MBA Loans in the US

The United States is currently the world’s most popular MBA destination, according to research into applicants’ preferences. By extension, this means that there are a great number of people looking to fund US-based programs. US citizens and permanent residents have the option of applying for both federal and private MBA loans. For international students, however, the options are mostly limited to private loans and these often require a co-signer as a guarantor.

The purpose of this article is to give you a starting point for finding information about loan options for funding MBA study in the United States. It is strongly advised that you check with the financial aid department of the schools to which you are applying before filling out any forms for private MBA loans.

Federal student loans

Federal student loans are provided by the US Department of Education. These have some benefits over private student loans (there is a comparison listed on the Federal Student Aid website). For example, federal loans are usually offered at a fixed interest rate which is often lower than that available with private loans. That is why the financial aid departments of business schools such as Columbia and Wharton recommend that you seek out federal loans before applying for private MBA loans.

US citizens and permanent residents have the option of applying for two types of federal MBA loans – Direct Unsubsidized Loans and Direct PLUS Loans for Professionals and Graduate Students, also known as Grad PLUS Loans. You must fill out the FAFSA in order to apply for either loan.

Direct Unsubsidized Loans

Maximum amount: US$20,500 per academic year (US$10,250 per semester)

Interest rate: 5.84% (for loans disbursed between July 1, 2015 and June 30, 2016)

Origination fee: 1.068% (for loans disbursed between July 1, 2015 and June 30, 2016)

The amount you can borrow through a Federal Direct Unsubsidized Loan is determined by your business school, based on cost of attendance and the other financial aid you’re receiving. Loans are not need-based. However, the student is, of course, responsible for paying the interest on the loan during all periods and this includes any periods of grace, deferment or forbearance as well as the time you attend school. If you choose not to pay the interest at any time, it will accrue.

Direct PLUS Loans (Grad PLUS Loans)

Maximum amount: Cost of attendance minus other financial aid received

Fixed interest rate: 6.84% for loans disbursed between July 1, 2015 and June 30, 2016

Origination Fee:  4.272% for loans disbursed on or after October 1, 2015

Direct PLUS Loans can cover all expenses not paid by financial aid for graduate students who will be attending a school that participates in the direct loan program and who don’t have a bad credit history. Indeed, to apply for this form of federal loan, applicants must fill out a PLUS Credit Authorization form, which initiates a credit check, in addition to a FAFSA. Compared to private loans, however, the credit criteria for Direct PLUS Loans are generally less stringent.

Private student loans

Private student loans are credit-based and often have a variable rate, although there are institutions that offer fixed-rate student loans (including some mentioned later on in this article). Unlike federal loans, private loans do not have an income-based cap for monthly repayments. Your credit report and score are the largest factors in determining your eligibility for a private loan, so it’s a good idea to get a copy of your credit report before filling out a loan application.

Private loans for international students studying in the US

The majority of international student loans require a co-signer who is either a US citizen or permanent resident of the country. In addition, some lenders will require you to have a social security number. The application process varies by lender, but loan applications generally take four to six weeks to process. Wells Fargo, Citizens Bank, Sallie Mae (originally known as the Student Loan Marketing Association), Union Federal and Discover are examples of companies that provide loans to international students that can call upon a US co-signer.

Prodigy Finance can provide loans without the need for a co-signer which cover the cost of attendance minus other financial aid. The terms of each loan vary by school. Other loan options that don’t require a co-signer include the BAEF MBA Fellowship (for Belgian citizens who hold at least a master’s degree from a Belgian university) and the Canada Student Loan (for Canadian citizens looking to study in the US).

Private MBA loans for US citizens and permanent residents

The following is a list of companies offering MBA loans to students in the US, based on lists from Columbia Business School, NYU Stern and UC Berkeley’s Haas School of Business:

• Citizens Bank TruFit Student Loan for MBA students
• PNC Solution Loan™ for Graduate Students
• Smart Option Student Loan for graduate students from Sallie Mae
• Custom Choice Loan from SunTrust
• Wells Fargo Graduate student loan
• MBA student loans from CommonBond
• MBA student loans from Discover (available with both fixed and variable rates)
• Union Federal Private Student Loans (funded by SunTrust Bank)
• Private student loans from local credit unions with LendKey
• Loans at both fixed and variable rates through SoFi
• DRB Student Loans for MBAs from Darien Rowayton Bank
• Student Choice (for borrowers attending approved schools)
• iHELP (student loans from a network of community banks)
• NJCLASS Grad/Professional Loan (largely for residents of New Jersey or those attending approved schools in this state)
• CHESLA loans (for Connecticut residents or those attending accredited institutions in Connecticut)