Financing Your MBA

An excerpt from the new book Case Studies & Cocktails by Carrie Shuchart and Chris Ryan

Just thinking about the cost of an MBA is enough to give you a case of angina. But before you start searching for your insurance card and calling 911, remember that this is an investment in your future, an investment that should teach you the practical application of calculating an ROI (return-on-investment), which is almost certainly positive.

Funding for an MBA can come from a variety of sources. The most realistic ones are financial aid/loans—federal and private; personal savings, grants and fellowships, and work-study positions. The most unrealistic sources of money? Highly-paid part-time work, that really rich uncle, online poker, day trading, and insider trading (we’re kidding, of course).

And while everyone has to figure out how to pay, there is no universal approach. This part of MBA planning is unique to you. Your resources, school, citizenship, and credit history will all play major roles in defining your payment approach.

Don’t be afraid to ask for help. Check with your school for the latest in advice and resources; opportunities (particularly for international students) will differ from place to place. This is a massive undertaking, it’s complicated, and there are people throughout your school who have much more experience with this stuff. Just because it has to do with money and you’re in an MBA program doesn’t mean that you’re expected to know all of the answers.

Financial aid officers, as well as other students, are great resources. Ultimately, though, finding the right mix of loans will take time and effort on your part. At least there are a lot of free pizza lunches in your future.


The majority of funding for loans comes from the federal government. However, times (and terms) have most likely changed since you last applied for federal student loans. As of the 2010-2011 school year, many loan products will be appearing under new names:

The Stafford Loan is now called the Direct Loan.

The Grad PLUS Loan is now called the Direct Grad PLUS Loan.

These name changes are a result of changes in the law; all future Stafford and PLUS loans will come directly from the U.S. government.

Federal Perkins Loans, which are common for many undergraduate students, are much less useful for business school students since these loans require demonstrated financial need, are limited to $8,000 a year, and are capped by a $60,000 lifetime limit. If you have Perkins loans at this amount from your college days and/or are unable to show need, you need to look at the other loan products. However, one of us had a little Perkins loan for business school; he always felt good paying it since it was administered directly by the university and came with an old school booklet with tear-out coupons for payments. With a fixed five percent interest rate, Perkins loans are as safe as houses and cheaper than the Direct loans, so if you qualify and you want Uncle Sam’s money, take this type of greenback first.

Many students rely on a compilation of the two Direct loans for the bulk of their financing, since these loans, in theory, can get you all the way to the school’s estimated budget. How much you can borrow is limited by the government and varies from school to school. (Remember that the ‘student budget’ your school provides is computed in accordance with federal requirements that assume a ‘modest’ lifestyle. Your school is not trying to be disingenuous when its room and board figures seem to imply that you will live with an actual roommate.) The chart below lays out a few of the characteristics of the key federal loans:


Direct Loan (Stafford)Direct Grad PLUS Loan
Maximum Amount$20,500 per yearThe school’s student budget minus any other financial aid received (including a Direct Loan)
Interest Rate6.8% (1.0% origination fee), fixed7.9% (4.0% origination fee), fixed
Interest Accrual 

(how your overall bill grows while you’re in school)

Subsidized portions accrue no interest during enrollment, grace, and deferment periods 

Unsubsidized portions accrue interest over the loan’s lifetime.

Interest accrues over the entire lifetime of the loan, regardless of your student status
EligibilityBased on demonstrated financial need 

Available to U.S. citizens and eligible non-citizens enrolled with half-time or greater course load

School must participate in program 

Available to U.S. citizens and eligible non-citizens enrolled with half-time or greater course load

Repayment TermsStandard repayment is 10 or 25 years 

Repayment begins six months after graduation or when enrollment drops below half-time

Stanfard repayment is 10 or 25 years 

Repayment begins six months after graduation or when enrollment drops below half-time


  • KE

    This needs to be updated because the gov’t no longer provides subsidized grad loans.

  • IMD Applicant

    Great! Looking forward to read one. Excellent work on the site, John. Many thanks.

  • Rackbar

    Great article, but a useful addition to this article would be to include the names of some of the better private loan organizations. Which banks are best and have the most favorable terms to students? Is Sallie Mae better than the major banks? Do credit unions have more favorable terms? Furthermore, some more details on the best way to obtain a credit score would also help. 

  • Liza Mae Villarante

    Thanks a lot for your guide.  I am a working professional, a project manager/administrative officer in the Philippines, with also a good scholastic records, and a barrister.  However, money is hard to find here for an MBA program.  What scholarship can you suggest for me?

  • Nancy John

     cool  post about Financing your MBA

  • b-school guy


    When you the new P&Q rankings come out for MBA and EMBA?

  • Michael,

    Thanks for letting me know. I’ll track down the authors and see if they can provide a working link.


  • Michael

    On page 2 there is a link for a model to insert your own numbers in a loan payback chart. However, the link doesn’t work.

    Could you get me a working link please?


  • Alok,

    We’re working on that. Check back soon!

  • Thanks Jane!

  • This is a great article. I will appreciate if P&Q come up with a similar article for international applicants (including those who do not have US co-signer).


  • Jane, great to know that it’s so helpful!

    We’re on Facebook. Please stop by and ‘like’ us 🙂!/pages/Poets-Quants/117025308342232

    All the best,

  • Jane

    Kudos John!

    This website answers questions, and produces comparisons and infomation that are most interesting to Pre/current and Post MBA folks.

    It releases my thoughts on schools and rankings of all sorts…..debt, GMAT, top MBA…..MBA advice.

    I love this website. You should create a facebook page……for us all to ‘like’!

  • Saleem and Cristian,
    We’ll check into that. I think an article on international student scholarships is a great idea.

  • Cristian Vasquez

    I am wondering the same thing. Is there any type of private fellowships or scholarships available for exceptional International Students? Information on this would be greatly appreciated. Thanks!

  • Where can I find financing information for International students in US? Is it easy for international students to get loans, if gets admitted in one of top 20 US business schools?


  • Chris – Kellogg

    I’d also suggest considering doing a part-time program, allowing your normal income to pay for (at least) your living expenses and (hopefully) some of your tuition. Most schools have evening and/or weekend programs available.

    The immediate problem with an evening program is that you might not live in the city where your first choice school is. You can check to see if your company will allow you to relocate to a new office or work remotely. The weekend program at Kellogg has a significant portion of the students who travel to Chicago by car and plane, from as far away as Seattle and NYC.

    Most programs offer career services to their part-time students also, so the opportunity to jump to into Consulting from Engineering is still an option.

    I’d caution those considering accepting employer sponsorship. Other than the usual agreement to work at a company for a couple of years after graduation, many schools will not allow you to participate in their formal placement programs. It is considered an ethical conflict for the school to take your employer’s money, then help you find a new job. I’d recommend only taking their assistance if they’re offering enough to offset that opportunity cost, and there’s some type of growth plan being discussed.

  • tim

    Yeah, the actual GI Bill terms are far more complex. For those commissioned through the OCS college option are also a special case – I believe they only have to serve their 3 year active commitment post 9/11. For ROTC, it also depends whether they were on scholarship or not.

  • With respect to the 9/11 GI Bill: “You must serve beyond your four-year military commitment.”

    Not true. This only applies if commissioned from a service academy or ROTC (in other words, the government paid for undergrad). Otherwise, the four-year commitment fulfills the 3 years of active service after 9/11/01 required by the GI Bill.