MBA Student Loans - Choose The Right Loan For you

It is a known fact, or at least commonly known that getting a degree in Masters of Business Administration is equivalent to securing your career. There is a whole other set of jobs reserved for MBA holders, recruiters are waiting to grab on to qualified graduates to enhance the quality of their firm. Although I just created a sweet picture in your head, what is also important is to be aware of the process of obtaining the degree, from the financial aspect.

The average tuition fee for a two-year MBA program begins with a mere $60,000.

And if you wish to attend one of the top business schools or private schools, you can expect to pay a tuition fee somewhere around the bandwidth of $100,000 to $200,000.

However, this factor should not demotivate you from your goal of attaining an MBA degree because financing your education is not entirely a complicated or challenging process.

This article will provide you with all the necessary information about paying you're your MBA program, how these loans work, some of the best MBA loan options and some advice on how to make an informed decision.

Table of contents

Best MBA loan providers in 2019
Private or federal loans for MBA?
How to decide on the right loan option
Eligibility for an MBA loan
Conclusion

Best MBA loans and loan providers in 2019

First, we will consider the options of federal aid provided by the government, then move on to the best private lenders and what each of them best provides.

1) Federal subsidized/Unsubsidized loan

Stepping into the game of borrowing loans for an MBA, this is naturally the first option every borrower will consider.It is to be noted that graduate students are not eligible for subsidized loans. The federal unsubsidized direct loans have fixed interest rates (4.53-6.08%),which is low compared to private lenders, and also minimal fees.

But there is a loan limit of approximately only $20,500 on an annual basis. Loan amounts For undergraduates: $5,500 for year one, $6,500 for year two, and $7,500 for year three and thereafter, up to a total of $31,000. This may not be very favorable if you intend to cover the entire or most part of your MBA tuition fees. The term length varies from 10 to 25 years once repayment begins, depending on the repayment plan.

If you want to only make the fees payment process lighter, then you can opt for this as a source of financial support.

2) Federal Grad PLUS Loan

Here, graduate students can take out a loan up to their cost of attendance, minus any other aid received. The fixed APR is 7.08-7.08% which may be a little on the higher side in comparison, along with an origination fee. The borrower need not have an exceptional credit history. In the case that it is not very striking, they can still receive a grad PLUS loan by enlisting a co-signer without adverse credit history or portray circumstances of goodwill for their credit history. The term lengths vary from 10 to 25 years once repayment begins, depending on the repayment plan.

Borrowers who wish to play safe and want to minimize risk would prefer to opt for this federal option as they can later on go for income repayment options and Public Service Loan Forgiveness if they need some flexibility in an ambivalent job scenario; which is not available when borrowing private loans.

3) Common Bond Private Student Loan

The highlight of loans offered by Common Bond is that they offer loans specifically keeping in mind MBA students, and these loans come with lower interest rates than federal PLUS loans or other graduate student loans, once you have met their underwriting standards. To be precise, there are around 29 eligible MBA programs. Those borrowers who have an excellent credit rating will prefer to go for this option. (Min credit score – 660)The fixed APR starts from 5.45% and can go up till 9.74%, and the variable rates start as low as 3.66% and can go up till 9.64%. There is an origination fee of 2% as well.

The loan amount offered is around $2000 on the total cost of attendance with a maximum amount of around $500,000. The term length of repayment varies from 5, 10 to 15 years. Here, the borrower is assigned a dedicated mentor who will act as a guide throughout the process.

The borrower also has an option to apply for an MBA loan alone or along with a co-signer. This is one among the few private lenders that offer forbearance in case of economic hardship, and also fully deferred interest-only, or immediate repayment options. It is to be noted that loan service is not provided by Common Bond in Nevada and Mississippi.

4) Citizens One Private Student Loan

This is also one such lender that offers loans designed specifically for Business school students.The fixed APR starts from 4.40 to 12.19% and the variable rates start as low as 3.08% and can go up till 11.26%. There is no MBA loan origination fee or prepayment penalty.

Citizens One provides MBA students with higher aggregate loan limits than students in general graduate school programs; up to the total cost of education or $225,000, whichever is higher. The term length varies from 5, 10 to 15 years. There is a special loyalty discount for existing customers of Citizen One Bank customers. It is a good option for international borrowers as well, but with a co-signer.

Full in-school deferment is also offered for business school loans. This option is beneficial for those borrowers with excellent credit background.

5) Laurel Road

The fixed APR starts as low as 6.24% and the variable APR starts as low as 6.24%. There is no origination fee and no prepayment penalty for loans borrowed. There is also an additional discount of 0.25% rate discount for graduates of MBA who earn more than $100,000.

The loan limit is equivalent to your specified MBA program's full cost of attendance. The term length varies from 10, 15 to 20 years.In terms of deferment and forbearance, you have the option to defer payments or make interest-only or full principal and interest payments. And in case of forbearance, one year is permitted for reasons of economic hardship.

Like federal loans, Laurel road is one of the few private lenders who offers death and disability forgiveness of loans.

6) Discover Bank Student Loans

The fixed APR starts from 4.99% and can go to 12.24% whereas the variable APR starts from 3.74% and can go up till 11.62%. There are zero fees required for MBA students and other graduate students at the business school. It is quick and easy to apply online where knowledgeable student loan specialists are always available to help the borrower 24/7.

There is the availability of in-school deferment repayment option and there is no penalty for prepayment. The limit of the loan is up to the MBA program's full cost of attendance.

As an added motivation for students, there are rewards for good grades as well. (a 3.0 GPA (or equivalent) will receive a one-time cash reward. The reward redemption period is limited)

Even though it is not compulsory, students may have the option to apply with a creditworthy cosigner. Adding a creditworthy cosigner may improve the likelihood for loan approval and a lower interest rate may be received.

It is to be noted that international students need a co-signer to avail loans for their MBA program. The term length of repayment is 20 years. (after deferment period ends, in case)

7) College Ave Student Loans

The fixed APR starts from 4.72% and goes up till 12.94% and the variable APR begins from 3.70% to 11.98%. The minimum credit score requirement is around the mid 700’s. The term length of repayment of the loan ranges from 5, 8 10 to 15 years.

Repayment plans are more flexible in comparison with other lenders. The repayment cost can be minimized with College Ave as they offer interest only and flat payment plans. Even international students can qualify with a co-signer. For students who are pursuing part-time BA, this is a good option to explore as College Ave is one of many private lenders who requires the borrower to be at least enrolled half-time to be able to take out loans.

8) Sallie Mae

Sallie Mae MBA loans let you defer payments during an eligible internship for up to 48 months fixed APR starts from 4.74% and goes up to 11.35% whereas the variable APR starts as low as 3.25% and goes to 10.65%. There is a 0% origination fee and no penalty for paying off MBA loans before its due date.

Sallie Mae is also another private lender that permits loans to part-time students. The loan amount is given starts from $1000 and can go up to 100% of the school-certified expenses. The term length varies from 5 to 15 years.

Worried about your college tuition? Learn more about student loans

Should I go for a private or federal student loan for my MBA?

There are multiple options available for you to choose from to finance your MBA loans. Depending on your personal financial needs, you can opt for federal loans or private lenders with attractive MBA loans who have some options designed specifically for your needs.

Lets us overview both the categories based on certain aspects.

1) Interest rates

Federal loans generally have lower interest rates as compared to private MBA loans. (graduate PLUS loans have an interest rate of 7.08%)

But, on the other hand, if you have an outstanding credit history, the private lender may consider a lower interest rate which will be a benefit to you.

Some private lenders offer both fixed and variable interest rates so you can choose wisely.

Further in the article, you can read up about the options from various lenders that we have scrutinized for your decision-making process.

Also, utilize one of the free student loan calculators available online to see how much will be benefitting at the end of the day

2) Origination fees

For federal loans, either direct subsidized or direct PLUS, there are some fees to be paid which is taken out by the government before they give out the loan to the borrower. Currently, graduate PLUS loans have an origination fee of 4.248%, which is still, on certain levels, considered to below.

Contrarily, not all private lenders charge fees. There are some who don’t charge either application, origination or disbursement fees.

3) Refinancing

Refinancing is a savior in disguise for many student loan borrowers as it improves the stats of their loans and changes the repayment terms positively.

However, in the case of federal loans with low-interest rates, refinancing is not a viable option. You will have to go for refinancing your federal loans with a private lender. And with private MBA loans, you are permitted to refinance with private lenders to get a lower interest rate, and in turn, improve your credit rating too.

Refinancing student loans is a great way to manage your student loan debt. It is advised to have in-depth knowledge of refinancing so you can take full advantage of it.

4) Repayment

Repayment is the factor that makes federal loans shine the most, as it contributes to making the debt easy to handle.

If you need to finance part or all of your MBA, federal loans are definitely the safer choice as it has flexible repayment terms.

What makes deferral loans stand out is that you don’t need to start making payments until you graduate from school whereas that is not the case with private loans wherein payments are needed to be started right away.

After graduation, in case the situation demands, you can opt for deferment or forbearance in case of federal loans to make the situation less complex. This option is not always provided by every private lender. Student loan repayment can be used to your advantage which can help boost your credit score. It is advised to have an in-depth knowledge so you can take full advantage of it.

Another point not to miss is the option of repayment plans (especially Income-driven repayment plan) with federal loans which is not offered in private loans.

Death and disability

Also, in case the borrower dies or is faced with total disability, his federal loans are waived off, but in case of private loans, mostly, the co-signer is burdened with the responsibility to take over the repayment.

But it is also to be noted that a private MBA loan may make sense if you have excellent credit and a firm grasp on your career trajectory and future income and are sure of the stability that you will gain in the near future.

How to decide the right MBA student loan option for me?

There are a number of factors to be considered based on which you can solely decide what will be the most suitable option for you. In an attempt to cover all the basic but necessary perspectives, you can use the following pointers to settle at an arrangement.

Primarily, the right student loan option to pay for your MBA will depend on your financial background and repayment goals.

Customarily, give first preference to federal direct unsubsidized loans - As seen above, these loans have a lesser fixed interest rate and small fees comparatively. Those terms, even though they may be close enough to what a private lender might place in front of you, there is also the benefit of protection that comes along with it. If those terms don’t work well with you, and you want to look at private loans, then be sure of strong future financial returns.
Observe and recognize the direction of your career path - The cost of an MBA is quite high and it doesn’t look like it's going to get low anytime soon, but hand in hand, the career prospects are also increasing.

If unsubsidized loans don’t cover all your MBA costs, federal grad PLUS loans will then make sense if you intend to work for an NGO. Options like Public Service Loan Forgiveness and income-driven plans can help also help in such cases.
Estimate where you stand currently - If you wear the feather of a strong credit score in your hat, and have a strong belief of your future income being high, then we would advise you to look around for the best private MBA loan.

Consider a combination of options as well. For instance, if your employer is willing to sponsor part of your MBA where you will eventually earn a higher salary if you commit with the company for a certain number of years after you receive your degree, then it may seem plausible to take on a private MBA loan to save on interest or overall costs.

Eligibility for an MBA student loan

In order to be eligible to apply for an MBA loan, the borrower must meet certain basic eligibility requirements such as the following:

The borrower must be a U.S. citizen or permanent resident*
Should be enrolled at least half-time as a graduate student (at a recognized eligible institution)
Making satisfactory academic progress (SAP)
Should have a positive, verifiable credit history — or a cosigner with a strong credit history

*Some lenders will accept applications from foreign borrowers applying with a creditworthy cosigner. The cosigner also needs to be a U.S. citizen or permanent resident.

The borrower must also check with their respective lender to confirm eligibility requirements. Most graduate students may easily qualify on their own without a cosigner, especially if they have at least 2 years of employment history. But, having a cosigner with a strong credit history could also help you qualify for a lower rate, even if you’re eligible on your own merit. You’ll also want to consider that some lenders’ eligibility standards require you to be an existing customer or member (i.e. have a banking relationship with them or be willing to join a credit union) in order to borrow a loan in their program. You may find some competitive rates among these types of institutions, but be sure to read the disclaimers to understand their qualification standards.

Loan Limits

The average minimum loan amount the borrower may be eligible to borrow is usually $1,000 but again, it differs from loan to loan, and lender to lender.

As observed, the maximum amount that can be borrowed is the full cost of attendance as certified by the particular program and by the school, not counting in the other financial aid.

Fees

As we saw above, various lenders offer different fees, while some don’t charge any fee at all.

Conclusion

As it is a known fact that an MBA program is a capital-intensive endeavor, it is better if the borrower does the process of borrowing a loan with due diligence similar to that of buying a home as there is not much difference in cost.

Students also have the option of studying online, but thorough research must be done before enrolling in any such arrangement as this will be the degree responsible for securing your career.

The bottom line here is that getting an MBA can be expensive, but it is definitely worth the money, effort and time. It is necessary to be smart about your choices to ensure its worth. This is the primary step before entering into a world of MBA clad job market eventually. Start checking with your employer and look towards maximizing student loan tuition assistance programs. Then move onto borrowing student loans, either federal or private, based on your need and financial background.

Always keep in mind what your motive is at the end of the day, the reason behind why you are toiling hard to attain an MBA degree. IT is mandatory to have a clear path in mind, to avail the returns of what you sow, and to be mindful of how you spend each penny of the loan borrowed and how you utilize its due benefits for the betterment of your education.