Now that you’ve made a commitment to getting your advanced business degree, the next question is likely to be, “How will I pay for it?” Luckily, financial aid is readily available to anyone considering returning to school to get an MBA.
The first thing you will have to decide is whether you will go to school either as a full-time or part-time student. About two thirds of business students work toward their degree as part-time students while they continue working full-time. Another consideration is if you work for a company that offers either full or partial tuition reimbursement to its employees. This benefit will greatly reduce your costs.
The good news is that whether you attend full-time or part-time, funding for your graduate business education is readily available. For most students, the primary source of funding is through the various student loan programs. These costs are an investment in your future earnings potential. According to a recent salary survey conducted by the National Association of Colleges and Employers, average starting salary offers for graduates of MBA programs is 25 to 40 percent higher than for non-MBA graduates.
Determining Your Costs
Now let’s look at the cost of getting your advanced business degree. Your most important expense is tuition and fees. A survey conducted by the National Association of Student Financial Aid Administrators (NASFAA) using 2003–04 data estimated that the average total cost of attendance for full-time graduate-level business students was about $22,015 at public institutions and $32,936 at private institutions. For part-time programs, the mean cost was $10,572 at public institutions, and $15,587 at private institutions.
Most business school students pay more for books and supplies than they did as undergraduates. Owning your own computer is now a must, but schools often have discounts with major computer suppliers.
There are other “indirect costs” you must consider when developing your expense budget. Whether you will commute, live in campus-provided housing or live off campus will be a major consideration. Most business schools can tell you what the average cost of living will be in the area and may offer subsidized housing or provide a housing office to help you find a place to live. Other indirect costs include travel expenses, miscellaneous personal expenses, and other expenses if appropriate. As a student, you will need to budget your expenses as carefully as you budget your time.
Financial Aid
Once you’ve calculated your total expenses to go to business school and determined the personal resources you can make available from current income and savings, you will need to consider financing options.
Financial aid is different at the graduate level. Most importantly, all graduate students are considered independent for the purpose of federal financial aid. This means your parents are not required to assist you financially or complete the Free Application for Federal Student Aid (FAFSA). Information from the 2003–04 NASFAA study reports that 13 percent of full-time M.B.A. students received a fellowship, grant, and/or tuition waiver, while another 9 percent received assistantships. However, 31 percent of full-time and 45 percent of part-time students received assistance from their employers, far higher than any other graduate program. Looking at the 2003–04 graduating class, 56 percent of public and 62 percent of private school students reported having student loan debt, averaging $25,563 and $38,499 respectively.
Types of Financial Aid
GIFT AID
- Individual grants, scholarships, and fellowships
- Tuition waivers awarded by individual business schools
- Company employee educational benefits
- Federal grants
- State grants
SELF-HELP AID
- Federal Work-Study
- Teaching Assistantships
- Resident Assistantships
- Research Assistantships
LOANS
- Federal Perkins Loan
- Federal Subsidized Stafford Loan
- Federal Unsubsidized Stafford Loan
- Federal Direct Loan
- Private loan programs
- Tuition payment plans
Applying for Financial Aid
To qualify for federal aid, every student is required to complete the FAFSA, either in paper or electronic form. The paper form is available in both business school and undergraduate school financial aid offices. You are strongly encouraged to file using FAFSA on the Web at www.fafsa.ed.gov.
Soon after January 1, before the period you plan to enroll, you should complete the FAFSA, which asks about your prior (or base-year) income and assets. Be sure to check with the school for their specific filing deadline dates.
Some business schools require that you complete an additional application called the Financial Aid PROFILE form from the College Board. If your school requires this additional form, you need to complete this in October or November prior to your enrollment. The paper version of the PROFILE is available from the financial aid office and is also available online at www.collegeboard.com.
Once you have submitted the proper application, the business schools you have designated will receive information showing the amount you can afford to contribute to your education, calculated based on your income and assets. This is called the Expected Family Contribution (EFC). The EFC from the federal form is the official amount that determines whether you will qualify for certain types of federal aid. If this amount is less than the total cost of attendance, you have demonstrated need and will qualify for aid—usually low-cost, government-subsidized loans.
Also, there are governmental, institutional, and private loans available to students regardless of whether they demonstrate need. The financial aid office is your best source of information for guiding you through this process and providing advice on these alternative loan programs.
Your Credit History
Since most business students have to borrow to pay for their education, making sure you qualify for a loan is critical. This means that your credit record must be free of default or serious delinquency. You are strongly encouraged to check your credit history with one or more of the following credit bureaus and clean up any adverse credit problems that might appear.
Equifax Credit Information Services, Inc.
P.O. Box 740241
Atlanta, GA 30374
800-685-1111
Web site: www.equifax.com
TransUnion
P.O. Box 2000
Chester, PA 19022
800-888-4213
Web site: www.transunion.com
Experian
475 Anton Blvd.
Costa Mesa, CA 92626
888-397-3742
Web site: www.experian.com
Debt Management
Although the maximum limits on borrowing from federal and private programs are high, you will want to make sure you are not borrowing more than you will later be able to repay (see Table 1).
To estimate your monthly payment, choose the closest interest rate and multiply the amount of the payment listed by the total amount of your loan and then divide by 1,000. After having estimated your income and the amount you’ll need to borrow for your education, you can use Table 2.
International Students
Costs of U.S. business schools for international students are usually the same as U.S. citizens at private institutions. However, international students are required to pay the out-of-state tuition rate at most public institutions. A Certificate of Eligibility for a student visa will serve as proof of sufficient funds. International students should make sure they have obtained the necessary funds from their own resources, including their home government. There may be institutional aid available for international students. Students should contact the financial aid office for possible funding sources. International students usually need a U.S. co-signer for private (alternative) loans.
Additional Information
For more information about financing your business education, check with the personnel office at the company where you work and the financial aid office at the business school you plan to attend. You can find additional financial aid resources at www.petersons.com/finaid/.
