Each year, around 200,000 people graduate with a master’s degree in business, so if you’re wondering how to pay off business school loans, you’re certainly not alone.
Those questioning the need for an MBA in today’s job market seem to be in the minority, as people are still graduating from business schools in record numbers.
And you can see why — the average starting salary for an MBA in 2021 was around $115,000, and that’s if you went to a good school. If you went to an outstanding school with real name recognition (like Stanford, Wharton, or Northwestern), the average MBA salary was $138,000.
If you graduated with a concentration in one of these categories, you could look forward to a lifetime of higher salaries and better opportunities:
· Information Technology & Security
· Healthcare Management
· International Business
· Real Estate
Now You Want to Know How to Pay Off Business School Loans Fast
Student loan debt is a massive problem in the U.S. today. It’s estimated that total student loan debt is about $1.7 trillion — for reference, that’s more than all outstanding credit card debt in the United States.
For those who have obtained an MBA, the average debt for both undergrad and grad school is a combined $66,300. Those who attended top-level schools hold an average of over $100,000 for graduate school alone.
Now it’s time to look for solutions other than simply paying your federal and private student loans for the next ten years.
Weighing Issues in the News
Federal loan forgiveness is getting a lot of airtime. It seems to be a favorite topic lately, but the Student Loan Debt Relief Plan only includes loan forgiveness of up to $20,000.
The upcoming interest rate increases signaled by the Federal Reserve are another issue. The Fed is expected to continue raising interest rates into 2023, which could have a significant impact on student loan refinancing interest rates and the cost to borrow money. This is something to keep in mind if you’ve been on the fence about the best time to refinance — there’s no time like the present.
Top 8 Strategies for Paying Off Student Loans for Business School
Let’s dive into strategies for paying off business school loans as quickly as possible. Each of these strategies can work independently, or you can combine options as opportunities arise.
First things first: are you enrolled in autopay programs with each of your student loan servicers? Most loan servicers offer a 0.25% discount on interest rates each month that you’re enrolled in automatic payments. That extra money can go toward paying your principal balance — more about that below.
Not only does autopay make bill paying incredibly easy, it also saves you a little money along the way. Plus, there’s no more hassle of paying online — or worse — mailing checks every month.
2. Employers Are Paying Student Loans
Many large companies are struggling with recruiting top talent and keeping those people engaged rather than looking around for the next big opportunity.
Since the pandemic, companies have been faced with changing work environments and a recruitment marketplace focused on flexibility and a better work-life balance. And if you can do it from Cancun, even better.
We’re seeing a growing number of companies offering student loan support as a way to entice top candidates. There are a variety of options like matching contributions, a monthly stipend, or lump sum annual payments. It’s even possible to negotiate a complete student loan pay off.
If you’re in the job market, be sure to explore each company’s alternative benefit offerings and negotiate when possible.
3. Pay More than the Minimum
By paying more toward your student loans than what’s required each month, you move the needle on the principal more quickly. Just like with credit cards, paying extra each month can save you time (and money) at the end of your loan term.
Especially now while federal loans are deferred and interest is set at 0%, it’s a great time to make larger payments on your federal loans to make a real dent. The suspension on federal student loan payments is set to end December 31, 2022.
When making payments that are larger than the minimum, be sure your loan servicer knows to apply the extra amount to your principal and not to the next month’s payment.
4. Pick Up Extra Work
Believe it or not, MBAs are in high demand for contract work. You can use this to your advantage in paying off student loans from business school.
If you are an IT professional, there are tons of companies looking for help with coding, website development, and various other business applications. You might even start your own full-time company.
For finance, marketing, and international business MBAs, small- and medium-sized companies are learning that they can contract for individual projects with MBA-level expertise without having to absorb the cost of a full-time employee.
There are numerous websites where you can advertise your services, and for a small fee, the company will handle the financial transactions and market your services. It’s a win-win for everyone. Try upwork.com or guru.com for MBA-level opportunities.
5. Extra Lump Sum Cash Payments
The next time you find yourself with extra cash, consider putting that amount toward your student loan balance with a lump sum payment.
This money can come from a variety of places, so keep your eyes peeled — sign-on or year-end bonuses, federal and state tax refunds, or even inheritance from your Great Aunt Florence could come into play.
Instead of letting the money get passively absorbed into your regular expenses, put it to good use by helping pay off your student loans.
6. Make Bi-Weekly Payments
It’s math! By making bi-weekly payments for half of your regular monthly payment, you end up making a full extra payment per year directly to your principal balance.
For a 10-year loan, that’s almost a full year off your repayment term, and even longer if you pay more than your minimum each month.
A number of student loan lenders understand that this is a great option for customers. Servicers will often allow you to choose bi-weekly payments and they know to apply the final amounts to the principal. You can check with your servicer to verify they allow this option and will apply the payments correctly.
7. Focus on Higher Interest Rate Loans First
You hear this advice all the time — put your efforts toward paying the loan with the highest interest rate first, assuming you have multiple student loans. Once that loan is paid off, then focus on the next highest interest rate, and so on.
There is another school of thought that suggests you start with the smallest balance and work your way through the small loans first, then move on to the larger balances. The psychology at work here is you feel like you’re making progress more quickly and stay motivated.
With either choice, you’ll make headway on your loans, so pick the option best suited to your needs.
8. Refinance Your Student Loans
It’s important to understand how much you have in total student loan debt and what your interest rate is on each loan. Once you know that information, you can compare your numbers with current student loan refinancing rates to see if you can recognize some cost savings. The good news is most private lenders don’t charge application or origination fees like a mortgage lender, and they typically don’t have pre-payment penalties, either.
Getting information from various lenders may sound like a lot of research and time, but using Purefy’s rate comparison tool allows you to submit some basic info to receive up to four pre-qualified rate quotes from industry-leading lenders.
With a solid credit score and good income, you could qualify for a lower rate by refinancing. And without pre-payment penalties or other fees, you can choose to refinance again if circumstances change and you qualify for a lower rate in the future.
These strategies for paying off business school student loans faster can be used together or separately depending on your financial needs. From using your windfall cash bonuses to making bi-weekly payments, these solutions can help you attack your student loan debt and save money.
If you want to learn more about refinancing, we encourage you to use the Purefy rate comparison tool where you can see actual pre-qualified offers in minutes. And if you have any questions about refinancing, Purefy’s award-winning team of student loan advisors will be there to guide you through the process.