Getting a Master of Business Administration is an investment. Tuition costs vary widely depending on the school, but the average cost in 2020 was $195,416 for the top 25 two-year programs in the US.
The high price tag doesn’t mean that an MBA isn’t worth it. Calculate your return on investment by doing some research on the starting salaries of MBA graduates , and possibly, of graduates from the specific program you plan to attend. You might also consider doing some research on your field of choice to learn more about demand for employees and your growth potential. Then do the math—does the investment seem worth it in terms of the higher salary you stand to earn for a lifetime?
If you’ve committed to pursuing an MBA, the reality is that a higher income is probably still a few years away, but you’re responsible for the costs now. It can be daunting, but you have many options for making business school more affordable. The key is to plan ahead and do the research so you have plenty of time to take advantage of the opportunities out there. Here’s a few options to evaluate as you craft a plan to pay for your MBA program.
Saving Up in Advance
If you’re already employed, 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 up 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.
For example, Wharton , the University of Pennsylvania business school, offers fellowships aimed at students of specific populations, and those who’ve demonstrated leadership in public service.
Other awards are 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.
Beyond grants offered by your institution, plenty of foundations, associations, and other groups offer support to MBA students. For example, the Forté Fellows Program and the American Association of University Women offers grants and fellowships to women pursuing MBAs.
Students who have served in the military can apply for Military MBA’s Merit Scholarships . The Toigo Foundation and the Association of Latino Professionals in Finance and Accounting are among the organizations that offer support for minority students pursuing MBAs.
You can look for other scholarships using search engines like FastWeb , FinAid , and Scholarships.com . Even if some of the amounts offered are small, combining a bunch of scholarships can add up.
To increase your chances of winning an award, it’s worth putting in the time to polish your application materials and secure solid references, if any are required. Investing that time and effort today can help make your MBA much more affordable down the line.
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 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 reduce 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 saving, scholarships, or sponsorships, borrowing student loans is another option. You might first consider borrowing from the federal government, certain borrower protections, and flexible student loan repayment options .
To apply, you’d fill out a Free Application for Federal Student Aid (FAFSA®) online just like you did during your undergraduate years. (Research the deadline for your state to make sure you’re applying on time.) 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. Interest rates are set annually, for the 2020-21 school year the interest rate on Direct unsubsidized loans for graduate students is 4.30%. 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.
The Direct Unsubsidized Loan will have a six-month grace period after graduation in which you won’t have to make principal payments (remember, interest still accrues). The Direct PLUS loan doesn’t have a grace
period , so principal payments are due as soon as you earn your degree.
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.
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.
The Takeaway
MBA programs can offer a valuable opportunity to advance your career, but they can also carry 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 different 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 also think about 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.
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SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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