You got into business school! Now what? Your first strategic challenge will be figuring out how to pay for an MBA.
Getting a Master of Business Administration is an investment. Tuition costs vary widely depending on the school, but the average is $80,000 for a two-year program . That doesn’t include other costs of attendance, like fees, room and board, and health insurance. Since you’ll be in school, you probably won’t be able to work as much, while you’re enrolled.
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 if you can, 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 guide to how you can make paying for MBA school a reality:
Saving Up in Advance
The most common sense approach to tackling a big future expense is to save for it. 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 putting money away toward your degree. Even if you can’t save up for the entire cost of attendance, it’s worth stocking away as much as you can.
The more you save now, the less you may have to take out in loans later. As your bright business mind knows, loans mean interest, and interest means your degree will cost more overall.
You could start living like a student now by cutting your expenses to prepare for the lifestyle change. If you can live lean and save big, it’ll not only pay dividends while you’re in school, but also help set you on solid financial footing for the future.
Taking Advantage of Free Money
The only thing better than saving money is getting some for free. 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, start 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 , Prospanica , the Bureau of Indian Education , and the Association of Latino Professionals in Finance and Accounting are among the organizations that offer support for minority students pursuing MBAs.
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 often 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 will offer you a full ride, or thereabouts. Companies that offer tuition reimbursement for employees pursuing MBAs include Deloitte (up to $10,000 a year), Bank of America (up to $5,250 a year), Apple (up to $5,000 a year), Intel (100% of reimbursable costs!), Procter & Gamble (up to $40,000 total), and Chevron (up to 75% reimbursement of tuition).
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, you could also take out student loans. You might first consider borrowing from the federal government, because those loans offer relatively low interest rates, certain 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.) And just like for your bachelor’s degree, your school will decide 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.
As a graduate student, you’re likely eligible for Direct Unsubsidized Loans (up to $20,500 each year) and Direct PLUS Loans. Neither of these loans is awarded based on financial need.
Both of them accrue interest while you’re in school—you can find the current interest rates on the Department of Education website . 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 you graduate 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 student loans with private lenders, including banks and online financial institutions. Some nonprofits also offer no- or low-interest loans for graduate students.
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 Your 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.
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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