How To Finance Your MBA?
Getting your MBA is a huge step forward for both your education and your career. As the job market is becoming more and more competitive, any advantage you can bring to a job interview can be the difference between a congratulations handshake and a rejection email.
If you’re looking for a way to finance your upcoming MBA education, it can seem like a daunting task. Admissions are the first hurdle; figuring out an economic plan for your education is the next. Luckily, there are a lot of options that can make the financial aspect of furthering your education an easier pill to swallow. Whether you receive grants, scholarships, or fund your MBA through loans, you do have some options.
How Much Does an MBA Really Mean to Your Career?
In general, the more education you have, the more money you can expect to make in your lifetime. That’s a (more or less) fact of life that has been drilled into recent generations of students since before they finished high school. While there’s no such thing as absolutes, the numbers support this idea. According to some recent studies, a person with an MBA can see an increase of around $45,000 in starting salary over someone that does not have an MBA.
An MBA doesn’t just mean you’ll start off your career in a better position than if you didn’t have it, either. Some recent studies have shown that MBA Fifth-Year pay (salary plus bonuses received in fifth year since MBA graduation) increased 80% from candidates starting salaries. In short, whether you’re going for your MBA in business or marketing, your graduate school experience should mean quite a bit to your own personal bottom line.
The Cost of an MBA
Just like your undergraduate tuition costs, your MBA education costs will differ depending on what kind of program you get accepted into. On average, a two-year MBA program will probably run you around $60,000, but some of the top programs can exceed $100,000 in tuition. With these numbers, it’s obvious that you won’t be able to pay it off with pocket change, which is the reason having a good financial plan is so vital, even at the early stages of the process.
Applying For Financial Aid and Scholarships
Provided you are eligible, financial aid and scholarships are great ways to get some money for school that does not require repayment. While financial aid is usually tied to economic standing, scholarships (as well as fellowships) are usually tied to academic achievement as well as other factors. Most MBA programs will have resources on their website that will allow you to research what you have at your disposal. It’s a good idea to exhaust this option as best you can; you won’t be able to find a loan that you won’t have to pay back.
Going the Loan Route
For most, it’s unlikely they will go their entire MBA education without taking on some sort of loan. While taking on debt isn’t exactly something anyone loves to do, an MBA education is an investment, so it should not be looked at as a deterrent, provided you could afford it. Generally, there are two types of loans: federal and private, and knowing the difference between the two is a very important aspect to understand.
As the name implies, a federal loan is a student loan that is provided to you by the United States Department of Education, while a private loan is given to you by a private loan company, like SallieMae. Federal loans are usually a preferred loan, but it’s not uncommon for students to take on both federal loans and private loans in order to fund their education. Federal loans have a few advantages, including a fixed interest rate and income-driven repayment plans. Not all federal loans are born equally, though, so it’s important to understand which federal loan you are taking out and what that means for your repayment plan.
When we talk about different federal loans, we are talking about the difference in subsidized and unsubsidized loans. Subsidized student loans do not accrue interest during your enrollment while unsubsidized will, though you will not be expected to pay either until after you graduate. There are also PLUS loans, which are a little different, but are uncommon. These have a fixed interest rate of 7.21% and have no cap on how much you can borrow.
In comparison, private loans do carry some benefits over federal loans. Recently, the interest rates of federal loans have doubled to a fixed rate of over 6%. While you can find private loans that can exceed that interest rate, you may also be able to find some that have a lower rate. However, these interest rates are not fixed like federal loans, and can change throughout the life of the loan. But the most important benefit of getting a private loan is that they do not come with a cap. You can fund your entire education with private loans, while federal loans have a maximum amount of money you can borrow, which varies from loan to loan.
Understanding the options available to you in order to fund your MBA is an important step in the process. Research the differences between each and determine how much you can afford from each. An MBA is a worthy investment and can help you out in your career down the road.