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The best way to pay for a Master of Business Administration, or MBA, is with money you don’t have to pay back, like fellowships and employer assistance. If you can build significant savings beforehand, this is also a great way to cover graduate school costs. Lastly, you can consider a part-time or executive MBA program in which you can use some of your salary to pay your way.
The average cost of an MBA in the U.S. is $225,605, according to BusinessBecause, a website that connects prospective MBA students, current students, employers and business schools.
If free aid, wages and savings aren't enough to cover the full cost, you may need MBA student loans to fill the tuition gap.
Before you borrow, use these strategies to pay for business school.
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1. Find MBA fellowships, scholarships and grants
Fellowships, scholarships and grants are considered free money — aid you don’t have to repay — and should be your top priority when exploring how to pay for an MBA.
Many fellowships, grants and scholarships are awarded by business schools and based on merit. For these awards, you generally don’t have to fill out a separate application: You are automatically considered when you apply to a business school.
Students can also apply for scholarships outside their MBA program. Many of these scholarships are merit-based and geared toward diversity and inclusion. The National Black MBA Association, for example, awarded $2 million in scholarships in 2021 to help the Black community excel academically, increase income potential and lower unemployment rates.
An ideal candidate for merit-based awards will show how they have excelled in academics, leadership, community impact and other areas of importance to the school or organization.
2. Use employer aid for business school
If you’re working, your employer can be a key resource for funding your MBA. Workplaces may offer education benefits that partially or fully sponsor a graduate business degree. Consider reaching out to human resources to see what benefits your company offers and the requirements that come with them.
Employer sponsorship
Though rare, some employers — like the global consulting firm Deloitte — pay for all of an MBA. These programs often come with stipulations, like continuing to work for the employer for a certain number of years after graduation.
Tuition reimbursement
Most employers won’t fully sponsor an MBA, but about 47% offer some type of undergraduate or graduate tuition assistance, according to Statista, a market and consumer data company. The reimbursement amount can vary by employer. The most recent data from the International Foundation of Employee Benefit Plans, a nonprofit offering employee benefit research and education, shows reimbursements ranging from $5,000 to $6,000, according to a 2019 study. With these education assistance programs, you’ll likely have to cover costs upfront. Make sure you know your employer’s requirements before relying on this option.
Graduate assistantship
Assistantship jobs can provide money toward tuition as well as a monthly stipend. Business school assistantships may require helping school faculty with tasks like conducting research or grading papers. The number of assistantships a school offers is often limited. And unlike federal work-study, assistantships aren’t need-based — only high-achieving students are typically hired. Contact the school’s employment office for details.
3. Build savings
Many students start MBA programs after gaining a few years of work experience. Depending on how far ahead you’re able to plan, consider setting aside money regularly for your degree.
A common rule is to put about 20% of your money toward debt repayment and savings goals, like paying for an MBA. But tackle this only if you’ve already established an emergency fund.
If you have retirement savings, you may be tempted to tap into an individual retirement account or 401(k) to pay for an MBA. Though you may not have to pay an early withdrawal penalty, you’d likely be hit with taxes on that amount and would have less money for retirement. Consider exploring MBA student loans first.
4. Take out business school student loans
Graduate business students can cover gaps in 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.
But if you expect a career in the private sector, are employed or won’t need access to repayment programs, like income-driven repayment, you may be better off shopping around for a private business school loan. Here’s why:
- Federal interest rates and fees are higher for grad students. Unsubsidized federal loans come with higher interest rates for graduate students (6.54%) than undergrads (4.99%). Interest rates on federal graduate PLUS loans are 7.54%. 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 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 loan if you plan to pay off your loans fast or are confident you can afford payments if the interest rate rises.
- All graduate student loans accrue interest. Graduate students aren’t eligible for federal subsidized loans — loans where the government pays the interest during certain periods, like when you’re enrolled in school at least half time. Because only unsubsidized loans are available for graduate students, you wouldn’t qualify to receive these potential interest savings.
You can use a student loan calculator to determine how much your loans will truly cost you. For example, a business school student graduating with $65,000 in MBA student debt could expect to pay $23,721 in interest. That is on top of the $65,000 principal, assuming a $739.39 monthly payment, 6.54% interest rate and 10-year repayment term.
After receiving your degree, you can refinance MBA loans if you think you will qualify for better loan terms.
Frequently Asked Questions
How do I pay for an executive MBA program?
Executive MBA programs are for seasoned professionals; the average student has been in a management position for about nine years, according to the Executive MBA Council. These students work full time while attending school on a modular schedule, like every other Friday and Saturday.
In 2022, 27.5% of executive MBA students received partial sponsorship, according to the Executive MBA Council, and 16.4% received full sponsorship. Those who don’t receive a sponsorship can use the same types of aid available to other MBA students. Though executive MBAs don’t follow a traditional class schedule, they still meet the half-time enrollment requirement to qualify for federal student loans.
What funding options do international MBA students have?
International students can use many of the same methods to pay for an MBA — except for federal student aid. This is typically available to U.S. citizens and eligible noncitizens only.
International MBA students may be able to take out private student loans, if they have an established credit history or an eligible co-signer. Otherwise, look for lenders who prioritize international students.
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