The best MBA student loans are federal loans, followed by private. But student loans aren't the only way (or best way) to pay for business school.
The truth is: getting an MBA is expensive. The Masters of Business Administration degree could be a way to bolster your business skills - but it does come at a price. And is it worth it?
According to a recent Investopedia article, the average cost of tuition alone for a 2 year MBA program is $80,000. And that's just tuition alone.
When you factor in the other expenses like books, room and board, and more, you could start seeing the price climb to between $100,000 and $200,000. And for a full time program, the opportunity cost of lost wages could be huge.
Whether you're looking at a part-time MBA program or a full-time MBA program, you're likely going to need student loans as one part of your financial aid pie. Here's what you need to know about paying for your MBA program, including the best student loan options to pay for your MBA.
Let's break it down.
How To Pay For Your MBA (Order Of Operations)
There is a smart order of operations to pay for your MBA program - and it doesn't start with student loans. Before you ever embark on an MBA program, you need to strongly consider the ROI (Return On Investment) of your MBA program.
The goal of an advanced degree, like an MBA, is to help you move your career (and salary) forward. Beyond your current job, an MBA also enables you to build a stronger network that might allow you to get a better job after graduation.
However, you need to align your MBA with your skills and job experience. An MBA loses a lot of it's value within 1-2 years after graduation. As such, you need to combine your MBA with your skills to maximize it's value. If you're over-educated and under-experienced, you won't see a great ROI.
When it comes to calculating the ROI, it's all about how much you're going to spend, and how much debt you're going to take on. Follow this list from best to worst to get an idea of how to pay for your MBA program.
- Employer Tuition Assistance Programs
- Your Own Savings
- Scholarships and Grants
- Direct PLUS Student Loans
- Private Student Loans
Of course, there are variations on a theme - especially when it comes to paying for an MBA. For example, your employer might cover all the costs of tuition, and you just need to pay for the remaining items. This could lead you to change your order of operations, since Direct PLUS loans might be off the table.
It's always important to analyze what you need for your own situation.
Employer Tuition Assistance Programs
One of the awesome things about an MBA program is that many employers also different tuition assistance programs to help pay for all (or some) of the cost of getting your MBA. These programs might go under the name Tuition Reimbursement Program or Tuition Assistance Program.
For example, in my situation, my employer offered to reimburse me $5,250 per year until my MBA was paid off. This was win-win. It allowed me to get an MBA almost free, and my employer received some assurance that I would stick around - if I left, I didn't get any of the accrued money that was owed to me.
As such, I had to take out student loans up front to pay for my MBA, but my employer reimbursed me annually until the student loans were paid off.
There are also student loan repayment programs that some employers are starting to offer. These can be a great asset if you already have student loans.
Your Own Savings
After looking into employer assistance programs, you can potentially consider using your own savings. This is especially true for individuals who are going back to school mid-career. You might have enough in savings to make a strong dent in the cost of your MBA program.
A few rules to keep in mind when using your own savings to pay for an MBA:
- Never use retirement plan money (i.e. don't pull or take a loan from your 401k, IRA, etc.)
- Ensure that you have an emergency fund of at least 6 months
If you follow those rules, it's safe to use the other money to pay for school. This could significantly reduce or eliminate the amount of student loans you would potentially need to borrow.
Scholarships And Grants
Going back to school for an MBA, you might to even have considered scholarships and grants as something MBA candidates "do". But there is definitely free money available to graduate students like MBA candidates, and you should take advantage.
Check out this list of MBA scholarships available.
Also, don't dismiss grants either. There are a lot of different grants that you might qualify for if you put some time and research into it. Check out our guide on using grants to pay for college.
Direct Grad PLUS Student Loans
If you've exhausted all the options to pay for your MBA, it's time to look at Direct Grad PLUS Student Loans. Direct Grad PLUS loans are the best student loans to take out for your MBA. The reason is simple: Grad PLUS Loans allow for income-driven repayment plans, student loan forgiveness, and hardship options like deferment and forbearance.
These loans can be take out to cover the maximum cost of attendance (according to your schools' financial aid office), minus any other financial aid received. For most MBA candidates taking out student loans, Direct Grad PLUS Loans can make up the difference of what's needed to pay for college.
A Direct PLUS Loan does require a credit check, so if you have a poor credit history, you may need a cosigner to help you with the student loan.
Direct PLUS Loans have some of the highest interest rates for Federal loans, so it's important to consider that when borrowing. If you have excellent credit, you might want to consider other options now or later.
Private Student Loans
Some MBA candidates cannot solely rely on Federal loans to pay for the cost of getting an MBA.
Either they exhaust Federal loan limits due to their school’s cost, they need more funds to cover living expenses while attending school, or they need more time to complete their education (which increases cost).
Others may find more value in taking on private loans given their excellent credit and ability to repay. In this case, private student loans may be a cheaper alternative due to low interest rates and excellent borrower programs.
We recommend borrowers shop and compare their private student loan options. It's essential to get at least 2-3 quotes from lenders and see your options first. Platforms like Credible and Splash make comparison easy, but they don't have all the lenders available.
Here are two other great private MBA student loan options:
Sallie Mae MBA Student Loans
Sallie Mae is probably one of the most well-known lenders on this list. They are the nation's largest private student loan lender by loan volume. As a result, they also offer some of the most competitive private MBA student loans out there.
You can take out Sallie Mae student loans starting at just $1,000 (which is one of the lowest) and can borrow up to the total cost of education². Sallie Mae has a variety of repayment plans to select from, they offer 48 months of deferment during your residency and fellowship⁴, and 12-months of interest-only payments after your grace period⁵.
Read our full Sallie Mae review here.
Sallie Mae MBA Student Loans Details | |
|---|---|
Product Name | Sallie Mae MBA Student Loan |
Min Loan Amount | $1,000 |
Max Loan Amount | Up to 100% of the school-certified expenses² |
Variable APR | 5.37% -14.97% APR¹ |
Fixed APR | 4.25% - 14.48% APR¹ |
Loan Terms | 10 to 15 Years |
Promotions | None |
Ascent MBA Student Loans
Ascent Student Loans is a solid choice as a private lender - as they great graduate student loans for business school. They also offer a solid loan amount range from $2,001 - $400,000*, competitive rates, and easy repayment terms.
They offer loans starting at just $2,001* minimum, and they offer 48 month loan deferment while in school, and a grade period to postpone full principal and interest payments up to 36-months after graduation, up to 9-months after leaving the program, or otherwise dropping to less-than-half-time enrollment.
Read our full Ascent Student Loans review here.
Ascent MBA Student Loans Details | |
|---|---|
Product Name | Ascent MBA Student Loan |
Min Loan Amount | $2,001 |
Max Loan Amount | $400,000 |
Variable APR | 7.73% -16.09% APR |
Fixed APR | 5.29% - 15.96% APR |
Loan Terms | 5, 7, 10, 12 15, or 20 years |
Promotions | None |
International MBA Student Loans
International students cannot get federal student loans and must rely on private student loans. International students make up anywhere from 18% to 20% of the MBA population in the United States.
There are two main options for international student MBA loans. Prodigy allows international students to borrow up to $220,000. They also don't require a US cosigner, and have various repayment options. Check out Prodigy here >>
Another option is MPower. They have a lower lifetime limit of $100,000, but also may be a good choice for international business school students.
Refinancing Student Loans After Graduation
If you're finding this article after you've already taken out loans for your MBA, you might consider student loan refinancing.
If you have private loans or high-interest Federal Loans (like the Direct PLUS Loans mentioned above), refinancing might allow you to lower your payment or save on interest on your MBA student loans. Through refinancing, you take out a new student loan from a private lender and use it pay off your other loans. With the new student loan, you may qualify for a lower interest rate, better repayment term, or lower monthly payment.
If you have Federal student loans, refinancing will cost you the ability to apply for an income-driven repayment plan or forbearance. That's why, for many borrowers, we don't think you should refinance your Federal student loan for a private student loan.
However, in some cases, MBA candidates are the exception to the rule. After getting your MBA, you might have the potential to see your salary rise by a significant amount of money. For many, this means they would benefit more from getting a student loan with a low interest rate, versus keeping a Federal student loan.
For example, Direct PLUS Graduate loans currently have an interest rate of 8.048%. But you can refinance with Credible and potentially save a lot in interest!
See if Credible makes sense to refinance. You can shop loans in 2 minutes. As a bonus to College Investor readers, you'll get up to a $1,000 gift card when you refinance with Credible. See terms. Check out Credible today.
Final Thoughts
The bottom line is that getting an MBA can be expensive, but for many, it's worth it. The trick is to ensure that you're figuring out how much it's worth - almost like Step 0 of your MBA education.
Remember, you can ensure that an MBA is valuable by paying as little as possible out of pocket. Start checking with your employer, and looking to maximize student loan tuition assistance programs. Only borrow in student loans what you absolutely have to.
Remember, what's the end goal of your MBA degree? Don't just go get an MBA "just 'cause'". Have a clear path to getting a return, and be mindful of how you spend and pay for it.
Frequently Asked Questions About Student Loans For Your MBA
Which MBA student loan is best?
The best MBA student loan is going to be a federal Grad PLUS Loan. After that, it's important that borrowers shop around for private loans and get multiple quotes.
Should students take out student loans for an MBA?
Only if necessary. The should exhaust other options first, especially programs like employer tuition reimbursement.
What to look for in an MBA student loan?
Borrowers should look at federal student loans first. After that, they can look at private MBA student loans. For these looks, borrowers should look at the interest rate, loan term, and repayment terms to find what works best for them.
How long are MBA loans?
Federal Grad PLUS loans can be extended to 25 years of repayment. Private MBA loans range from 5 to 20 years.
Ascent Student Loans
Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: AscentFunding.com/Ts&Cs. Rates are effective as of 6/3/2024 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest rates require full principal and interest payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the repayment examples above, based on the amount of time you spend in school and any grace period you have before repayment begins.
*The minimum amount is $2,001 except for the state of Massachusetts. Minimum loan amount for borrowers with a Massachusetts permanent address is $6,001.
Sallie Mae
¹Rates displayed are for medical school student loans:
Lowest rates shown include the auto debit discount: Additional information regarding the auto debit discount: Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. *These rates will be effective 06/21/2024.
Terms:
Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years.
² For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website may be subjected to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time.
⁴ To apply for this deferment, customers and an official from the internship, clerkship, fellowship, or residency program must complete and submit a deferment form to us for consideration. If approved, deferment periods are issued in up to 12-month increments. Customers can apply for and receive a maximum of four 12-month deferment periods. Interest is charged during the deferment period and Unpaid Interest may be added to the Current Principal at the end of each deferment period, which will increase the Total Loan Cost.
⁵ GRP allows interest-only payments for the initial 12-month period of repayment when the loan would normally begin requiring full principal and interest payments or during the 12-month period after GRP request is granted, whichever is later. At the time of GRP request, the loan must be current. The borrower may request GRP only during the six billing periods immediately preceding and the twelve billing periods immediately after the loan would normally begin requiring full principal and interest payments. GRP does not extend the loan term. If approved for GRP, the Current Amount Due that is required to be paid each month after the GRP ends will be higher than it otherwise would have been without GRP, and the total loan cost will increase.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.
Editor: Claire Tak Reviewed by: Ashley Barnett
