How to Pay for an MBA
Paying for an MBA can be expensive, but you have a number of ways to find the funds. You can work for an employer who contributes to your school costs or offers tuition reimbursement, use your savings, or look for scholarships, grants, and fellowships. You can also apply for federal financial aid or private student loans—but you should exhaust sources of free money first.
Obtaining a Master’s in Business Administration (MBA) can open up doors for you in your career and can help equip you with the tools necessary to succeed in business. Unfortunately, paying for an MBA or any graduate degree can be very expensive and is a challenge for many young professionals looking to further their education.
You’ll need to explore all of your options for how to pay for an MBA, including MBA loans or MBA scholarships. This guide can help you to understand the different sources of MBA funding so you can find the right one to meet your needs.
The Return on Investment for an MBA
If you’re thinking about earning an MBA degree, it’s important to know that you’ll likely need to spend a lot of money, even though an MBA is only a two-year program. In fact, according to MBA Today, most students will spend six figures to get their degree. The actual expenses students will pay vary by MBA program and different tuition fees, but for full-time programs, costs for the class of 2019 range from around $53,318 for in-state tuition to $155,528 at Wharton School.
If you’re going to pay a small fortune for business school, you’ll want to make sure it’s worthwhile by looking at the return on investment. According to the Princeton Review, the ROI you’ll receive on an MBA degree will depend on what school you attend as well as what job you take after graduation.
With a degree from the Stanford Graduate School of Business, for example, the average starting salary for MBA grads is $125,000 while students incur a total tuition cost of $119,000. The estimated 10-year ROI comes in at around 325%. With a degree from Carey School of Business at Arizona University, however, grads earn an average of $98,000, and the MBA program costs around $68,000. Students will get an annual ROI of close to 250%.
You may be able to save money by doing an online MBA program, but the MBA online b-school program needs to be one that’s reputable and accredited.
The data shows going to school to get your MBA can definitely be worth it—but make sure to have a plan for what you’ll do after graduation from business school to recoup the costs you incurred. If you use loans, you’ll also need to think reasonably about student loan repayment and how that will affect you for years after you earn your degree.
How to Finance an MBA
Even if it’s worth it to earn your MBA degree, you still need a plan to come up with thousands of dollars for tuition, room and board, living expenses, and other fees.
When you’re deciding how to pay for your MBA program, you should always exhaust sources of free money first. If you need to borrow, federal student loans from the U.S. Department of Education should typically be used up first due to borrower protections they provide. Finally, to supplement these sources of government loan funding, you may need to take on some private loans, but you should never borrow more than you need because you don’t want to get stuck with loan payments for decades after the grace period ends.
To help you decide what sources of funding to use, here’s an overview of all of these options.
One of the best ways to pay for an MBA is to save up the money for it. Most MBA programs like applicants to have worked for at least a few years so they have some practical experience before earning their master’s in business. While working, try to put aside as much money as possible if you know you’ll be continuing your schooling. The more you can save, the less you’ll need to borrow and pay interest on.
Free money can be even better than using up your savings on an MBA—if you can get it. Fortunately, there are plenty of ways to get others to help you pay to go to school.
One option is to work for an employer who will subsidize the costs of your schooling. There are some companies that pay for MBA degrees or at least help cover your expenses, provided getting a degree will enhance your job-related skills. You may need to make a commitment to work for the company for a certain time if they pay for your school, but doing so can be worth it.
You can also look for scholarships, grants, and fellowships for MBA programs. Schools offer both need-based and merit-based aid, so check with your school’s financial aid office. Depending on where you live, your state may also offer grants for school as well.
Companies, labor unions, professional organizations, churches, and groups you belong to also make scholarship funds available in many cases. For example, some scholarships available to help students pay for an MBA include:
- The FEMC Richard Metzler Scholarship, which provides up to $5,000 in funding for students who demonstrate a commitment to management consulting.
- The Government Finance Officers Association Scholarships for students who plan a career in government.
Online scholarship search tools and guides can make it easy to find money you don’t have to repay. You should start looking for scholarships and grants as early as possible when you’ve decided to go back to school for an MBA. You should also explore work-study programs that you may be eligible for. Apply for as many as you can so you can take full advantage of any and all sources of free money available to you.
Federal Financial Aid
Unfortunately, for most students, there’s not enough money from savings or free sources of aid to fully cover the cost of an MBA. This means it becomes necessary to take out student loans. Student loans can come from the federal government or from private lenders, but you should always exhaust federal student loans first because they offer many important borrower protections.
Federal student loans have fixed interest rates for all students, so you don’t have to shop around among lenders. You can qualify regardless of credit for certain federal loans, and you are eligible for programs such as income-based repayment or Public Service Loan Forgiveness which is similar to tuition reimbursement if you work in an eligible job.
Unfortunately, MBA students aren’t eligible for Subsidized Direct Loans, which are need-based and are reserved for undergrads. However, you can obtain Unsubsidized Direct Loans.
You can also apply for Graduate PLUS Loans through the federal government, but you can’t qualify if you have adverse credit. Grad PLUS loans aren’t alwayscheaper than private loans and don’t always offer a lower interest rate, so once you’ve exhausted your limit for Direct Loans, compare your options carefully to determine if federal or private student loan funding is right for you.
Private Student Loans
Private student loans aren’t subject to the same loan limits that Unsubsidized Direct Loans financial assistance programs are, and you typically don’t have to complete the FAFSA to apply for these. You can borrow up to the amount you need for school costs, so private loans may be necessary if you don’t have enough money from other sources. However, private loans for graduate students have less flexibility in terms of repayment plans and fewer protections. You may also need a cosigner for private loans.
Private student loans come from many lenders including banks and credit unions. These lenders vary in terms of qualifying requirements, the interest rate charged, length of time you have to repay your loan, and loan terms such as when you can pause payments in times of financial hardship and how much you must pay while still in school.
Since interest rates aren’t standardized when it comes to private loans for a business degree, shop carefully to find a lender offering you the most affordable rate. Be aware that loans could either be fixed rate or variable rate. With fixed-rate loans, your interest and payments don’t change the entire time you have the loan. With variable rate loans, your loan may start out at a lower rate than a fixed rate loan—but it’s tied to a financial index and can fluctuate, so there’s a chance your rate and payment will go higher.
Now you know all of your options to pay for an MBA program. Remember, MBA students shouldn’t take out more student loans for business school than necessary and should always look for free sources of financial aid when earning an MBA degree. The less you borrow, the easier it will be to become debt-free after graduation—and the sooner you can start using that big salary your MBA helps you to earn for other financial goals.
Author: Christy Rakoczy
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