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04/10/2018

How Recent Loan Changes Affect Business MBA Students

MBA students at the best business schools typically spend part of their summer determining how they’re going to pay for school for the upcoming year, but this year was more difficult for a lot of students. Many changes have been made to the federal loan programs that handle loan for MBA students, which will affect their loan payments and the total amount they’ll end up owing for school.

One of the first major changes that will affect MBA students at good business schools is that they no longer have access to all the benefits of the subsidized Stafford loan program. Before the changes were made, students could hold off paying the 6.8% interest on the loan during the time they were in school and for the first 6 months after they graduated Now, MBA students can still take out Stafford loans and have 6 months after they graduate before they have to start repaying, but interest on the loan starts accruing right away, which can add almost $2,000 to the overall cost of the best business programs.

Another change that will affect MBA students has to do with the loan origination fees for Stafford and Federal Plus loans. Students used to be charged a 0.5% fee on the amount they borrowed as long as they made the first year’s monthly payments on time. If they missed a payment, then another 0.5% fee would be added. Now, all students will initially be charged a 1.0% fee on their Stafford loans, regardless of whether or not they make their first 12 monthly payments on time. As for the Graduate Plus loans, they used to have an origination of 2.5%, but it has now increased to 4.0%. All these fee increases can add a few thousand dollars onto the final amount a student will pay back for their loans for enrolling in the best business colleges.

Business schools and organizations dedicated to assisting graduate students are worried what affect these changes will have on the enrollment in MBA programs. The cost of getting a graduate degree was already pretty high, and now it’s even higher. It may be enough to convince some prospective students to decide not to enroll in an MBA program and pursue their business career goals. What these organizations are almost sure of is that graduate students will begin to rely more on private loan to help pay for their MBA. They’ll avoid the federal loans and their higher costs in favor of private loans.

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