How International Students Can Finance An MBA In The U.S.

Paying for an MBA as an international student may seem daunting. The average cost of a two-year top 25 program reached $195,416 in 2020. Funding sources differ by home country and many traditional loan options available to U.S. citizens are not available to non-citizens.

However, there are resources available for international students, including scholarships, and there are many paths to financing your education.

If you have already exhausted your savings, employee sponsorship, and family resources or loans, read on for a road map of different options for paying for your MBA. These range from Fulbright scholarships to no-cosigner loans offered by your school’s credit union.

SCHOLARSHIPS

Scholarships are grants that you do not have to repay. Start here when trying to fund your MBA.

One example of a scholarship available to internationals is the Fulbright Foreign Student program. The U.S. government funds this program for internationals pursuing graduate degrees in the United States. The scholarship amount varies by your home country. For example, the website Prep Advisor shared that while there is no cap on what an Indonesian Fulbright recipient can receive, a Bulgarian citizen can receive a maximum of $30,000 to cover tuition, fees, and living expense.

In addition to outside scholarships, some MBA programs offer fellowships for students from a specific country or region. Kellogg offers scholarships to students from African countries. Wharton provides scholarships to students from emerging markets and offers two full-rides to Israeli students who have completed military service. Berkeley Haas partners with the Mexican non-profit FUNED to provide a $10,000 annual grant to two Mexican students, and offers scholarships to African students through the MasterCard Foundation.

If you have received acceptances from multiple schools do not be afraid to ask for additional financial aid or for additional scholarships available to people from your region.

LOANS IN YOUR HOME COUNTRY

Before exploring financing options in the U.S., understand financing options in your home country. Some countries offer low-cost financing options to study abroad.

The Bank of Mexico provides loans of up to ~$10K USD / year to Mexican students pursuing post-graduate education. The interest rate is currently only 2.87% on these loans making them considerably cheaper than comparable financing options in the U.S. It is important to note that these loans have a one-year grace period before repayment, and they do not require repayment in year two if you borrow in year one.

Another home country financing option is from the Bank of China. They will loan up to 90% of total tuition costs and miscellaneous fees. The loan can be made in USD or in RMB with the option to borrow in dollars reducing the foreign exchange risk. Interest-only payments are due while the student is in school. Full loan payments start two months after graduation.

Most financial aid offices recommend that you exhaust loan options in your home country before pursuing loans in the United States. Before borrowing, make sure you understand the loan repayment terms, foreign exchange risk, and how the interest rate compares to other options. If you borrow in your home currency and work in the U.S. after school, the terms of your loan could change if the value of your home currency appreciates against the dollar.

LOANS WITH A U.S. CO-SIGNER

There are several banks in the United States that will provide loans with a U.S. co-signer. A co-signer is someone — generally a family member, parent, or friend — who guarantees to pay back the loan if you cannot. U.S. banks assess the risk of lending to an individual based on their credit score. This is a number based on the individual’s history of repaying credit cards, home mortgages or auto loans. While credit scores can range from 300 to 850, a good credit score is considered anything above a 700.

If you have the option of choosing between co-signers, try to find a co-signer with a higher credit score. A family member who recently bought a home or are co-signing loans for college-aged children may not be willing or able to co-sign for an additional loan. If you have someone in the U.S. willing to co-sign your loan, there are several banks who will lend to you. These include Citizens Bank, Discover MBA Loan, SoFi, Sallie Mae, and Union Federal Private Student Loans. This list comes from the NYU Stern website but these companies will lend to students pursuing an MBA program across the U.S.

For instance, a 2017 Vanderbilt MBA was able to secure a 7% interest rate from Discover MBA loans with a U.S. co-signer. He compared this loan to options at a 10-12% rate in his home country of India. The loan in his home country would did not offer a grace period while he was in school which was another factor in choosing a U.S. loan.

While the interest rate on loans for internationals is quite high, refinancing at a lower rate after school may not be an option, unfortunately. Nerdwallet lists four loan providers who may allow you to refinance on a working visa. However, many MBA students who are on F1 or L1 visas are denied refinancing attempts. If you plan to stay in the U.S., you should start building a U.S. credit score, and plan to pay off your loans more aggressively if you cannot refinance at a lower interest rate.

LOANS WITHOUT A U.S. CO-SIGNER

If you do not have a U.S. co-signer, there are other options that you can pursue.

Some schools will co-sign loans on behalf of their international students. For example, both Harvard Business School and MIT Sloan School of Management offer this service through their respective credit unions. The Harvard University Employee Credit Union includes a table with loan rates for international students without a co-signer on their website. Students who pursued this option said it was easy and convenient. Similarly, a 2020 MIT graduate received an 8% interest rate loan through the MIT Federal Credit Union, which simplified her lending process.

If your school does NOT offer to co-sign, Prodigy and MPower are the two companies who will provide loans for students without a U.S. co-signer. Prodigy recently expanded the list of countries which are not eligible for loans so do not assume you will be able to receive a loan without a co-signer. Make sure to consider financing when comparing different admission and financial aid packages.

BOTTOM LINE

Several options exist for financing a U.S. MBA as an international student. Start with scholarships and fellowships, since these are grants that you do not need to repay. But if you do need to borrow additional funds, there are multiple options to consider. Subsidized loans from your home country government are generally the best option, but read the fine print, especially the repayment terms and any foreign-exchange or interest-rate risk. 

If you do need to borrow in the U.S., shop around and compare interest rates and loan terms. Most of all, get ready for the incredible educational and personal experience that is a U.S. MBA program.

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Eryn Schultz is the founder of Her Personal Finance, an online financial education platform that helps recent MBA grads and other high earners get in control of their finances. She is a 2015 Harvard Business School graduate who has been featured on NPR, CNBC, and the Houston Chronicle, and she is passionate about making it easier for internationals and first-generation wealth builders to understand the U.S. financial system. Check out her 10-week financial bootcamp, and follow along on Instagram for daily personal finance tips.