Do your career goals include working in marketing, accounting, or general management? Chances are you’ll want to earn your Master of Business Administration (MBA). But have you thought about how you’ll pay for business school?
Not only will you need to invest at least two years for your MBA studies, you’ll have to come up with as much as $61,000 per year for tuition at some of the top business schools in the country.
Business school is an expensive investment, especially when you consider that you need to pay for other expenses in addition to tuition — things like room and board, food, phone, and extras like vacation trips that are common with MBA students. Then there is the less obvious cost of lost earnings as you step out of the workforce for two years.
If you’re thinking of going to business school you might want to start by calculating the ROI of your degree.
For many people, obtaining an MBA can pay off in the long run. The median income for an MBA according to Earnest data is $115,000 four years out of school. Your income may be higher or lower depending on factors such as where you go to school, where you work, and economy growth, but there’s no doubt that an MBA can increase your earning potential.
How much does it cost to attend business school?
While it really varies by school, here are a few examples:
Massachusetts Institute of Technology (Sloan) estimates total yearly expenses to be $98,014. At the University of Miami School of Business, tuition and other expenses will cost you an estimated $67,052 per academic year. And if you attend Harvard Business School, be prepared to shell out a hefty $98,400 per year including room and board.
So how can you pay for business school? The answer is likely a combination of financial aid through loans and scholarships, and maybe even some of your own savings.
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Your first step in deciding how to pay for business school should involve going to your school’s financial aid office. You’ll find scholarship information and how to apply for other forms of financial aid. The Free Application for Student Aid (FAFSA) must be filled out and submitted in order to receive grants and/or loans. Once you’ve filled out the FAFSA and applied to the college of your choice, the school will often automatically consider you for grants.
Federal loans are offered through a college’s financial aid office, and repayment is usually expected to begin once six months have passed after graduation. Federal loan rates are determined by when they are issued and borrowers should check with the Department of Education for exact rates.
|Type of loan||Rates and costs (through 7/1/16)||Maximum borrowing per year|
|Federal Stafford Loan||Fixed 5.84%, with a loan fee of more than 1%. Interest accrues with loan origination.||$20,500|
|Graduate PLUS Loan||Fixed 6.84%, with a loan fee of more than 4%. Interest accrues with loan origination.||Amount up to the school’s Cost of Attendance minus the amount of all other financial aid you are receiving (including other loans).|
|Federal Perkins Loan||Fixed 5%; no loan fees. Interest accrues with the start of the repayment period.||$8,000|
Unlike federal loans, you can apply for private student loans through a lending company rather than your school’s financial aid office. For some financially responsible borrowers, private loans may offer rates that are more competitive than federal loans.
There are plenty of private loans available — and they can come in fixed or variable rates — but unlike federal loans, private loan rates are different for each lender and applicant. The rate you’ll receive on a private student loan will be determined by your credit history, and for some lenders, your employment, income, and savings.
Scholarships, fellowships, and grants
Many scholarships offered by business schools are based on merit, and recipients are chosen according to admissions applications and GMAT scores. As you consider the schools you want to attend, research the available scholarships they offer and guidelines for eligibility.
There are also scholarships that are specific to ethnicity such as the Stanford Reliance Dhirubhai MBA Fellowship Program, which provides a full scholarship for up to five Indian students who want to obtain an MBA at Stanford Graduate School of Business. African American and Hispanic MBA applicants can seek grants through the National Black MBA Association (NBMBAA) and National Society of Hispanic MBAs (NSHMBA), respectively. Minority grad students who pursue an MBA may also be eligible for a fellowship from the Robert Toigo Foundation, which provides an award of $2,500 per year paid directly to your business school tuition.
These above are just a few examples of the options that are available. Harvard Business School has a useful resource page with a variety of external funding options for those attending business school, whether at HBS or elsewhere.
Federal Work-Study Program
If you demonstrate financial need, you may be eligible to participate in the Federal Work-Study (FWS) Program, which gives part-time employment to graduate students. Not only can you use this income to pay for educational expenses for business school, you can also earn some money under the FWS Program. The type of work you are assigned is usually closely related to what you’re studying in business school.
For full-time degree programs, the employers offering this benefit tend to be corporate firms, including management consulting, financial services, or other multinational companies.
The quid pro quo for employees earning their MBA through the sponsorship of their employer is that they stay for a certain period of time (often two years) after earning the degree or pay back the tuition costs to their employer.
Alternatively, schools offering an executive-level business degree programs for mid-career students — also known as EMBA programs — can be attractive to employers who want to nurture leadership by promising employees.
Some companies that offer tuition assistance programs for employees who earn their MBA include Deloitte and PWC. You can also speak directly with your employer to see if this is something they would consider offering.
School loan forgiveness
A number of top MBA programs offer their own loan forgiveness programs for graduates who enter public service after graduating.
For example, Stanford GSB will pay a percentage of graduates’ loans while they are employed in nonprofit or public service positions. The Yale School of Management will support the repayment of annual need-based loans to a maximum of $10,100 per year for graduates working in public or nonprofit sectors. A number of other top schools also offer loan forgiveness programs for graduates entering public service, so it’s worth looking around.
MBA graduates with federal loans can also use one of the government’s income-based repayment programs, but these may be less flexible than individual school forgiveness programs.
Your loans after you finish business school
Keep in mind that if you have prior loans from an undergraduate/graduate program, it may be possible for you to defer those payments while you are obtaining your MBA. Contact your lenders to confirm the deferment process. Remember, your total debt will be determined by which types of loans you have taken out and through which lenders.
Once you’ve completed your MBA studies, your next goal will be to get your new career started. Once you have secured a position and have a job offer letter in hand, you may be able to refinance your student loans for a lower rate.