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How to pay off business school debt
Once you've secured that MBA, find ways to bring your debt under control.
There’s much debate over whether business school is worth the debt. But if you’ve already committed to a program — or know that an MBA is in your future — there are ways to reduce how much you owe. Many top-tier business schools have loan repayment assistance programs, though you usually need to work for a nonprofit or government agency to qualify.
Average MBA student loan debt
According to the Condition of Education report published by the National Center for Education Statistics (NCES), the average student loan debt for those finishing an MBA in 2016 was around $66,300 — about $11,000 more than graduates in 2012. However, your actual debt load will vary depending on how expensive your individual MBA program is.
What’s the average cost of business school?
The average yearly tuition for top business schools in 2017 ranged from $34,000 to $69,000, according to U.S. News and World Report. However, it notes that most of the programs sit at the higher end of that scale — ranging from $55,000 to $68,000. And those numbers exclude living expenses, books, travel fees and other costs that pop up during your studies.
Repayment assistance programs for business school
Although there are no overarching repayment assistance programs available to graduates of business school, most universities have their own programs to help graduates pay down their student loan debt.
Harvard Business School Social Enterprise Loan Repayment Assistance Program (SELRAP)
The Harvard Business School Social Enterprise Loan Repayment Assistance Program (SELRAP) was established in 1992 to help graduates working in the nonprofit or public service sectors with their student loan debt. Selection is determined by a committee, which looks at not only your annual income and financial need, but also the type of position you hold and your long-term career goals.
NYU Stern School of Business Loan Assistance Program
The NYU Stern School of Business Loan Assistance Program was designed to help graduates who’ve chosen to take lower-paying leadership positions at nonprofits, government agencies and organizations dedicated to social service pay back their student loans. Your total award amount is based on the debt you have and your current salary, with those making less than $60,000 qualifying for the full award.
Stanford MBA Nonprofit-Public Service Loan Forgiveness Program
The Stanford MBA Nonprofit-Public Service Loan Forgiveness Program covers all or a portion of your loan repayments for a year, provided you’re working for a nonprofit or government agency — and plan to for the next six months. The exact amount you qualify for is based on your income and financial need.
Columbia Business School Loan Assistance Program
The Columbia Business School Loan Assistance Program helps students who’ve decided to pursue lower-paying positions at eligible nonprofits, government agencies and other similar organizations. You must apply within five years of your graduation date, and you could be eligible for up to $30,000 depending on how large your student debt load is.
Duke University Fuqua School of Business’s Rex and Ellen Adams Loan Assistance Program
The Rex and Ellen Adams Loan Assistance Program was established to help Duke MBA—Daytime alumni pay off their student loan debts. If you work for an eligible nonprofit or government agency, you may qualify for up to eight years of assistance, although you must apply for the program within three years of receiving your MBA.
4 tips to pay back business school debt
Getting your MBA may be lucrative, but it’s also expensive. Here are a few tips to make your business school debt a bit easier to manage:
- Start paying down interest ASAP. If you’re still in school and can afford to, make interest-only repayments — even if just on your higher-rate loans. This keeps interest from capitalizing and getting added to your principal, making your loans less expensive in the long run.
- Apply that signing bonus — and your yearly bonus — to debt. Many companies give MBA grads a signing bonus when hired, so try to allocate most of that toward an expensive loan’s principal balance. Follow this up with your yearly bonus, and you’ll be paying off large chunks of your loans in no time.
- Enroll in Public Service Loan Forgiveness (PSLF). If you decide to use your MBA to work for a government agency or nonprofit for at least 10 years, you may qualify for PSLF. This completely cancels federal debt — but you’ll have to make 120 repayments while working for a qualified employer to be eligible.
- Consider consolidating or refinancing your loans. Don’t qualify for PSLF? You might want to consider refinancing your private and federal student loans. Your high-paying job might help you score an especially low rate or better terms. Just be aware that you’ll lose any federal loan perks when you refinance.
Compare student loan refinancing offers
How long does it take to pay back business school debt?
It depends on how much you borrowed and your salary once you graduate.
Federal student loans typically have terms of 10 years, although there are extended repayment plans that last up to 25 years. Private students loans vary from five years all the way up to 25 years with some lenders.
If you pay every loan on time and don’t enter forbearance or deferment, the loan term gives you a good idea of when you’ll be debt-free. And if you check out some of the tips above, you might find there’s room in your budget to pay off your loan even faster.
Is business school worth the debt?
This depends on your personal, financial and career goals — but in general, business school graduates believe it is.
According to the 2017 Alumni Perspectives Survey Report, graduates who completed business school — with or without receiving an MBA — found the experience worthwhile, both professionally and financially. And although there are only a few business-related positions on the list of top highest-paying jobs, the return on investment of pursuing a graduate business degree may make it worth the debt.
Although you may be taking out a good amount of student loans over the two or three years your program lasts, the average starting salary for people graduating with an MBA is generally quite high.
Top 8 starting salaries for business school graduates — by industry
Average starting salaries for business school graduates was around $63,932 in 2017, according to the Graduate Management Admission Council. However, how much you take home each year varies depending on the industry you’re in and bonuses you receive.
|Industry||Annual salary in 2017|
|1. Energy and utilities||$90,106|
|3. Health care||$69,000|
|6. Finance and accounting||$60,772|
|7. Nonprofit or government agency||$60,306|
|8. Products and services||$58,172|
Many former business school graduates believe it’s worth the cost, but that still means you’ll likely have a good amount of student debt to pay off. Look into whether your school offers any repayment assistance programs first. If not, you might want to consider refinancing your student loans with a private lender.
Or explore more tips for paying off professional student loans.
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