How an MBA Loan Differs from Other Types of Student Loans

An MBA loan will allow you to finance your graduate business degree in a similar manner to the way undergraduate student loans finance undergraduate degrees. While both MBA loans and other student loans are similar in nature, there are key difference with MBA loans that mean you should specifically seek and MBA loan if you are looking to get your MBA. 

Nature of the Degree

MBA degrees typically take one to two years to complete depending on the workload you elect. Other student loans are based on a 4-year life cycle. Some law school or PhD loans are even longer. Even though the MBA loan will likely only be used to finance a short period of school, the cost per credit for your MBA degree will be much higher than an undergraduate degree. This means an MBA can cost as much as or more than an undergraduate loan despite the short time line. You will amass a high amount of debt in a very short time frame. 

Cost of Living

Most undergraduate student loans, particularly federal student loans, do not account for cost of living. MBA students have usually been working for a number of years before pursuing the advanced degree. This means they will often have other expenses, such as auto loans, that they need to continue paying. Additionally, graduate students do not typically have on-campus living options. This makes housing much more expensive for graduates. If you are seeking a private student loan to pay for your MBA, be sure to seek a loan large enough to cover your living expenses while you attend school.

Immediate Return on Investment

Once you achieve your MBA, lenders will expect you to be immediately employed. While there are typically "grace periods" with undergraduate debt, most MBA loans require immediate payments upon graduation. You may have the option to defer payments if there is something preventing you from working immediately upon receiving your degree. A workforce recession can prevent even qualified candidates from finding work. You should actively seek a deferment or financial hardship option for your MBA loan. It is also possible to structure your payment schedule as a portion of your income. Consider these flexible payment options so you do not have a huge bill the day you accept your diploma.

Working MBAs

Many schools now offer options for you to pursue your MBA while you maintain your employment. These programs usually occur at night, on weekends, or online. Many find the MBA is a strenuous program and difficult to complete while holding down a day job. However, working while you complete your program can reduce the amount of debt you have to incur. Unlike graduate degrees, MBA degrees are typically more flexible to accommodate for workforce and family requirements. Taking out a smaller loan and continuing to work while pursuing your MBA will save you large amounts of money over your lifetime. Your employer may also subsidize a portion of your MBA, further reducing the costs you put toward student loans.

 


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