Paying for MBA programs can be a challenge. Pell Grants and Federal Supplemental Educational Opportunity Grants (FSEOG) are no longer available to you, and if you took loans as an undergraduate you’re probably not enthusiastic about borrowing more money. But there are some options out there that can at least offset some of the cost of business school.
Here is some helpful financial aid advice for MBA applicants:
1. Try school-based grants and fellowships first. As always, the best kind of student assistance is the kind that you don’t have to pay back. Even though government grants are no longer available at the graduate level, there are many similar programs offered by educational institutions. Not all business schools have them, however; some provide generous grants with little or no effort required from students, while others offer nothing at all.
How to Pay for an MBA Program?
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Upon being admitted to business school, contact the financial aid office and see what grants and/or fellowships they offer. If money is available, it is generally given out to two groups: those who can demonstrate need, and those who apply first. Getting your application in early automatically puts you in one of those groups, and if you’re struggling financially (as many grad students are) that puts you in both. Receiving grants or fellowships generally makes paying for MBA programs much easier, so make every effort to submit your application early and show your school that you really do need the assistance.
2. Next, check into work-study programs. If you’re attending business school full time, working can be difficult. But most institutions do offer work-study programs, which generally provide on-campus jobs with a limited workload (often 15 hours per week). This can be enough to help with living expenses, books and other costs without seriously interfering with your studies.
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3. If you have exceptional financial need, a Perkins Loan is your next step. Your financial aid office can help you determine if you qualify. If you do – and you need financial assistance beyond what grants, fellowships and work study can provide – then a Perkins Loan is an excellent option. The interest is very low (5% as of the 2011-2012 academic year) and does not accrue while you’re in school, there are no fees and you have nine months after graduation to start repaying.
4. If you don’t qualify for a Perkins Loan, Federal Direct Loans (Stafford Loans) are an acceptable option. MBA students can take up to $20,500 per year in Federal Direct Loans, at an interest rate of 6.8% (as of the 2011-2012 academic year). If you qualify – and the requirements are not as stringent as for Perkins Loans – the government will subsidize up to $8,500 of this amount. However, this is only true through July 1st 2012; after that date, Federal Direct Loans will no longer have a subsidized portion for graduate students.
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If some or all of your Stafford Loans are unsubsidized, you will either have to start paying the interest while you’re in school or have it added to the amount you owe (this is called “capitalizing” the interest). Obviously this a less-than-ideal way to pay for your MBA, but even unsubsidized Stafford Loans are usually better than private loans.
5. Take private loans only as a last resort. All private lenders are different, but they generally do not offer the favorable terms that federal student loans do. They almost always require a credit check and tend to have higher interest rates. Private lenders also usually require you to start paying interest while you’re still in school.
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If you do have to take a private loan, do a lot of comparison shopping. At certain times, some lenders will offer to waive the origination fee or lower interest rates to attract borrowers. As with any loan you take, take the time to carefully examine the terms before you sign.