MBA Loans

If you're looking to pursue a career in business, chances are the thought of earning an MBA has crossed your mind. And because you're business savvy, you probably want to know all of your funding options before you coming to borrowing so you can keep your student loan debt to a minimum.

Once you've explored different ways to pay for your graduate degree you may still find yourself needed a student loan.

So, what are the options for MBA loans?

First things first. You may still be eligible to borrow federal student loans through the Direct Unsubsidized Loan and Grad PLUS Loan programs; although depending on your/your cosigner’s credit score, you may qualify for a lower private loan interest rate than is currently offered in the Grad PLUS program. (Federal Perkins Loans may also be available to you, but that’s fairly rare, so we won’t be covering those here; you can find more information about that program at: https://www.edvisors.com/college-loans/federal/perkins/). Your school’s financial aid office can walk you through the nuts and bolts of applying for these loans and help you understand your eligibility, but let’s cruise at 30,000 feet and take in the high-level view.


Federal Student Loan Options

The borrowing cap for the Direct Unsubsidized Loan for graduate school is $20,500 per year. Under the Grad PLUS Loan program, you may borrow up to the annual full cost of attendance. But note, the Grad PLUS Loan requires a credit check. If your credit isn’t great, a Grad PLUS Loan may require a cosigner (endorser).

Like the Direct Unsubsidized Loan, the Grad PLUS Loan program is not subsidized, which means you will be responsible for the interest that accrues on your loan from when your loan is first disbursed. The Direct Loan and Grad PLUS Loan programs both have a number of deferment and loan forgiveness provisions associated with them, so they are definitely worth exploring.

Private MBA Loans

When weighing your options, it may be worth looking into private student loans as well. In today’s marketplace, many private MBA loans offer competitive interest rates, and while they may not have the deferment and loan forgiveness programs associated with the federal student loan programs, the terms available may be a better option for your situation.

Lender Program Name Annual Minimum Annual Maximum
Sallie Mae Smart Option Student Loan®
for Graduate Students
$1,000 100% of the school-certified cost of attendance
CommonBond CommonBond MBA Loan No Minimum $110,000 or the school certified maximum
Discover MBA Student Loan $1,000 100% of the school-certified cost of attendance
Ascent Ascent Tuition Loan $1,000 Total cost of attendance, as certified by the school
PNC PNC Solution Loan™ for Graduate Students $1,000 School-certified cost of attendance, up to $65,000 per year
College Ave Graduate Student Loan $2,000 100% of the school-certified cost of attendance
LendKey
(provides loans from credit unions)
LendKey Private Student Loan $2,000 100% of the school-certified cost of attendance

Information compiled as of 10/17/2017

What You Should Know About Private MBA Loans

There Will Be A Credit Check

A student loan is still a loan. Many business school students qualify on their own without a cosigner, especially if you have at least two years of employment history. If your credit history is less than stellar, a cosigner with a stronger history may help you get a lower interest rate than you would qualify for on your own.

Borrowing Limit

The minimum amount you may be eligible to borrow is usually around $1000, and the maximum amount you can borrow is the full cost of attendance, less other financial aid as certified by your school.

Eligibility and Fees

There are certain minimum eligibility standards you must meet to qualify for an MBA loan, including:

  •  U.S. citizen or permanent resident*
  •  Enrolled at least half-time as a graduate student (at an eligible institution)
  •  Making satisfactory academic progress (SAP)
  •  Have a positive, verifiable credit history—or a cosigner with a strong credit history

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

Some lenders may also require that you are an existing customer or a member of their lending institution.

It’s worth noting that most lenders today do not charge an origination or disbursement fee (hooray!). Eligibility, fees, and interest rates vary from lender to lender. Always read through the loan disclaimers, terms and conditions and qualification standards.

Interest Rates

MBA loans can carry a fixed or variable interest rate. Your lender may offer one or both types, and your creditworthiness will play a role in determining your Annual Percentage Rate (APR). Note that some lenders use the 1-month London Interbank Offered Rate (LIBOR) vs. the 3-month LIBOR plus a markup on which to base the APR. Others may use the Prime index plus a markup. Be sure to read the fine print when comparing your options for a better understanding of how your rate is calculated.

Below is an example of what you may expect to see when comparing APRs in today’s marketplace.

  Variable Rates Fixed Rates
 As low as 2.87% APR+  5.74% APR+
 As high as 12.49% APR 12.99% APR

+The rates advertised may require that you or your cosigner enroll in an auto debit discount program. Variable rates may increase after the loan has been approved and accepted (i.e., after consummation).

Information advertised valid as of 2/13/2017

Repayment Term

The length of repayment will depend on your loan balance but could be as long as 20 years following your in-school deferment and grace period.

Borrower Benefits

Repayment incentives vary by lender, but there are some standard types of benefits and incentives you may encounter. Take some time to learn about these programs so you can take advantage of the savings and unique perks that may be available to you.

No prepayment penalties – This is pretty standard across lenders, but worth verifying. Paying off your loan early—with no prepayment penalty—can save you a bundle.

Auto debit discount – This is also a pretty common incentive, and the savings are often between 0.25% and 0.50% cut from your interest rate when you have your payments automatically deducted from your bank account. Occasionally, the discount only applies if the account you are debiting from is with the same bank or lender, so read the fine print.

Existing customer discountSome lenders may offer a rate reduction (typically 0.25%) if you are an existing customer with a prior or qualifying account.

Cosigner release If it is important to you to have the ability to release a cosigner from your loan in the future, look for this option when reviewing loan programs. The lender will require anywhere from 12 monthly on-time payments to 48 monthly on-time payments to qualify. Expect your creditworthiness to be reevaluated at the time you request the cosigner release. Each lender has its own very specific requirements. You should be very careful you understand what the lender requires to get a cosigner release.

Deferment or forbearance options Lenders may offer member protections in the form of deferments or forbearances. If you run into a financial hardship, such as job loss or military deployment, your lender may grant you a temporary postponement of loan payments. This can help you avoid default and protect your credit while you get resituated. These options may come with time limits as well as numerous qualifiers.

Free FICO® Credit Scores This can be a great perk, especially if you are monitoring your credit for a cosigner release. Lenders who provide this perk typically do so on a quarterly basis.

Choice of repayment plan Your lender may offer you a choice up-front that could save you money, such as an interest only payment plan while you are in school that may provide a lower rate than the deferred payment option. Your lender may also give you a choice of how many years you would like to repay your loan, for example 7, 10, 12 or 15 years. Choosing your repayment plan can help ensure you are able to stay on top of your finances in a way that suits your circumstances. Keep in mind that the longer the term of your repayment plan, the more interest you will pay over the life of the loan.

In A Nutshell

Business school, like other graduate school programs, can be paid for in a variety of ways. Start with grant and scholarship opportunities prior to borrowing. If you still find you need to borrow for school, weigh all of your loan optionsboth federal and privateto find the option that is best for you.

Graduate School Loans