If you’re considering going to school for your MBA, paying for it can be one of the biggest obstacles. The average borrower will walk away with $42,000 in combined undergraduate and graduate student loans when they finish their programs.
When it comes to student loans for MBA programs, you have multiple options. Depending on your needs, you may stick with federal loans, but private lenders with MBA loans designed specifically for your needs can be attractive, as well.
Find out about different MBA loans below and learn what factors you should keep in mind as you compare options.
Interest rates for MBA student loans
Federal loans generally have lower interest rates, so for many people, getting a federal loan is the cheaper option. However, if you have excellent credit, a private lender may approve you for a low interest rate, which can save you money in the long run.
If you take out a federal loan for your MBA program, you will receive either Direct Unsubsidized Loans or Direct PLUS Loans.
A Direct Unsubsidized Loan has a current interest rate of 5.31%. Because it is unsubsidized, the loan builds interest, even while you’re in school. A Direct PLUS Loan has a current interest rate of 6.31%
If you opt to go with a Citizen’s Bank MBA loan, you can choose between a variable and fixed interest rate. While a variable interest rate is often lower at first, it can fluctuate and rise with the market.
Right now, Citizen’s Bank variable interest rates range from 3.51% to 9.26%, depending on what payment plan you choose. The fixed loan interest rates range from 5.10% to 10.60%.
Finally, College Ave also offers fixed and variable interest rates. If you opt for a variable rate and sign up for the autopay discount, your starting interest rate could be anywhere from 3.94% to 8.78%. If you instead sign up for a fixed-rate loan, your interest rate would range from 6.73% to 11.35%.
MBA student loan origination fees
If you take out Direct Unsubsidized or Direct PLUS Loans, there are some fees associated with your loans. The government takes out the fee before they disburse your loan, so the amount you receive is slightly less than the loan you take out.
If you take out a Direct Unsubsidized Loan, the government will charge you a loan fee of 1.069%. If you take out a Direct PLUS Loan, your fee will be 4.276%.
Private loans tend to work very differently. Most private lenders do not charge application, disbursement, or origination fees. In fact, Citizen’s Bank says that borrowers save $925 on average in fees.
Refinancing options for MBA loans
There is one downside to federal loans: If interest rates go down, you cannot refinance your loans through the federal program. In that instance, you must refinance through a private lender instead.
With private MBA loans, you can refinance them to a lower interest rate as the market and your credit improves. By refinancing, you could save hundreds or even thousands of dollars over the length of your repayment term.
Federal loans offer unique benefits when it comes to repayment — benefits that can make managing your debt much simpler.
First, you do not need to start making payments on your federal loans until you graduate from school. With private loans, you may be required to make payments right away, which can be a lot of pressure while you are trying to get your MBA.
If, after graduation, you lose your job, you can defer your federal loans or ask your loan servicer to put you on forbearance. That means you can stop making payments without going into default. With private loans, you typically do not have this option.
If your income is relatively small after you graduate, your federal loans may be eligible for an income-driven repayment plan (IDR). Under an IDR plan, your payments are capped at a percentage of your income and can be as low as zero.
With private loans, IDR plans are not available and you have to keep up with your payments, even if you have a small income.
Finally, in the case of death or total disability, your loan servicer will discharge your federal student loans. For private loans, that may not be the case. And because many private loans require a cosigner, that means a loved one can end up making payments on a loan even after the borrower has passed away.
Choosing between federal and private student loans for your MBA
In most cases, it makes sense to take out as many federal loans as you are eligible for before turning to private student loans to pay for the rest of your education.
Federal loans typically have lower interest rates and more generous repayment terms. However, some borrowers with excellent credit and steady incomes may benefit from going through a private lender.
For more information on managing graduate school loans, check out the ultimate student loan repayment guide for MBA grads.
Need a student loan?Here are our top student loan lenders of 2019!
|2 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 4/1/2019. Variable interest rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
4 Important Disclosures for Discover.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.07% – 11.32%2||Undergraduate, Graduate, and Parents|
|4.50% – 11.35%*,3||Undergraduate and Graduate|
|4.84% – 13.49%4||Undergraduate and Graduate|
|4.25% – 11.30%5||Undergraduate and Graduate|
|4.50% – 9.47%6||Undergraduate and Graduate|
|3.74% – 9.72%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.32%8||Undergraduate, Graduate, and Parents|