Subsidized Stafford Loans are a need-based federal student loan program where students do not have to pay interest until after they graduate. July 1, however, marked the end of subsidized Stafford loans for graduate students. Since Stafford loans are among the most common and lowest-cost ways to pay for college, the end of the subsidized graduate student loan program has become a cause for concern for those applying to graduate school. As an MBA Applicant, however, you still have several options including the unsubsidized Stafford Loan.
You Still Have the Option of Unsubsidized Stafford Loans
According to Andrew Mitchell, Director of Pre-Business Admissions at Kaplan Test Prep, "A misconception might be that 'loans have gone away, therefore people won't be able to finance business school'. That's not really the case. There are still a variety of loan options and among them is the unsubsidized Stafford Loan."
What is the unsubsidized Stafford Loan? It is a fixed-rate student loan that is available to all MBA students -- proof of financial need is not required. You are charged interest during your MBA program, which accrues while you are in school and during grace periods. The amount of loan money you receive is determined by the school. If you want more information on unsubidized Stafford Loans, the Federal Student Aid website provides a detailed FAQ.
Financial Aid Help from Business Schools
Options for financing an MBA are still available for most accepted students. Why is this? Mitchell explains, "MBA programs typically guide admitted students along the way to apply for the financing they may need in order to get an MBA." Through this guidance, accepted MBA students will going to be able to find the financing they need in order to attend an MBA program.
Most of the 265 business schools included in Kaplan's 2011 Survey of Business School Admissions Officers, said that the level of financial aid in 2011 either increased or stayed the same when compared to the previous year. 3% of schools surveyed said financial aid increased significantly, 33% said it increased somewhat, and the majority of respondents (47%) said that it stayed the same.
The best form of financial aid is merit scholarships. This type of scholarship is usually awarded based on the strength of your MBA application. In fact, many business schools have a policy where all MBA applicants are automatically considered for merit scholarships. Mitchell notes that one of the biggest factors for awarding merit scholarships is your GMAT score: "It can be the key difference between getting into the program and getting substantial financial support." While admissions officers take a holistic view of each MBA applicant, they consider the GMAT score to be one of the best indicators of whether or not an MBA candidate will succeed while attending their business school.
You can make the financial aid application process easier by researching the particulars of the program they are interested in. If there are details that are unclear, you can ask questions by call admissions or attending information sessions offered by the schools.
What You Should Be Aware of When Applying for MBA Loans
While most MBA applicants focus on getting money for college, finding loans and scholarships is not the hardest part of paying for an MBA program. The hardest part is finding ways to pay off the loans once you've graduated. As Mitchell points out, "Everyone who takes out financing to get their MBA is committing to have an income to pay it off after their MBA is done." This is why you should be aware of the level of commitment you are making when deciding to use loans to finance your MBA, as well as how your career choices will affect your ability to pay off your loans.
Committing to pay off an MBA loan is also a career commitment, because MBA graduates have to make a certain income to pay off their MBA. Depending on your chosen career path, it can take an average of between three and seven years to pay off an MBA loan.
The financial obligation that comes with an MBA loans can make things more difficult for MBA entrepreneurs, since they are still obligated to make all of their loan payments on time even though they are running a startup that has yet to make a profit. While getting an MBA help you develop your entrepreneurship skills, financing an MBA with loans can put more financial pressure on both you and your startup. Paying off active MBA loans can also make it difficult for those who are considering applying to their MBA to careers in less financially lucrative fields such as non-profits or the arts.
Another thing you should think about while applying for student loans is how you plan to reduce personal spending while you are in business school. This is particularly important for full-time MBA applicants since they won't be earning a regular pay check anymore. Mitchell mentions that while the large loan checks sent to many students are not a source of income, even though it may feel that way. You still need to pay them off later, which is why MBA students should be careful when spending that money.
You should also factor in the expenses associated with attending an MBA program. For example, many MBA students move to attend their program of choice. Many full-time MBA programs now include trips for team-bonding and recruiting. These travel costs, especially those for overseas programs, can add up quickly. That doesn't mean that you should forgo MBA-related travel, you just need to find a balance between your financial needs and your needs as an MBA student.