Admissions Tip: Thinking About Financing
Though many business school applicants know exactly what they want to do—and how much they hope to make—after they graduate from an MBA program, a surprising number apply to school without thinking about how they’ll pay for this expensive degree. While some students do foot the entire bill themselves or receive scholarship support from the school or an outside institution, the vast majority of MBA students borrow funds to cover their tuition and living expenses. With this in mind, we wanted to cover some very basic information on loans for the benefit of both recent admits entering school this fall and early birds just beginning to think about their applications for Fall 2014.
The primary source of funding for U.S.-based applicants will be federal loans or alternative education loans. The main federal loans, available to U.S. citizens or permanent residents, are the Direct Unsubsidized Loans, the Direct PLUS Loan and the Federal Perkins Loan. Full-time students, usually those enrolled in two or more courses per semester, can borrow as much as $20,500/year through the Direct Unsubsidized Loan program. The Direct PLUS Loan can be used to pay for the total cost of attendance less any aid you’ve already been awarded. Meanwhile, the Federal Perkins Loan program is school-based program for students with exceptional financial needs. Perkins Loans are low-interest, a rate of 5 percent, with a maximum annual loan amount of $8,000/year for graduate students or $60,000 in total. Those interested in applying for federal student aid should check out the Free Application for Federal Student Aid (FAFSA). When federal loans are not enough, private loans can help bridge the gap in education costs. Students might contact their local bank or look into lender programs, such as SallieMae or Access Group, for details on borrowing eligibility.
International students are not eligible for federal loans but may consider private loans as a financing option. InternationalStudentLoan.com, for instance, offers a credit-based loan to international students who are looking to finance their education in the U.S. However, as with most private loans, this loan requires a U.S. citizen or permanent resident to co-sign. International students can also visit International Education Financial Aid (IEFA) to search for funds, as can U.S. citizens planning on studying overseas. Finally, most of the leading MBA programs offer private loans to their students in partnership with a particular financial institution—some of which do not require a co-signer—so this might become an option after one is admitted.
Typical timelines of loan repayment can extend up to 25 years, depending on the lender’s conditions of deferral and the amount of funds borrowed. After graduation, students usually have a six-month grace period before monthly repayment begins. While schools’ admittance packages usually include detailed information about financing the MBA, incoming students and applicants should not hesitate contact the school’s financial aid office for further information on available need- or credit-based loans.