A very common way that business students pay for graduate school is through MBA loans. Loans provide needed funds to pay for some or all MBA expenses. Loans involve borrowed money that has to be paid back, with interest added on.
Generally speaking, there are two types of loans out there. First there are Private Student Loans - loans provided by third party, private lenders. Second there are Federal Stafford Loans - loans provided by the U.S. federal government.
Private Loans
Interestingly enough, the Graduate Management Admissions Council (GMAC) provides loans actually called "MBA LOANS". However, there are a myriad of private loans out there. Private lenders provide loans for educational purposes just as they do for other purposes.
The interest rate for a private loan is usually not as low as that of a federal loan. However, private education loans are usually more favorable than other types of loans (i.e. a car loan). Shop around when it comes to private MBA loans so you can get the best deal.
Federal Loans
Federal loans (also called Stafford loans) are not specific to MBA programs. Rather, they are issued to qualifying graduate and undergraduate students of all disciplines. The advantages of federal loans are the lower interest rates and the favorable repayment terms. There are two types of federal loans - subsidized and unsubsidized.
- Subsidized - This is the most ideal type of federal loan. This loan charges no interest until six months after a student graduates. So the interest is paid or "subsidized" by the government until that time. This type of loan usually has a lower award amount.
- Unsubsidized - This is a federal loan where interest does accrue while you are in school. In other words, the loan is not subsidized by the government. This type of loan usually has a higher award amount.
There are advantages and disadvantages to both federal and private loans. Look at both types to see what loan type best fits your situation. Often, the cost of the MBA program is such that both loan types are needed.
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