For many students pursuing an advanced business degree, MBA student loans are a necessity. While business school can be demanding, financing your MBA doesn’t have to be. There are plenty of student loan options available for professional programs. Here’s what you need to know.
Loans for Business School
Using loans for business school is a popular way to finance your MBA. However, student loans should supplement scholarships, Federal Work Study (for those with demonstrated financial need), and employer tuition reimbursement (if applicable). You’ll definitely want to compare federal loan options, but if you still have a void in your financial aid picture, you may need an MBA Loan.
MBA Student Loan Rates
The interest rates for MBA loans can be highly competitive. Federal student loans rates for business school start at 7.94% for unsubsidized student loans and 8.94% for Grad PLUS Loans. Private student loans offer competitive rates often with no origination fees. Current rates range from 5.09% to 14.50%.
The rate you qualify for will depend on your creditworthiness and/or that of your cosigner, as well as whether you opt for a fixed or variable interest rate MBA loan.
Best MBA Student Loans
It is always best practice for MBA students to exhaust federal loans first, as they come with certain benefits and protections (such as lengthy deferment and forbearance terms, and various repayment options) that you will not find with private student loans. However, private student loans may offer more competitive interest rates, save you money on fees, and may allow you to borrow enough to cover your financial gap. Here are our top picks for private student loans for business school.
We work with the top lenders that offer options for MBA Students.
MBA Loans for International Students
Getting an MBA loan as an international student studying in the U.S. may be challenging. But there are some lenders that offer assistance. You can start your search with one of the lenders above. Or you can check with your financial aid office about additional options. To qualify for a loan, you will need a creditworthy cosigner who is a U.S. citizen or U.S. permanent resident. And you will need to be prepared to show additional documentation such as passport, visa, national ID, ISIC, etc.
Borrower Benefits
The following benefits may be included in your MBA student loan:
No Prepayment Penalties
This is standard across the board but always reassuring. If you come into a windfall or just work really hard to earn extra cash to pay down your student loan debt, there is no penalty for early repayment.
Auto-Debit Discount
The auto-pay discount is also a pretty common incentive, shaving between 0.25% and 0.50% off your interest rate by authorizing your student loan payments to be automatically deducted from your bank account. Before you enroll in auto-pay, be sure to check account requirements. Some lenders require you use an account from their financial institution for automatic payments rather than an account of your choice.
Existing Customer Discount
Some lenders offer an interest rate reduction (typically 0.25%) if you are an existing customer with a prior or qualifying account.
Cosigner Release
When evaluating loan products, prioritize the option to release a cosigner from your MBA loan in the future. Lenders typically require 12 to 48 on-time monthly payments for qualification. Additionally, your creditworthiness will be reassessed when requesting cosigner release to ensure you can manage the payments independently. Remember to carefully review the fine print, as each lender establishes their own terms for cosigner release.
Deferment and Forbearance Options
Lenders may provide member protections through deferments or forbearances. For instance, if you encounter financial hardships or unusual circumstances like a job layoff or military deployment, your lender may offer a temporary option to postpone loan payments. This allows you to regain stability, prevent delinquency or default, and safeguard your credit score. Keep in mind, the availability and eligibility for deferment or forbearance may have limitations.
Free FICO® Credit Scores
Periodic free credit scores may be provided by certain lenders, typically on a quarterly basis. Along with furnishing your actual credit score, you may be given information about the primary factors impacting your score and tips or best strategies to monitor and handle your credit in the future.
Choice of Repayment Plan
This comes in two stages. First, your lender may offer choices up front that could save you money. An example would be an interest-only payment plan while you’re in school that could provide a lower rate than a deferred repayment option. Second, you may find that some of today’s lenders give you the choice of how many years you’d like to repay your loan. For example, you could choose 8, 10, 12 or 15 years. Keep in mind that there are no prepayment penalties. A choose-your-own repayment plan could help ensure your payments are structured in a way that keeps you on top of your finances according to your financial circumstances and desired schedule, especially if you choose an auto debit payment method.
Federal Student Loans for MBA
Keep in mind federal loan options like the Direct Unsubsidized Loan, can also be used to finance your education. The option to borrow federal loans is presented to you in your financial aid award letter from your school. Federal loans are known to have a number of deferment and loan repayment options associated with them.
Graduate students can borrow up to $20,500 per year in the Direct Unsubsidized Loan program. However, note that in today’s marketplace private lenders may offer rates that are lower than some federal student loans. Since the government does not cover the interest on Direct Unsubsidized Loans, this means you will be responsible for repaying interest as it accrues from the day it is disbursed.
Part-Time MBA Student Loans
Part-time students as well as full-time students may be eligible to borrow MBA loans provided they meet the following criteria:
- 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 (as well as meet all other lender criteria)
*Some lenders will accept applications for MBA student loans from foreign borrowers applying with a creditworthy cosigner. The cosigner needs to be a U.S. citizen or permanent resident.
MBA Student Loan Limits
The minimum MBA loan amount you may be eligible to borrow is usually $1,000 but you will want to check with your lender.
The maximum amount you can borrow equal to your certified cost of attendance, minus other financial aid, as certified by your school.
MBA Student Loan Repayment
The length of your student loan repayment term will depend on your loan balance but could be as long as 20 years following your in-school deferment and grace period. Your lender may offer different repayment options while you’re enrolled in school, like immediate repayment, interest-only payments, or deferred payments. You will remain in the grace period until your enrollment status changes to less than half time, you leave school, or graduate. Payment typically begin six months after the grace period ends. Your lender may allow you to choose your repayment term. The longer your repayment term, the more affordable your monthly payments will be, but on the flip side, the more you will repay in total. How much more will depend on the interest rate on your loan and length of your repayment term.
If you’re looking to simplify your MBA student loan payments, or lower your interest rate, you may want to consider student loan refinancing. Some of the benefits of refinancing may include:
- Lowering your monthly payment amount
- Lowering your interest rate
- Decreasing how much you pay over the life of your loan
Which MBA Student Loan is Right for You?
The best MBA student loan for you will depend on your financial situation and educational funding gap. Generally, it’s best to start by exploring your federal student loan options before considering a private student loan.
When it comes to federal MBA student loans, direct unsubsidized loans are a top option. These loans often come with low interest rates, income-driven repayment options, and qualify for loan forgiveness in some circumstances. While you will have to pay the accrued interest eventually, you can choose not to pay interest while you’re enrolled at least half time and during the loan’s grace period.
These loans don’t require a credit check or have any income requirements, but they do have an origination fee that averages just over 1%. There are also loan limits that affect how much you can borrow with federal direct unsubsidized loans. For those enrolled in an MBA program, that’s $20,500 per year, and $138,500 total.
To qualify for federal direct unsubsidized, you must be enrolled at least half-time. Unfortunately, international students do not qualify for federal direct unsubsidized loans if they are not otherwise eligible for federal student aid. If you are an international student and ineligible for federal student aid, you may want to explore your private student loan options.
What to Look for in a Private Student Loan
When considering a private MBA loan, it’s vital to review the terms and conditions carefully for the qualification requirements. You also want to note the repayment options and any borrower benefits (like, postponement and discharge options).
Consider Your Loan Eligibility
The first thing you want to look for is, of course, loans that you qualify for. Factors that may affect your eligibility for most private MBA student loans include:
- School eligibility: Depending on your school, your loan options may be limited to lenders that are willing to work with student attending your school. Most private lenders allow any major accredited university, but some only approve loans for specified schools or degree programs.
- Credit history: All private MBA loans require a credit check. While many private lenders only require borrowers to have a minimum credit score of about 670, you will get a lower interest rate with a credit score above 700. Borrowers in the excellent credit score range (above 800) typically get the best rates and loan terms. If you are unable to qualify on your own, you can apply with a creditworthy cosigner.
- Income: Like with most loans, you will need to demonstrate proof of income by demonstrating at least two-years of work history. If you haven’t been able to earn income while enrolled in school, you do have the option to apply with a cosigner to help you qualify for a loan.
- Debt-to-income ratio: If you have high debt in relation to your income, your student loan lender may think you are a high-risk borrower.
Avoid Predatory Lending and Scams: Find the Right MBA Loan Lender
After you’ve narrowed down your MBA loan options to those you qualify for, the next step is to rule out poor lenders. While predatory lending is less common with student loans, it does happen. Watch out for these warning signs:
- Lack of transparency: Your lender should be transparent regarding loan terms. If information is unclear, such as whether the loan has a fixed or variable interest rate, stay away.
- Lax lending requirements: Most reputable lenders won’t approve borrowers with a credit score under 670, adverse credit history, or no income. If you are not asked for a credit check, the lending requirements seem lax, or you are offered more than your cost of attendance, you may be dealing with a student loan scam.
- High interest rates: An interest rate above 14% is unusual for an MBA loan. If a lender is offering a rate above that, note the red flag. Start reviewing other terms and conditions on the loan, you may notice other odd features of the loan to confirm your suspicions.
- Abnormal fees: A reputable MBA loan provider will only include principal and interest in your loan amount. If there are any other unnecessary costs rolled into the loan, that’s a red flag. Loans with high late fees, prepayment penalties, or other unusual loan terms should be approached with caution.
- Asset-secured loans: You should never be asked to use your house, car, or other high-value assets as collateral for a student loan. Student loans are unsecured debt, and collateral is not required.
If you are ever concerned the student loan you are reviewing is a scam, start doing some research. Try to research the loan and look for student loan reviews. If you feel like you have encountered a student loan scam, or are a victim of a student loan scam, it’s important your report the fraudulent activity to the FTC
Look for the Best Interest Rate and Loan Terms
Remember to pay attention to other factors that may affect the total cost of the loan, such as interest rates and origination fees. In addition, look for factors that may reduce your total loan cost as well, like an interest rate discount for setting up automatic payments. Repayment options are another important aspect to consider. Flexible repayment options can make all the difference if you find yourself struggling to make your monthly payments in the future.
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