MBA Financial Aid
Most MBA students receive some kind of financial aid for their education. In the 2007-2008 academic year, the U.S. Department of Education reported that 85% of full-time masters students received some kind of financial aid, whether as loans, grants or scholarships.
FINANCIAL AID FOR ONLINE INSTITUTIONS
If you enroll in an MBA program offered by a school accredited by 1 of the 6 regional accrediting agencies that are approved by the U.S. Department of Education, you will be eligible to receive federal financial aid. This is true for fully online schools, brick-and-mortar schools that offer online and hybrid programs and traditional brick-and-mortar schools.
INSTITUTIONAL FINANCIAL AID
Institutional financial aid is aid that is offered by a particular school or department to their students. Some schools have more funds than others, but most of these funds are available through merit-based scholarships. If you want to apply for institutional financial aid, check with the schools that you are applying to and review their eligibility requirements. Conditions for institutional financial aid often include a minimum GPA, a financial need statement and enrolled for a certain number of academic hours each term.
SCHOLARSHIPS AND GRANTS
Scholarships and grants are 2 forms of financial aid that you do not have to repay after you graduate from school. Grants are usually offered to students who show financial need and have strong academic records.
Scholarships are usually awarded to students by schools, departments and independent organizations. In general, your eligibility for a scholarship will be determined by requirements that are set by the institution or organization that awards it. In many cases, these requirements typically include academic achievement, extracurricular talents or interests, ethnic background or membership in certain organizations. You can research scholarship opportunities through the U.S. Department of Education’s free scholarship search database.
There are few scholarships available for professional degrees like the MBA. This is typically because most professional degrees prepare you for relatively high-earning jobs that will allow you to quickly repay your student loans after you graduate.
FELLOWSHIPS AND ASSISTANTSHIPS
Fellowships and assistantships are typically reserved for graduate students. Although it is possible for an online student to win a fellowship, it is highly uncommon for an online student to receive a research or teaching assistantship since these positional almost always require the recipient to work on campus.
If you are enrolled in an online MBA program, there are several fellowships that you can apply to. Some are available from private organizations while others are offered by individual business schools. For example, women who are enrolled in full-time, part-time and executive MBA programs at participating schools may apply for a fellowship from the Forte Foundation. And Harvard Business School offers the Horace W. Goldsmith Fellowship to students who are interested in using their MBA to work in the nonprofit sector.
WORK STUDY
Work study is a form of federal financial aid that places students in jobs so that they can earn money and pay their tuition. Work study positions are usually on campus, but that can also be available with local businesses that volunteer to participate in the program. Not every school offers work study, so if you are interested in this opportunity, check with the schools where you are applying to see if they participate.
STUDENT LOANS
Education loans are the most common form of financial aid that students use to pay for part or all of their MBA programs. You can borrow from the federal government or from private lending institutions such as banks or credit unions.
FEDERAL EDUCATION LOANS
Federal education loans are available to help you pay for your tuition, living costs, books and other school supplies. When you borrow from the federal government to fund your education, you receive advantages and protections like low fixed interest rates, several repayment options and the possibility of deferral or consolidation.
The Direct Loan Program administers student loans through schools instead of through banks. This means that you will receive your loan directly from your school. As a graduate student, you can borrow up to $20,500 per academic year from the federal government.
Direct Stafford Loans
If you are a graduate student, you are automatically eligible for a Direct Stafford Loan. These loans do not require a credit check and are often included in a school’s financial aid package. Beginning in July, 2012, all Direct Stafford Loans will be unsubsidized. This means that you are responsible for the interest that accrues while you are in school.
PLUS Loans
PLUS Loans are available to MBA students but require a credit check. If you take out a PLUS Loan, you are expected to begin repaying the loan after the last disbursement of funds. However, it is possible to defer your first payment until you are finished with school or are enrolled less than half time.
PRIVATE EDUCATION LOANS
You may take out education loans from private lenders, but these loans do not have the same advantages as federal education loans. In most cases, you will have to undergo a credit check and will be subject to fluctuating interest rates and strict repayment plans.
LOAN REPAYMENT
When you graduate from your MBA program, you must begin to repay your education loans. Most students are given a grace period of 6 to 9 months to find a job or enroll in another academic program. Although there are several repayment options available, your loan type may limit which repayment plan you can choose.
FEDERAL EDUCATION LOANS – REPAYMENT OPTIONS
If you choose to borrow from the federal government, you may have several repayment options to choose from. These plans range from 10 years to 25 years.
Standard Repayment Plan
The standard repayment plan gives you up to 10 years to repay your loan. Your monthly payment is fixed and will not be less than $50. With the shorter repayment period, your monthly payments will be higher than with other repayment plans. However, because the money is paid back in a short amount of time, the amount of interest that you have to pay will also be lower.
Graduated Repayment Plan
If you choose the graduated repayment plan, your monthly payments will increase every 2 years. Although your payments increase, no 1 payment will be more than 3 times the amount of another single payment. If you think that your salary will increase over time, this repayment plan might be right for you.
Extended Repayment Plan
With the extended repayment plan, you will pay a yearly fixed or graduated amount for up to 25 years. With this plan you will have lower monthly payments, but the total amount that you pay will be higher due to the higher amount of interest that will accrue. In order to be eligible for the extended repayment plan, you must have borrowed through the Direct Loan Program and the total amount borrowed must exceed $30,000.
Income-Based Repayment (IBR) and Income Contingent Repayment (ICR) Plans
The income based repayment (IBR) plan adjusts your monthly payment amount according to your income and family situation. You are eligible for this repayment plan if your monthly payments under the IBR are less than your monthly payments would be under the standard repayment plan. If you enroll in the IBR plan, make payments for 25 years and meet other criteria, you might be eligible to have the remainder of your loan forgiven.
With the income contingent repayment (ICR) plan, you must have received your education loans through the Direct Loan Program. Your monthly payments are established based on your adjusted gross income, the amount borrowed and your family’s financial situation and size. If you are married, your spouse’s income is included in the adjusted gross income. If you choose the ICR plan, your monthly payment amount will not exceed 20% of your family’s discretionary income.
PRIVATE EDUCATION LOANS – REPAYMENT OPTIONS
Private education loans have limited repayment options, and you are subject to the conditions set by the institution from which you borrowed the money. These often include variable interest rates that can significantly increase your monthly payments.
LOAN CONSOLIDATION
Loan consolidation is the combination of multiple education loans into 1 loan with just 1 monthly payment. In general, the federal education loans that are eligible for consolidation can only be consolidated under another federal loan program. With loan consolidation, you may have lower monthly payments, but the total cost of your loan will rise because of the extended repayment plan that comes with consolidation.
Although private education loans might be consolidated with a bank, they will not have the same benefits as a federal loan consolidation. Before you agree to a private loan consolidation, be sure to read through the agreement and know exactly what you are agreeing to.
LOAN DEFERMENT
You may defer, or put off, your federal education loans if you decide to pursue more education, are called to military service or experience financial hardship. While a loan deferment means that you will not have to make monthly payments for a specific period of time, your loans will continue to accrue interest during your deferment period.