The best time to start planning your MBA financing is before you apply to business school.
After all, you’re committing to one of the biggest financial investments you’re likely to make at the same time you forego an annual salary. On average, this means giving up approximately $200,000 in earnings while paying about the same amount for tuition and other school expenses. It’s a big investment, but also one that can pay off in a big way – on average, MBAs who study at one of the world’s top schools also double their pre-MBA salary within three years.
According to a recent report from Graduate Management Admissions Council, only 17 % of candidates say financial factors have no impact on their MBA decision making. So if how to pay for the MBA is one of your key considerations, the good news is that there’s a vast array of financial aid for business school to make it all possible. Before you dive into the details, step back to understand your options and set a strategy. Your MBA financing options are uniquely tied to your profile and circumstances—your personal income and assets, nationality, chosen program, and credit history are all factors that will impact your financing approach.
At Fortuna Admissions, we often discuss funding options and advise candidates on their scholarship applications. Having myself headed up INSEAD’s Admissions & Financial Aid office, I’ve compiled some essential guidance to get you started, which includes tips and insights from the experts at College Coach and MPOWER Financing.
10 Tips on MBA Financial Aid: What To Know About Paying for Business School
1. Save Now.
It’s never too early to start saving for your MBA, in fact, you should do so as soon as you decide you are going to apply. This means getting serious about adjusting your expenditure downwards; this is a good time to cut back on your daily Starbucks. You’re not alone if you’re among the young professionals with a chunky disposable income accustomed to spending what you earn without much thought – especially if you don’t have kids or a mortgage payment. It can be a big shock to be thrust into a student lifestyle again, so it’s better to start the trimming earlier rather than later.
First, get to know all potential costs and project a realistic budget for the length of your program. Beyond the hefty tuition, costs include living expenses, materials and books, study trips and extracurricular activities. Don’t underestimate your budget—it can be difficult and time-consuming to refinance mid-course. You also want to be in a position to make the most of the opportunities you have during business school, such as study trips and career treks as well as travel to interviews.
2. Apply early.
Look at the financial aid resources of your target programs. Most schools have helpful online info, and if you’re admitted you’ll likely receive a framework of options related to public and private loans, scholarships, flexible payment terms, and trusted sources of indie financing. Remember, schools that accept you want you to have the money to attend; it is a blow to the admissions office when admits drop out because they can’t finance their MBA.
That said, it’s likely the financial aid office will have less funding available the later you apply (many distribute financial aid for MBA students on a first come, first serve basis). If there are multiple admission rounds, apply in the first round. Be sure to complete the FAFSA for MBA application before the priority deadline – funds do run out! Investigating MBA grants and scholarship funding is another thing you should do well before you even apply for MBA programs – some are even earlier than the app deadline (view our related article on finding scholarships for your MBA application).
3. Income is a big piece of the need-based aid puzzle.
Avoid inflating your income if you can. Try not to have a capital gain in the year(s) being assessed. But if you do, let the financial aid office know that it was a one-time occurrence, whether it is a one-time capital gain, abnormal bonus, severance package, or unemployment income. They may be willing to make concessions.
4. Your spouse’s income will influence potential aid.
While you still need to complete the FAFSA to apply for need-based aid, the graduate process differs from undergrad as parent financial data is no longer required. However, if you are married at the time of filing your FAFSA, then you’ll need to include your spouse’s income on the FAFSA for MBA, and this joint income will likely be used to determine any need-based funding. It’s not the most romantic consideration when setting your wedding date, but it’s something to think about if you haven’t tied the knot.
5. Know how many years of income you need to prove.
Some MBA programs review more than the one year of income that’s included on the FAFSA. For example, they may require you to produce your last two or three years of income tax returns to assess your true financial need. If possible, find out which year(s) of income are going to be factored before you apply.
6. Know that home equity can be a factor.
Some programs require the CSS PROFILE application in addition to the FAFSA. The CSS PROFILE asks students to report equity in your home, if applicable, so be aware that this will be an additional asset that isn’t included on the FAFSA.
7. Consider paying off your debts.
While assets must be reported as of the date you are filing the FAFSA, debt is not taken into account. If you were already inclined to pay off your car or direct a chunk of funds towards undergraduate loans, why not do it before applying for graduate financial aid?
8. Cite any special circumstances.
If you have special circumstances, reach out to the financial aid office. Although consumer debt and prior student loan debt typically won’t fly, unusually high medical expenses may be considered.
9. Look for Country-Specific Financing.
If you’re an international student, make sure to look for both loans and scholarships that are specifically targeted to people from your home country. Some examples of financing that are country-specific:
- Loans or scholarships offered by your government for students getting an MBA abroad;
- Programs like the Fulbright Scholarship offered by the US government to encourage international students to study in the United States;
- Scholarship programs offered by schools that are available to people from specific countries;
- US-based lenders that specifically work with international students, such as MPower Financing and Prodigy Finance (both offer no-cosigner loans).
10. Choose Loans Carefully.
Even if you take advantage of personal savings and scholarships, you’ll likely need to consider loans to finance your MBA. When you’re looking into loan options, it’s important to understand the terms each lender offers. Here’s a short list of factors to consider:
- The interest rate, and whether the interest rate is fixed or variable
- Origination fees
- The length of the loan term
- The approximate monthly payment once the loans are in repayment
- Deferment or forgiveness options for periods of unemployment and/or for public service
You should also realize that the lender with the best terms in your first year of business school might not have the best terms for your second year. Plan on repeating the loan application process in your second year of business school – and if you find another loan that is a better deal, it could save you a lot of money in the long run.
At the end of the day, most students integrate multiple sources to fill out their package—some combination of personal savings and loans, and if you’re lucky, a well-placed scholarship. “The value of an MBA, like the cost, is about more than the money,” says Fortuna’s Judith Silverman Hodara, former head of Wharton admissions, citing incalculable benefits like a program’s alumni network and front-row access to the latest industry insights. “While it is mission-critical to get practical about costs, the array of financial assistance that exists means that dollars shouldn’t stand in your way.”
Fortuna Admissions Co-Founder and Director Caroline Diarte Edwards is a former Director of Admissions, Marketing and Financial Aid for the INSEAD MBA program. Contributors to tips in this article include Michelle Clifton, Senior Manager of College Finance at College Coach, and MPOWER Financing. For a candid assessment of your chances of admission success at a top MBA program, sign up for a free consultation.