What are the advantages and disadvantages?
When you decide to go to a business school, your decision won’t be all about the career progression you see once you graduate.
There’s the cost, too, and funding your MBA is a huge commitment. According to the BusinessBecause Cost of MBA report, the total cost of a top-level MBA in the United States can exceed $ 200,000.
MBA loans are a common way for students to pay for business school, alongside MBA scholarships, personal savings, and corporate sponsorship. The average American MBA student takes out $ 62,000 in graduate student loans per year.
But how do you know if it’s worth it?
The advantages of MBA loans
MBA Loans Offer Greater Access to Students in Financial Difficulty
The most obvious benefit is that student loans increase accessibility to MBA programs for applicants who are strapped for financial resources. Since the cost of a program can cost you six figures, a loan can help cover the costs.
Taking out a student loan for your MBA can also open the door to affiliations with more prestigious educational brands, explains Barbara Coward, MBA admissions consultant (on the picture).
This is because they often receive the highest fees, and therefore without financial assistance, many applicants are excluded from the applicant pool. By taking out a loan, you can give yourself the opportunity to apply to the best expensive MBA schools in USA like Harvard and Stanford. It also pays off in the long run, with the lifelong brand recognition that comes with elite institutions.
MBA student loan rates may be low
MBA loan interest rates are generally favorable. When shopping, be sure to compare rates to get the lowest deal.
Juno, a student loan company founded by Harvard MBA graduates Chris Abkarians and Nikhil Agarwal, uses group purchasing power to negotiate the best possible student loan rates for MBA and Masters students, as well as to other undergraduate and graduate programs.
The company promises to offer the lowest refund rate for students and will match a lower rate if you find one.
You can save on taxes with MBA loans
Nikhil de Juno explains that many applicants who choose the loan route can also afford to pay for a business school, but choose to take a loan for tax reasons.
âThe reason they don’t want to pay for this with their savings is that it’s a taxable event if they liquidate their shares to pay for this,â he notes. “They much prefer to postpone paying those taxes and continue to grow in the stock market, especially when they can get a loan at 4% fixed interest rate over 15 years through us.”
You may be able to pay off your MBA loan faster than you think
Some of the top paying MBA jobs will see your salary go up to six figures. University of Chicago Booth School of Business graduates earn an average of $ 200,000 in three years of business school. INSEAD graduates see their salaries reach approximately $ 188,000.
So even if you have to take out a six figure loan, chances are that with hard work and quality work, you can pay it back after several years.
There are also loan forgiveness programs at some schools that remove your obligation to repay part of your entire loan. The Yale School of Management and the Stanford Graduate School of Business offer loan remission programs for graduates entering the nonprofit or public service sector.
You get an MBA
The lifetime return on investment of an MBA cannot be underestimated. Yes, many MBA programs are expensive, but the reasons for studying an MBA outweigh the cost.
âThe return on investment of a top-level MBA is well worth the expense and hassle of a loan,â says Candy Lee La Balle, MBA admissions expert (on the picture). âIn over 16 years of admissions counseling and hundreds of clients, no one has ever said they regret the cost of their MBA. It is a life changing experience that is truly priceless.
The disadvantages of MBA loans
MBA Loans Could Restrict Your Career Options
When you take a large loan, it often comes with stress, anxiety, and questions about how you’re going to repay the money.
This is arguably one of the major drawbacks of business school loans. To pay back the money, you might be more likely to target the highest paying MBA jobs in consulting, tech, and finance, rather than pursuing entrepreneurial ambition or nonprofit work, which could earn salaries. much lower.
“Having a debt of $ 200,000 after graduation that comes with a monthly payment can limit the number of jobs you can realistically hold during the first few years after graduation,” explains Chris from Juno.
MBA loans increase your overall debt
Most MBA candidates will have been trained up to the undergraduate level; some might even have a master’s degree. This means that you often land in an MBA class after you have already accumulated substantial debt.
âThis can lead to financial and / or emotional hardship,â explains Barbara. âEspecially if you have unforeseen expenses such as medical bills; your budget is already exhausted.
Nikhil Agarwal (left) and Chris Abkarians (right) co-founded Juno after Harvard MBA
MBA loans can be risky for some applicants
Even the best MBA loans come with some risk, especially when post-MBA career options can sometimes elude you.
There are several questions to ask yourself when taking out your business school loan, the main one being whether you have a backup plan if things go wrong. This is of particular concern for international students who could face visa problems if government policy changes without notice.
âYou’re playing on the unknown,â says Barbara. âFor example, you might be an international student taking out large loans to attend a business school in the United States, but the new visa regulations mean you have to go back to your home country, where wages might be. lower. “
There may be a lack of transparency on the part of lenders
One of the downsides to MBA loans that Juno’s Chris points out is the lack of transparency from some lenders. âIt’s more confusing than it should be figuring out what you’re going to be billed in most scenarios,â he says.
âIt’s very difficult to tell the difference between one provider and another, and we often assume that the rates that one would get from bank A versus bank B are about the same, and they can in fact be extremely different. “
You should always triple check the interest rates of different providers and compare what you are getting. Two providers might offer the same refund rate, but one might have a high percentage of handling fees, for example. Or, there could be marked differences between the repayment terms between two lenders offering the same interest rate.
Either way, be extra careful when applying for a loan because you don’t want to be caught off guard later.
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