The best way to pay for an MBA is free money, like fellowships and employer assistance. Ideally, you’ll also have money put aside for business school, or you can use some of your salary if you’re getting an MBA part time.
But free aid, savings and wages might not cover the cost of an MBA — especially at a top-tier school. The bill for such programs can be more than $200,000, according to Poets & Quants, a website that covers graduate business schools.
You can take out MBA student loans to fill a tuition gap. But before you borrow, use these strategies to pay for business school.
1. Find MBA fellowships, scholarships and grants
Fellowships, scholarships and grants are aid you don’t have to repay. Most fellowships and grants are awarded by business schools themselves, though private MBA scholarships from businesses or professional associations are available.
Unlike undergraduate scholarships, which may be based on your financial need, MBA fellowships and grants are usually awarded on merit alone. You may qualify based on criteria like your undergraduate GPA, GMAT score or any professional accomplishments you have.
A business school may automatically offer this aid upon your admittance — MIT Sloan School of Management at the Massachusetts Institute of Technology in Cambridge, Massachusetts, awards over 60 fellowships in this fashion, for example. In other schools, you may have to apply separately. Contact the business school’s financial aid office for details.
2. Use employer aid for business school
Money your employer provides or you earn by working can help you pay for an MBA. If you already have a job, reach out to human resources to see what education benefits the company offers, as well as its rules for that assistance.
3. Tap into savings
Most students start MBA programs in their late 20s, after their careers have begun. That time working likely convinced you that getting an MBA would be worth it for your future. It also, hopefully, was when you saved some of your salary to cover the cost of the degree.
An ideal budget puts at least 20% of your money toward debt repayment and savings goals, such as paying for an MBA. If you haven’t been saving specifically for business school, don’t touch other savings — like for an emergency or retirement.
You may not have to pay an early withdrawal penalty if you tap into an IRA or 401(k) to pay for an MBA. But you'd have to pay taxes on that amount and would have less money for retirement in the future. Opt for student loans instead.
4. Take out business school student loans
MBA students can cover remaining costs with federal or private student loans. Federal loans are best if you plan to work for a nonprofit or aren’t sure about your career path.
Federal interest rates and fees are higher for grad students. Unsubsidized federal loans come with higher interest rates for graduate students (4.30%) than undergrads (2.75%). Interest rates on federal graduate PLUS loans are 5.30%. Unsubsidized loans come with an origination fee of roughly 1%, but that fee is four times higher for PLUS loans. Most private lenders don’t charge origination fees.
Your work history is likely an advantage. All federal loan borrowers receive the same interest rates. Private loans determine rates based on your financial situation. If you’ve worked for a few years before getting an MBA and have built up your credit, you may qualify for a lower interest rate than federal student loans offer. You could also save more by opting for a variable rate, if you plan to pay loans off fast or are confident you could afford payments if that rate rises.
All graduate student loans accrue interest. Graduate students aren’t eligible for federal subsidized loans. The government pays the interest on subsidized loans at certain points, like when you’re enrolled in school at least half-time. Because only unsubsidized loans are available for graduate students, you won’t receive the potential interest savings from federal loans that undergrads do.
Use a student loan calculator to determine how much loans will cost you to pay for an MBA. For comparison, business school graduates owe roughly $66,000 in MBA student debt, including undergraduate loans, according to the National Center for Education Statistics.
If you decide federal loans make sense for you now, but your plans change in the future, you can refinance MBA loans after school to potentially save money.
» MORE: Compare graduate student loans
Frequently asked questions