How to Pay for an MBA: What to Know
- February 20, 2017
- Posted by: Jeff Gitlen
- Category: Student Loans
A common stepping stone most future corporate leaders take is earning an MBA. As the cost of an MBA can range anywhere from $10,000 to $90,000, degree candidates are constantly looking for strategies and tips to pay for an MBA. Thankfully, paying for business school is very similar to the undergraduate process.
Apply for Merit-Based Financial AidMost aid programs are often needs-based, this is no different for MBA candidates. However, it is possible to earn merit scholarships as well. The best place to start looking is the individual school and their financial aid office as they often maintain a database of available scholarships.
Apply for Needs-Based Financial Aid
One should also consider applying for private scholarships awarded to students with financial need. The best option to qualify for needs-based aid is to submit the FAFSA as federal loans and grants can be applied for an MBA. High-demand career fields will receive the highest amounts of aid, but will require an employment commitment after graduation.
Graduate students can currently borrow up to $20,500 in unsubsidized student loans with an interest rate of 5.31%. Depending on the cost of the MBA program, private MBA loans might also be required with variable rates starting at 3.74% and fixed rates at 6.24%.
Loan Forgiveness Programs
Because an MBA can be really expensive and some career fields have low salaries, MBA graduates that work for an eligible non-profit or a local, state, or federal government agency can have their loan debt forgiven after ten years of payments through the Public Service Loan Forgiveness program. Only federal loans can be forgiven in this program.
Some schools might also offer work-study positions to help students pay for college while enrolled in classes. These employment positions are limited and are available either on-campus or at off-campus organizations that benefit a public interest. Graduate students will either be paid on an hourly or salary basis, depending on the employer and type of work.
Apply for MBA Aid Early
The early bird truly does get the worm when it comes to receiving MBA financial aid. Business schools will distribute aid on a first-come, first-served basis. Even if you do not intend to apply for a federal student loan, they might require you to submit the FAFSA to help determine if you qualify for private aid. Those waiting to file for admission and financial assistance at the end of the application window will be less likely to qualify for any remaining aid or scholarships.
Employer Tuition ReimbursementFor those currently employed and returning to school to earn an MBA, their employer might also offer tuition reimbursement assistance to help offset the costs of a continuing education. Each employer has different reimbursement rates, but any assistance is better than nothing at all. As most employers seek a “return on investment,” they might require a work commitment after completing the degree program. Breaking the agreement by switching employers can result in having to repay a portion of the tuition assistance.
Use a 529 College Savings Plan
While most people only use 529 plans to pay for undergraduate degrees, these same tax-advantaged plans can also be used to pay for an MBA. This can be a great strategy for those that still have money remaining from their undergraduate years or looking for a way to save for business school with a lower tax burden.
Reduce Personal Spending
Many families plan to borrow to pay for a bachelor’s degree, but do not want to borrow the additional money required to earn a graduate degree. The easiest way for future MBA students to set aside money for business school is to reduce personal expenses and put that money in a separate savings account dedicated to paying for an MBA. Places to start include canceling cable TV subscriptions and taking lunch to work instead of going to a restaurant each day.
This means making and sticking to a budget. Following the 50/20/30 budgeting rule can be a great place to start saving for an MBA and living within your means. Even if you cannot save for the entire cost, trying to save for the cost difference between federal borrowing limits ($20,500) and the total tuition cost can be a good goal.
Know Your Spending Limit
One final tip to help pay for an MBA is to know the maximum amount you are willing to spend. While business schools like Columbia, Stanford, and Harvard have high name recognition, they are also some of the most expensive. There are many advantages to attending the best business schools, but an MBA from lesser-known accredited institutions has the same validity as an MBA from these schools.
Knowing your projected income will help you determine how to enroll in the best degree program for your budget.
Author: Jeff Gitlen
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