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Loan Changes Could Mean Extra Costs for MBA Degree Seekers
By Catherine Groux
Posted July 23, 2012 12:52 PM
Graduate students will have to pay more interest on their loans after July 1.As of July 1, graduate students can no longer take advantage of subsidized Stafford Loans, which do not accrue interest until after they have earned a degree. Although individuals who already have subsidized Stafford Loans will not be affected, the newest class of master's degree seekers will be responsible for paying the interest that accrues at a rate of 6.8% during the time it takes them to graduate.
Given the changes, graduate students who borrow $8,500 a year while earning a two-year degree will have to pay an additional $1,773 in interest, Bloomberg BusinessWeek reports.
David Moss, the interim director of financial aid at the University of Virginia's Darden School of Business, said graduate students will also be hurt by loan origination fees for Stafford and Federal Plus loans. Before the July 1 deadline, master's degree seekers were charged a 0.5% loan origination fee on the borrowed amount if they paid their first 12 monthly payments on time and an additional 0.5% fee if they missed any payments. Now, students will be charged a 1% origination fee for Stafford Loans.
While many professionals do not feel these loan increases will discourage individuals from earning a master's degree, Christopher Chapman, president and chief executive of Access Group, told BusinessWeek that the rules will certainly put extra stress on students, particularly those in search of a Master of Business Administration (MBA).
"I don’t know whether that will [affect] a person’s decision to go and get an MBA, but it certainly adds to their debt burden," Chapman said. "It is a meaningful increase in debt to what is already a fairly highly debt load coming out of an MBA program for most people."
