One of the most consequential choices you’ll make regarding your postgraduate education is the method (or methods) by which you’ll fund your studies. Giving this decision due consideration can mean the difference between insurmountable debt and a minimal obligation you can repay easily, in a short amount of time. With that said, here’s what to keep in mind to ensure you’re choosing the right MBA student loan.
1. Borrow Only What You Absolutely Need
It can be easy to go overboard when people start offering what, at the time, feels like free money. However, as the old saying goes, “Pigs get fed, hogs get slaughtered.” Be careful to take no more than you absolutely need. Most lending institutions offer the ability to borrow an amount sufficient to cover tuition, fees, and materials — along with housing, food, and medical insurance.
It can be tempting to cover all of those costs in one fell swoop with a loan, but you’ll be better off in the long run if you cover some of those costs with cash rather than credit. Look for ways to do more with less. Maybe share a place rather than living alone, look for and take advantage of student discounts, and above all, keep your spending to a minimum.
Either way, take some time to figure out exactly how much you’ll need to borrow, so you can start planning repayment right away. (Trust us, we are still fighting with Sallie Mae about student loans)
2. The Type of Work You’ll Get After Graduation
It’s important to keep an eye on what you’ll do with your degree and the level of income that will afford you. First and foremost, you want to be sure you’ll be in a position to cover your monthly payments. The good news is newly minted MBAs can expect to earn a pretty generous salary. However, you must also be aware of the other demands that will be placed on your income.
The smart play here is looking specifically into loans offering income-based repayment plans. That way, you can be certain you’ll be in a position to handle the monthly payments comfortably. It’s also a good idea to look into going to work in an area that will qualify you for repayment assistance and/or loan forgiveness.
3. Whether to Go Federal, Private — or Both
The Fed offers two types of loans for students pursuing MBA degrees. You can choose between Federal Direct Unsubsidized and Federal Direct Graduate PLUS. While the unsubsidized loan is good for up to $20,500, the PLUS loan is limited only by your cost of attendance. You’ll need to pass a credit check to get the PLUS loan; the unsubsidized does not impose that requirement.
Private loans require a credit check and the interest rates are tied directly to your credit score. In some cases, these are a better choice in terms of the interest rates you’ll encounter. This is particularly true if you work with a company like Juno, as it aggregates multiple MBA loans to leverage lower rates of interest from lenders.
4. All Associated Costs
Regardless of the type of loan you choose and the lender from which it originates, it’s critical to pay close attention to the interest rate applied, whether or not there are loan origination fees and whether or not that interest rate is variable or fixed.
At first blush, getting a fixed rate might seem like a preferable option — however, it really depends upon how long you think it’ll take you to repay the loan in full. A variable interest rate can make for a less expensive loan if you pay it off in a short time frame.
These are among the four most critical considerations to make when choosing the right MBA student loan for you. Taking each one carefully and applying it to your specific situation can save you a lot of money when it comes to repaying your MBA loans.