Student Loans to Pay for an MBA
To cover MBA costs, many people take out student loans.
Some students find that federal student loans work better for their situation, such as if they can get lower interest rates than private lenders. However, some students find that private student loans offer lower lifetime interest costs.
Or, you may find that a combination of federal and private loans works best. If you reach the $20,500 annual limit for federal unsubsidized direct loans, for example, you may find that private lenders offer better terms than closing the funding gap with federal grad plus loans.
“Federal student loans offer fixed interest rates regardless of credit and students can borrow as much as they need,” says Jack Wang, wealth advisor and college financial aid advisor at Innovative Advisory Group. They also “offer great repayment plans after leaving school.”
At the same time, however, some of these features may be seen as disadvantages depending on your situation.
“Some of the disadvantages are fixed interest rates, which can be higher than equivalent private loans, and not offering certain benefits such as cash back for good grades or help finding a job,” Wang adds. Also, you want to be aware of taking on more than you can reasonably repay.
“The biggest disadvantage of federal loans is that students can borrow more than they can afford to pay back because there is no significant credit check for federal loans,” he says.
Meanwhile, private student loans offer potential benefits, such as the ability to choose between taking out a loan on your own. with a cosigner, Wang said, in addition to choosing between a fixed or variable interest rate, and choosing payment types, such as interest-only or deferred. Remember, though, that Taking out private student loans Covering your MBA tuition also means possible federal student loan assistance, such as loan forgiveness or income-based repayment plans, Wang adds.
Explore your personal student loan options here to learn more.
How to Manage MBA Costs
Carefully comparing interest rates between federal and private student loans can help you choose financing that costs less in the long run. And while you certainly want to consider the academic and professional potential of an MBA school, you can also weigh the costs of comparable programs before making a decision.
Another way to manage MBA costs, outside of the budget, is to seek external assistance.
“A common way to reduce the cost of an MBA is to have your employer pay for it,” Wang notes “Another is to work for a company that offers a student loan repayment facility. While it doesn’t lower the cost of an MBA on the front end, it can certainly lower the cost of debt on the backend, which is as good as it gets.”
MBA costs can be high, but future earnings arising from this degree can make them worthwhile. Taking out a student loan can help cover the initial costs, and then you may be able to get help paying them off from your employer.
To apply, the process is usually pretty straightforward. You can go to a lender’s website and start an application by filling out some basic information like your name, social security number, and school.
Before you apply, though, you may want to consider looking at customized rates through lenders’ sites, before they do a hard credit check. your application. See how different student loan lenders compare rates and payment terms to determine which one helps you manage MBA costs. Check out personal student loan rates and options here now or through the table below.
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