Federal vs. Private Loans: Which is Best for Your MBA?
Source: https://business.rice.edu/admissions-blog/federal-vs-private-loans Parent: https://business.rice.edu/admissions-blog/what-mba-applicants-need-to-know-about-aid
Student loans are one of the most common means of funding an MBA education, but they can be daunting. The prospect of borrowing money is difficult enough — and on top of that, the process is often complex and individualized. \ \ But don’t worry — we’re here to guide you on financing your degree!\ \ In the United States, there are two main categories of student loan: federal and private. They each have pros and cons. The path you choose can depend on factors like your legal status, your borrowing history and whether you are enrolled in classes part time or full time.
What to Know About Federal Loans
The U.S. Department of Education offers eligible graduate students access to federal loans. \ Here are three things to know:
1. Federal loans have unique perks.
- Income-driven repayment plans
- Deferment and forbearance options
- Some loan forgiveness eligibility
2. There are two main types of federal loans.
- Direct Unsubsidized Loans (fixed interest rate, an origination fee, a max annual limit and a lifetime borrowing limit)
- Graduate PLUS Loans (fixed interest rate, an origination fee and a maximum borrowing up to the cost of attendance)
3. You must meet certain requirements.
- You must be a U.S. citizen, permanent resident or eligible non-citizen.
- You must be enrolled at least half time in an accredited degree program.
- You cannot be in default on a prior student loan.
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What to Know About Private Loans
Private loans can cover up to 100% of your school's cost. However, there are a few tradeoffs to be aware of. \ \ Here are three things to know:
1. Rates and terms vary between lenders.
- Don’t assume all private loans are equal.
- Investigate options from multiple competing lenders and compare offers in detail.
- Ask lots of questions!
2. You get fewer options to postpone or reduce your payments later.
- Private lenders are not required to offer borrower safety nets.
- Payments are set without regard to changes in your earnings.
- Federal loans can be discharged in cases like permanent disability. Private student loans are rarely discharged for these reasons.
3. Better credit means better terms.
- Having good credit — or a good cosigner — will improve your chances of being approved with a lower rate.
- And you’re less likely to pay extra fees.
(Note: If you’re an international student, select lenders like Prodigy and Mpower offer alternative standards to credit history.)\ \ An informed borrowing strategy is crucial for funding your MBA. We’re here to answer your questions and help craft a personalized plan to make financing your degree achievable.
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