What Are Your Private MBA Student Loan Options?

Ben Luthi Published on May 22, 2020

What-Are-Your-Private-MBA-Student-Loan-Options

Earning a master’s degree in business administration (MBA) can open a lot of career opportunities, but it can be incredibly expensive to get there.

Every school is different, but between tuition and fees, room and board, textbooks, supplies, and other expenses, MBA students may spend anywhere between $50,000 and more than $200,000 to get their degree.

Unless you’ve spent a serious amount of time saving for your graduate studies, you’ll likely need to borrow money to get through the experience.

Fortunately, there are several student loan options for graduate school, including federal loans and private MBA loans.

How to pay for business school

Your student loan options for graduate school can vary based on your current financial situation and your credit history. Here’s what you need to know about each option and how to determine the right fit for you.

Federal student loans

The U.S. Department of Education provides two types of student loans to graduate and professional students: Direct Unsubsidized Loans and Direct PLUS Loans.

With Direct Unsubsidized Loans, you can borrow up to $20,500 per year up to a maximum of $138,500, which also includes federal loan debt from your undergraduate degree. These loans come with a 6.6% interest rate for all borrowers, as well as 1.062% loan fee — these figures can change from year to year, depending on when you first borrow the money, but not by much.

One of the primary benefits of a Direct Unsubsidized Loan is that it doesn’t require a credit check, so it may be a good fit if you haven’t had the chance to build credit or if you’ve made some credit missteps recently. That said, the $20,500 annual limit may not give you enough to cover all your costs.

The other federal loan option is a Direct PLUS Loan. The only maximum these loans have is the cost of attendance at your school minus any other financial aid you receive. So you don’t have to worry about getting less than you need to pay your education-related expenses.

However, there are some trade-offs to get that benefit. For starters, the current interest rate (as of the 2019-2020 school year) on PLUS Loans is 7.08%, which is slightly higher than what Direct Unsubsidized Loans charge. Also, the upfront loan fee is 4.236%, which adds to the cost of borrowing money.

Finally, PLUS Loans do require a credit check of sorts. You won’t necessarily get denied if your credit is less than stellar. However, if you have what the Department of Education considers to be an adverse credit history, you may not get approved unless you have extenuating circumstances.

That said, Direct PLUS Loans may be a good choice if your credit is in decent shape, and you’re willing to pay a little more in the form of interest and fees to get access to more money.

Regardless of which type of federal loan you choose, you’ll get access to special benefits, including select student loan forgiveness programs, income-driven repayment plans, and generous forbearance and deferment options to help repay your debt.

Private MBA student loans

Private MBA loans are student loans offered by private lenders instead of the federal government.

Loan limits can vary depending on the lender, but you can generally expect to be able to borrow enough to cover your educational expenses. What’s more, some lenders offer MBA-specific loans, which can come with better terms than their generic private student loans.

In some cases, those terms can be even better than what the federal government offers.

The catch is that private lenders require a credit check, and your approval odds and the terms of your loan depend on your credit history and income situation. If you have great credit and a strong income profile — or you have a cosigner with these attributes who will apply with you — you could potentially qualify for a loan with a low rate that rivals the federal government.

Plus, private lenders typically don’t charge up-front loan fees at all, so you can include those savings while running the numbers. The best MBA student loans also come with the option to defer your payments until after you leave school, solid forbearance options if you experience financial hardship while repaying your debt, and more.

Keep in mind, though, that private loans don’t qualify for student loan forgiveness programs, and private lenders typically don’t offer income-driven repayment plans, which can be helpful if you can’t afford your standard monthly payments after graduating.

Compare private MBA loans to find the right option

While undergraduate students almost always get a better deal with federal loans, that’s not necessarily the case when you’re in graduate school.

As you’re trying to figure out how to pay for business school, take some time to shop around and compare interest rates from several private lenders, then place the best option side-by-side with your federal loan options.

It’s hard to say what the best MBA student loans are for everyone because every situation is different. But by using the Purefy’s Compare Rates tool, you’ll be able to review rate quotes from several lenders in one place — smoothly and quickly — to help you determine which option is best for you.

If you qualify for private student loans and decide to move forward, keep in mind that you may be able to refinance those private loans after you graduate to help you pay them off on a repayment schedule that works for you.

Don’t forget to look beyond student loans

While federal loans and private MBA loans can be a great way to pay for your graduate degree, make sure you exhaust your other options before you begin borrowing money.

For starters, make sure to fill out the Free Application for Federal Student Aid (FAFSA), which can determine if you qualify for federal grants. Also, check with your school to see if it offers grants and scholarships to its students — both of which you don’t have to repay.

You can also apply for private scholarships and grants from other organizations through websites like Scholarships.com and Fastweb.

Finally, if you have the capacity to work while you’re doing your MBA program, take the opportunity to use that ongoing income to help cover some or even all your expenses.