Your guide to graduate student loans for your MBA

According to Glassdoor, the average annual total pay for MBA graduates in the U.S. is $239,445.¹ With such a high potential return—the average total cost for an MBA program is $56,850—taking out graduate student loans can be a great investment in your future.² An education loan for an MBA can be a smart financial decision, and understanding your options will help you choose the best MBA loan.

This article will explore different types of loans, interest rates, the application process, repayment options, and tips for managing MBA debt.

There are many different lenders that offer MBA loans, but they’re all either federal or private loans. There’s no clear-cut best MBA loan, as many factors can affect your decision, including your credit score, your current income, how much you need to borrow, and what type of career you intend to pursue after graduation.³

Graduate students can apply for several types of federal loans for an MBA. These loans are provided by the federal government and are eligible for Public Service Loan Forgiveness (PSLF) and income-based repayment plans.⁴

Federal direct loans are among the best MBA student loans. Eligible students can borrow up to $20,500 per year, up to a total amount of $138,500, and acceptance isn’t based on your credit history.⁴ This amount includes loans you may have taken out as an undergraduate.

Federal Grad PLUS loans are available only to graduate students, and acceptance is based on your credit history. However, you can borrow enough to cover the cost of attendance after exhausting your other sources of financial aid, such as scholarships or grants.⁴

There are many more types of private loans for MBA students, but the terms and requirements vary. Borrowing from a state-based or nonprofit lender may offer more favorable terms. However, most private student loans are provided by banks and other financial institutions. You may be able to obtain a lower interest rate on private loans, depending on your credit history, but private loans aren't eligible for federal income-based repayment plans or PSLF.⁴

To apply for federal direct loans, you need to create an account at StudentAid.gov and complete the Free Application for Federal Student Aid (FAFSA). You’ll need to provide personal and financial information such as your tax returns, bank statements, and Social Security number. For a Federal Grad PLUS loan, you’ll have to follow a similar procedure and then fill out the Grad PLUS application, which includes a credit check. The FAFSA deadline is June 30 every year, but check with your school since it may have an earlier deadline.⁵

For private loans, the application process will depend on the lender. You’ll generally need to select a lender, complete an online application with personal and financial information, and consent to a credit check. A strong credit score will increase your chances of getting approved and may lower your interest rate. A co-signer may also help you secure better terms.⁶

When pursuing an MBA degree, understanding the scope of student debt is crucial for planning your financial future. Graduates often face substantial debt, with the average MBA debt for top business schools easily exceeding $100,000.⁷ This amount reflects the costs associated with earning an MBA, including tuition, fees, and living expenses.

For many, the minimum loan amount needed to cover these expenses starts high, and achieving credit approval for these loans can be a challenging process. Federal graduate loans provide some relief with manageable interest rates and the possibility of deferred repayment options, but they may not cover the total cost, leading students to explore other loans.

Permanent residents and U.S. citizens alike can benefit from federal government loans with favorable terms, but it’s essential to understand the differences between federal and private loans. Federal loans typically offer repayment flexibility, whereas private loans may require immediate payments or higher interest rates based on your credit history.

Carefully review the terms of each loan agreement and consider the potential student debt you'll incur. Balancing federal and private loans with different repayment structures can help manage the financial burden of your MBA education. Planning ahead and exploring all loan options will contribute to a more manageable debt load upon graduation.

Congress sets the federal loan interest rates every year. Currently, direct graduate loans have an interest rate of 8.08%, and Grad PLUS loans have an interest rate of 9.08%. Interest begins accruing as soon as the loan is dispersed, but payments are deferred until six months after you graduate or leave the program.⁸ The standard repayment plan is a fixed amount for 10 years. You also have the option to go on an extended repayment plan for up to 25 years if you borrow more than $30,000.⁹

Income-driven repayment (IDR) plans, such as Income-Based Repayment (IBR) and Pay as You Earn (PAYE), calculate payments based on your income and family size, which can reduce your monthly payments. The PSLF program may forgive federal direct student loans if you work for the government or a nonprofit for 10 years.¹⁰

For private loans, interest rates depend on your credit history and the lender’s policies, but they often range from 4% to 16%. Rates can be fixed, remaining the same over the loan's life, or variable, fluctuating with market conditions.¹¹

Repayment terms are similarly variable. Common options include deferring payments until six to nine months after graduation, making smaller or interest-only payments while you’re in school, or making full payments immediately.¹¹

A well-planned budget will help you track your income and expenses so you can repay your loans and cover your living costs. To create a budget, list all of your sources of income and categorize your expenses as fixed, such as rent and utilities, or variable, such as groceries and entertainment. Your budget will help you manage your expenses during and after school and keep your debt load as low as possible. It will also allow you to plan for your short-, medium-, and long-term financial goals.¹²

Once you graduate, consolidating or refinancing your loans can simplify debt management and potentially lower your monthly payments or interest rates. Loan consolidation combines multiple federal loans into a single loan with one monthly payment, often extending the repayment term and reducing the monthly payments.¹³

Refinancing is taking out a new loan at a lower interest rate to pay off existing loans. This can lower your overall interest costs. However, be cautious because refinancing federal loans with a private lender forfeits your federal protections and benefits, such as income-driven repayment plans and loan forgiveness options.¹³

Navigating the cost of an MBA can be challenging, but planning ahead to manage your debt effectively can yield significant benefits in the long run.

The University of Kansas Online MBA program is repeatedly ranked as one of the top MBA programs in the country.¹⁴ For less than $40,000—far less than the average MBA student loan debt—you’ll get a top-tier education and a valuable network of Jayhawk peers and alumni.

Everyone's financial situation is different. The University of Kansas School of Business is committed to helping you understand the options available for financing your MBA. From scholarships to employer assistance and government support, aspiring students have many available paths to an affordable investment in their futures.

Schedule a consultation with one of KU’s admissions outreach advisors today to learn more.