By Kaitlin Butler, CommonBond
What are all of your options for MBA loans? If you're a first-time borrower or a few years removed from taking out your undergraduate loans, the lending landscape can be confusing and challenging to navigate. Here's a quick guide to your loan options for funding your MBA:
Federal student loans
U.S. citizens and permanent residents are eligible to apply for loans through the federal government. All federal loans come with borrower protections, such as Income-Based Repayment, that private lenders don't offer, so you should review these benefits to see if they might be valuable to you post-MBA. All interest rates on federal student loans are fixed, and the standard repayment term is 10 years. These are the three main federal loan programs available to MBAs.
• Direct Unsubsidized Loans (the "Stafford Loan for grad students")
• Direct PLUS Loans
• Perkins Loans
Direct Unsubsidized Loans
You can borrow up to $20,500 annually in a Direct Unsubsidized Loan. They're available at an interest rate of 5.84% for the 2015-2016 academic year, and they come with an origination fee of 1.073%. (An origination fee is generally calculated as a percentage of your loan principal and is tacked onto the amount you owe. So, for a Direct Unsubsidized Loan of $20,500, your fee amounts to $219.97. That amount gets added to your principal, and you'll pay interest on a principal of $20,719.97 once you enter repayment.
Direct PLUS Loans
You can fund up to your annual cost of attendance, minus any other financial aid or loans, in Direct PLUS Loans. These are presently available at an interest rate of 6.84% with an origination fee of 4.292%.
The Perkins program is only available to "students who demonstrate exceptional need as determined by FAFSA data," so eligibility to borrow through this program may vary. Each summer, however, students will be notified if their FAFSA qualifies them for a Perkins Loan. Presently, Perkins Loans come with a 5% interest rate (and no fee) and a nine-month grace period after graduation instead of the standard six months. The Perkins Loan is also subsidized, meaning the U.S. government pays the interest on the loan until repayment begins. An $8,000 borrowing limit applies.
Private student loans
Private student loans from a financial institution like a bank or credit union, or a lending platform such as CommonBond, are another option. Private student loan options differ widely by lender and can include fixed and variable rates, different loan terms, and more.
Generally, you can stand to get lower interest rates on your MBA loans with private lenders. You might opt for private loans if you want to lower the total cost of interest paid and if you are unlikely to benefit from the government's borrower protections. Private lenders could even offer rates lower than both the federal Direct Unsubsidized and Direct PLUS loans, giving you the option to have only one loan company to work with and still minimize your interest rate. Some benefits, such as deferment and forbearance, are commonly available with private lenders.
With such a broad range of options, how do you choose a loan or a lender? Our recommendation: Call up the company's customer service team and get a real person on the line. Make sure the representative can answer all your questions about borrowing. This is a great way to gauge how comfortable you feel with the lender, especially if you need to ask questions in the future, and to become completely familiar with the loan application process.
At CommonBond, we offer an MBA Student Loan with two options at rates of 5.78% APR and 6.09% APR. As mentioned previously, borrowers forego federal loan protections but have access to CommonBond-specific protections, like CommonBridge, a program through which we help borrowers who are in-between jobs. If you're an international student earning your MBA in the U.S., you can still apply through CommonBond - through our partnership with Prodigy Finance, you could secure funding for a private loan that could be a good fit for you (with no U.S. cosigner required).
If you have any questions at all about your loan situation, get in touch with our Care Team at firstname.lastname@example.org or give us a call at 800-975-7812, and we'll be happy to help.
Kaitlin Butler is Content Manager at CommonBond, a student lending platform that provides a better student loan experience through lower rates, superior service, a simple application process, and a strong commitment to community. CommonBond is also the first company to bring the 1-for-1 model to education and finance.