MBA Student Loan Repayment and Forgiveness Options

MBAs will likely be best served paying off debt fast unless they’ll qualify for student loan forgiveness.
Trea Branch
Ryan Lane
By Ryan Lane and  Trea Branch 
Edited by Karen Gaudette Brewer
MBA Student Loan Repayment and Forgiveness Options

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MBA students can finish school with a staggering amount of debt. The most recent data from the National Center for Education Statistics shows an average MBA debt of $66,300 in 2015-2016. Personal finance company SoFi reports a higher average MBA debt of $74,707 based on data from 2014-2017. But given the trend of rising tuition, these numbers are likely significantly higher as of 2023. The best MBA student loan repayment option for you will depend on your job, financial outlook and business school you attended.

If you’ll qualify for MBA student loan forgiveness — by working for the government or a nonprofit — prioritize receiving it.

Many MBAs will likely have large enough salaries to aggressively repay loans. If you won’t, options are available to keep payments manageable.

Here are four MBA student loan repayment strategies along with tips for determining which one is right for you.

Qualify for MBA student loan forgiveness

Best for: MBAs who work in public service

You may be able to have all or part of your MBA student loans eliminated through Public Service Loan Forgiveness, a business school-specific loan assistance program or an income-driven repayment plan.

Public Service Loan Forgiveness, or PSLF, forgives federal student loans after you make 120 eligible payments on them while working full time for an eligible employer — regardless of the specific position you hold with that employer. For example, executives with MBAs can qualify.

If you worked for an eligible employer, returned to school for your MBA and then worked for an eligible employer again, all of your working years can count toward PSLF. Just remember that you have to make 120 payments on each loan, so MBA student loan forgiveness would likely happen after your undergraduate loans are forgiven.

Some business schools offer loan assistance for eligible alumni. These programs may require that you work for a nonprofit or provide some kind of public impact and meet specific income requirements. Assistance amounts and program requirements vary, so contact your business school for details. 

For example, Wharton Business School at the University of Pennsylvania provides up to $20,000 annually to eligible alumni, and the School of Management at Yale University covers up to one-tenth of a loan’s principal annually for eligible MBAs.

Federal student loan borrowers can enroll in income-driven repayment plans that forgive balances after a certain number of years. The most widely available income-driven plan is Revised Pay As You Earn, or REPAYE; borrowers with graduate student loans receive forgiveness after 25 years under this plan.

Income-driven repayment is best for borrowers who can’t afford their payments (more on that below), not those aiming for forgiveness. These plans extend your repayment period, costing you more overall. And because payments rise with your income, MBAs may be more likely to repay their loans before forgiveness kicks in.

If you qualify for debt forgiveness programs, consider the tax implications. A provision to the 2021 COVID-19 relief package allows tax-free debt forgiveness for qualifying debts canceled between Dec. 31, 2020, and Jan. 1, 2026. The government does not tax amounts forgiven under PSLF, but outside of the COVID-19 stipulation, income-driven forgiveness could be considered taxable income. You may also pay taxes on money received from a business school loan assistance program. Check with a tax specialist for more details.

Pay off MBA student loans fast

Best for: MBAs with strong finances

The 2022 median starting salary for new MBA hires is $115,000, according to the Graduate Management Admission Council. If you have money left over after setting aside funds for an emergency and retirement, consider prepaying your MBA loans to reduce interest costs.

Over 75% of business school graduates are offered a signing bonus in the U.S., with a median amount of $10,500, according to a 2022 GMAC report. Let’s say you applied that entire bonus to an MBA student debt amount of $66,300. That would reduce your repayment term by about two years and save you close to $6,900 in interest, assuming a 10-year repayment plan and 6.54% federal interest rate on graduate student loans.

Use a student loan payoff calculator to see the effect extra payments can have on your debt.

Most MBA students work before going to business school. If you repaid some of your undergraduate loans while you were working, use a student loan calculator to determine which loans to prepay.

You’d likely save more interest paying graduate loans first because they have higher interest rates and more remaining payments than undergraduate loans. But actual savings will depend on your loans’ balances and terms.

Refinance at a lower interest rate

Best for: MBAs with strong finances who don’t need federal benefits

Refinancing replaces your existing student loans with a new private loan. If you won’t qualify for loan assistance or forgiveness — and you don’t need federal options like income-driven repayment — consider refinancing your MBA loans if it'll save you money.

Refinancing your student loans could lower your monthly payment, your total overall payment — or both. If you’ve repaid undergraduate loans for a few years, use a student loan refinance calculator to make sure you won’t pay more by refinancing them to a longer repayment term. If you'd pay more by refinancing your undergraduate loans, you can refinance just your MBA loans.

How much would refinancing save you?

Opt for income-driven repayment

Best for: MBAs who can’t afford their monthly payments

Not every MBA graduate earns a six-figure salary. If you struggle to make your monthly student loan payment, the best way to reduce federal student loan payments is to enroll in an income-driven repayment plan. These plans set payments as a percentage of your discretionary income — generally 10% — stretch your repayment term to 20 or 25 years and forgive any amount left on your loans after that point.

Keep in mind that as your income rises, your payments will as well. Earn enough and you could eventually pay more than the standard amount, depending on which income-driven plan you choose. At that point, options like aggressive repayment or refinancing might make more sense for you.

If you took out private MBA loans, talk to your lender about options for paying less if you can’t afford your monthly payment.

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