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This article first appeared on the Credible blog.
While earning your MBA might provide employment opportunities, it could also be expensive — the average grad school debt for an MBA is $66,300.
However, there are several ways to potentially pay for an MBA, including student loans.
Here’s what you should know about MBA loans and where to find them:
3 of the best MBA private student loan options
A few types of student loans could help you cover the cost of an MBA, including federal and private student loans.
Tip: If you need to borrow money to pay for school, it’s usually a good idea to start with federal student loans. This is mainly because federal loans come with federal benefits and protections, such as access to income-driven repayment plans and student loan forgiveness programs.
After you’ve exhausted your federal student loan options as well as any scholarships or grants available to you, private student loans could help fill any financial gaps left over.
If you decide to take out a private student loan, be sure to consider as many lenders as possible to find the right loan for you. You can visit Credible to compare student loan rates from private lenders in minutes.
These Credible partner lenders offer private MBA student loans:
Citizens offers several types of private student loans designed for students pursuing graduate and professional degrees, such as MBAs. With Citizens, you can borrow $1,000 to $225,000 for an MBA with repayment terms ranging from five to 15 years.
- 0.25% autopay discount
- 0.25% loyalty discount
- Flexible repayment options
- Might be hard to qualify if you don’t have good credit
- 15-year terms not available to parent borrowers
- Long cosigner release period (36 months)
If you need to borrow a large amount, College Ave might be a good choice — you can borrow $1,000 up to 100% of your school-certified cost of attendance (minus other aid received). College Ave MBA loans come with terms ranging from five to 15 years.
- Can borrow up to 100% of your school-certified cost of attendance (minus other aid received)
- Multiple plans for in-school repayment
- 0.25% autopay discount
- Potentially long cosigner release period (can’t apply until more than half of the scheduled repayment period has elapsed)
- Doesn’t disclose minimum income or credit requirements
- Might be hard to qualify for cosigner release (24 most recent payments must have been on time, and your income for the last two years must be more than twice your outstanding loan balance)
Sallie Mae might be another good choice if you’re looking to borrow a large amount — you can borrow $1,000 up to 100% of school-certified cost of attendance. Repayment terms on Sallie Mae loans range from 10 to 15 years.
- Can borrow up to 100% of school-certified cost of attendance (minus other aid received)
- Can apply for cosigner release after just 12 months of consecutive, on-time payments
- 0.50% interest rate reduction on graduate and professional loans when making interest-only payments during school
- Doesn’t disclose minimum income or credit score requirements
- While part-time students are eligible, you must be enrolled at least half time to finance personal expenses
- Charges late fees (5% of the past due amount with a maximum of $25)
To find the “best companies,” Credible looked at loan and lender data points from 10 categories to give you a well-rounded perspective on each Credible partner lender:
- Interest rates
- Repayment terms
- Repayment options
- Customer service availability
- Eligibility criteria
- Cosigner release options
- Whether the minimum credit score is available publicly
- Whether consumers could request rates with a soft credit check
Other private student loans for MBAs to consider
Here are more private student loan companies Credible evaluated. Keep in mind that these lenders are not offered through Credible, so you won’t be able to easily compare your rates with them on the Credible platform like you can with Credible’s partner lenders.
You can use Credible to compare private student loan rates from various lenders, and it won’t affect your credit score.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to students attending graduate and professional programs, regardless of financial need. Unlike with subsidized loans, you’re responsible for all interest that accrues on unsubsidized loans — which means you could end up with a higher balance to repay.
Here are a few important points about Direct Unsubsidized Loans to keep in mind:
- Interest rates: 4.30% for graduate and professional students (for the 2020-21 academic year)
- Loan limits: Up to $20,500 each year ($138,500 aggregate limit between both undergraduate and graduate student loans)
How to apply: You’ll need to fill out the Free Application for Federal Student Aid (FAFSA) to apply for a Direct Unsubsidized Loan. Your school will use your FAFSA results to determine what federal loans you qualify for as well as how much you can borrow. Note that you must be enrolled at least half-time at a school that participates in the Direct Loan program to potentially qualify for a Direct Unsubsidized Loan.
Grad PLUS Loans
Another federal student loan option for MBA students is a Grad PLUS Loan. While Direct Unsubsidized Loans come with lower student loan limits, you might be able to borrow up to your school’s cost of attendance with Grad PLUS Loans (minus any other aid you’ve received). But keep in mind that PLUS Loans typically have higher interest rates than unsubsidized loans.
Here are a few important points about Grad PLUS Loans to keep in mind:
- Interest rates: 5.30% (for the 2020-21 academic year)
- Loan limits: Up to your school’s cost of attendance (minus other financial aid you’ve received)
How to apply: You’ll need to complete the FAFSA to apply for a Grad PLUS Loan. To be eligible for a PLUS Loan, you must be enrolled as a graduate or professional student at least part-time. Additionally, you’ll have to undergo a credit check and can’t have an adverse credit history — such as if you’ve been subject to foreclosure, bankruptcy, a repossession, or a tax lien. But if you have a cosigner with good credit or are able to prove extenuating circumstances, you might still be able to qualify.
How to pay for grad school and living expenses
If you’re considering graduate school, follow these steps to hopefully make affording the next few years a little easier:
- Decide if you want to attend part time or full time. Attending a full-time MBA program can be demanding, especially if you plan to work while going to school or have a family to take care of. If you attend part time, you’ll have a lower cost to cover each semester — but it’ll also take longer to graduate.
- Consider tuition reimbursement or other programs. Some employers provide partial or even full tuition reimbursement for employees who want to earn their MBA. Other options to look into include any fellowships offered by your school — a fellowship typically includes a job or volunteer duties in exchange for a stipend.
- Apply for grants and scholarships. These types of aid can be a great way to pay for grad school since you don’t have to repay them, unlike student loans. Be sure to dedicate time to researching and applying for both college grants and scholarships. You might find grants or scholarships offered locally and nationally by nonprofit organizations, businesses, or professional organizations in your industry.
- Take out federal student loans. Be sure to fill out the FAFSA to apply for any federal financial aid or federal student loans you might be eligible for, such as Direct Unsubsidized Loans or Grad PLUS Loans. Your FAFSA results might also qualify you for school-based scholarships.
- Use private student loans to fill in the gaps. If you’ve exhausted your grant, scholarship, and federal student loan options, private student loans could help fill any financial gaps left over. Before you borrow, be sure to consider as many private lenders as you can to find the right loan for your needs.
You might be able to defer student loans you took out for undergraduate studies while you pursue your MBA:
- Federal student loans can be deferred if you’re attending an eligible college or career school at least half-time. You can also defer Grad PLUS Loans for an additional six months after you leave school or drop below half-time enrollment.
- Private student loans can sometimes be deferred if you return to graduate school, depending on the lender. If you have private loans, check with your lender to see what options might be available to you.
Keep in mind that interest might continue to accrue on your loans while they’re in deferment, depending on the type of loans that you have.
How to qualify for private MBA student loans
While eligibility requirements for private MBA loans vary between lenders, you’ll likely come across a few qualifying criteria, including:
- Good credit: Your credit score plays a major role in determining what interest rate and terms a lender will offer. You’ll typically need good to excellent credit to qualify for a private student loan.
- Verifiable income: Lenders want to see that you’ll be able to afford your future loan payments. Some have specific minimum income requirements while others don’t — but in either case, the lender will likely ask to see proof of income.
- Low debt-to-income ratio: Your debt-to-income (DTI) ratio is the percentage you get when you divide all your monthly debt payments by your monthly income. You’ll typically need a DTI ratio of 50% or less — though some lenders might require a lower percentage.
It could be difficult to qualify for a private grad school loan if you have poor or fair credit. While some lenders offer student loans for bad credit, these typically come with higher interest rates compared to good credit loans. If you’re struggling to get approved, consider applying with a cosigner to improve your chances.
Even if you don’t need a cosigner to qualify, having one could get you a lower interest rate than you’d get on your own. Just keep in mind that your cosigner will be equally responsible for the loan if you can’t keep up with your payments.
How much do MBA students borrow?
About 51% of students who complete an MBA walk away with student loan debt, according to the National Center for Education Statistics. The average grad school debt for an MBA is $66,300 — almost twice as much as the overall average student loan debt of $33,654.
Additionally, student loan debt for recent graduates who earned an MBA has risen by 40% since 1999-2000.
How much do MBA graduates earn? In 2019, the average starting salary for MBA graduates was $115,000, according to the Graduate Management Admission Council. This is significantly higher than the $55,000 average salary for those with new bachelor’s degrees.
If you decide to take out student loans for your MBA program, be sure to consider how much those loans will cost you in the future. This way, you can be prepared for any added expenses.
You can find out how much you’ll owe over the life of your federal or private student loans using Credible’s student loan calculator.
Deciding which MBA student loan is right for you
Funding an MBA program can feel overwhelming. But many options are available that could help you pay for it. Remember that it’s usually a good idea to start by applying for grants and scholarships before turning to federal student loans and finally to private student loans.
Tip: Before taking out a private student loan, make sure to compare as many lenders as possible to find a loan that works for you. Consider not only rates but also repayment terms and any fees the lender charges to keep your future costs as low as possible.
Comparing private student loan lenders is easy with Credible. You can see your prequalified rates from lenders that offer MBA loans in two minutes after filling out a single form.
About the author: Angela Brown is a student loan, personal finance, and real estate authority and a contributor to Credible. Her work has appeared in Fox Business, LendingTree, FinanceBuzz, and Yahoo Finance.