Getting a Master of Business Administration is an investment. Tuition costs vary widely depending on the school, but the average cost of an MBA is $61,800 for a program in the U.S.
If you’ve committed to pursuing an MBA, the reality is that a higher income is probably still a few years away. However, you’re responsible for the cost of schooling now. It can be daunting, but there are options for making business school more affordable. Here are a few tips to evaluate as you craft a plan to pay for your MBA program.
Saving Up in Advance
If you’re already employed, and especially if you earn a high salary, it may make sense for you to stay in your gig for a few more years and put money away toward your degree. The more you save now, the less you may have to take out in loans later. If you’re interested in accelerating your savings, consider cutting your expenses to prepare for the lifestyle change of becoming a student again.
Taking Advantage of Free Money
There are a plethora of scholarships, grants, and fellowships available for business students. If you manage to land one, they can help reduce your costs slightly or significantly, depending on the size of the award.
When hunting for scholarships, consider starting with the schools you’re thinking of attending. Many institutions offer their own need- or merit-based scholarships and fellowships, some of which may even fund the entire cost of MBA tuition. Many, but not all, of these are geared toward specific groups of students.
Awards may be based on academic excellence, entrepreneurship, and for those committed to careers in real estate or finance. Contact your school’s admissions or financial aid departments to learn about the opportunities you qualify for.
Getting Sponsored by a Company
Some employers offer to pay for all or part of an MBA degree. In exchange, they may require that you work there for a certain time period beforehand and commit to maintaining your employment for some time after you graduate.
Some companies may offer relatively modest grants, while others might offer to cover the bulk of tuition costs. Some companies that offer tuition reimbursement for employees pursuing MBAs include Deloitte, Bank of America, Apple, Intel, Procter & Gamble, and Chevron.
If you can land a job at a company that offers this benefit, it can be a major help in paying for school and reducing your debt burden. Just be sure that you’re willing to meet the commitments, which in most cases means staying with your employer for a while.
Taking Out Student Loans
If you can’t make up the full cost of tuition and living expenses through savings, scholarships, or sponsorships, borrowing student loans is another option. You might first consider borrowing from the federal government, as federal loans offer certain borrower protections and flexible student loan repayment options.
Federal Student Loans
To apply for federal student loans, first fill out the Free Application for Federal Student Aid (FAFSA®). The school you attend will determine the maximum you’re able to take out in loans each year, but you don’t have to take out the full amount. You might choose to only borrow as much as you need, since you’ll have to pay this money back later—with interest, of course.
Graduate students are generally eligible for Direct Unsubsidized Loans (up to $20,500 each year) or Direct PLUS Loans. Neither of these loans is awarded based on financial need.
Both of them accrue interest while the student is enrolled in school. Unless you pay the interest while you’re in school, it will get capitalized (or added to the principal of the loan), which can increase the amount you owe over the life of the loan.
Direct Unsubsidized Loans will have a six-month grace period after graduation in which you won’t have to make principal payments (remember, interest still accrues). Direct PLUS Loans, however, do not have a grace period, so principal payments are due as soon as you earn your degree.
Private Student Loans
If you aren’t able to borrow as much as you need in federal loans, you can also apply for MBA student loans with private lenders, including banks and online financial institutions.
Private student loans will have their own interest rates, terms, and possible benefits. Make sure to research the different lenders out there and see which is the best fit for your financial situation.
Paying Student Loans Back
Taking out a big loan can be daunting, but there are options for making repayment affordable, especially with federal loans. The government offers four income-based repayment plans that tie your monthly payment to your discretionary income.
If you make all the minimum payments for 20 or 25 years, depending on the plan, the balance will be forgiven. (However, the amount forgiven may be considered taxable income.) If you run into economic hardship, you can apply for a deferment or forbearance, which may allow eligible applicants to reduce or stop payments temporarily.
If you put your degree to use at a government agency or nonprofit organization, you may also qualify for Public Service Loan Forgiveness. If you meet the (extremely stringent) criteria, this program will forgive your loan balance after you make 120 qualifying monthly payments (10 years) under an income-driven repayment plan.
Refinancing Student Loans
If you’re still paying off student debt from college or another graduate degree as you enter your MBA program, you could consider looking into student loan refinancing.
This involves applying for a new loan with a private lender and, if you qualify, using it to pay off your existing loans. Particularly if you have a solid credit and employment history, you might be able to snag a lower interest rate or reduced monthly payment.
While there are many advantages of refinancing student loans, there are also disadvantages, as well. If you refinance federal student loans, you lose access to federal forgiveness programs and income-based repayment plans. Make sure you do not plan on taking advantage of these programs before deciding to refinance your student loans.
The Takeaway
MBA programs can offer a valuable opportunity to advance your career and increase your income, but they can also come with a hefty price tag. Options to pay for your MBA degree can include using savings, getting a scholarship, grant, or fellowship, or borrowing student loans. Everyone’s plan for financing their education may be different and can include a combination of multiple resources.
Making existing loans manageable while you’re in school can go a long way to making your MBA affordable. Down the line, you can consider refinancing the loans you take out to get you through your MBA program. You can get quotes online in just a few minutes to help figure out whether refinancing can get you a better deal.
If you do decide to refinance your student loans, consider SoFi. SoFi offers an easy online application, flexible terms, and competitive rates.
SoFi Student Loan Refinance
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