How Do I Choose The Right MBA Student Loan?

Register for the webinar!Student loans are an essential part of many students’ b-school financing strategies, but they’re rarely user-friendly. You’ll face a multitude of options, and it’s up to you to decide the right loans for your situation. We’ll help you determine the right amount of student loans for your situation in our upcoming webinar, but for now, let’s take a look at the different loan options for MBAs and the general pros and cons of each.

At the highest level, you could borrow three types of loans to pay for your MBA: family loans, personal loans, and student loans. Not everyone has access to the first option of course, but if you do have a family member willing to provide the cash upfront, you could negotiate a great, low-cost funding source. Meanwhile, personal loans are usually far less preferable to student loans: Personal loans rarely offer interest rates lower than 9%, and most importantly, rarely offer in-school payment deferment options, meaning you’ll need to start repaying your loan as soon as you start school. Therefore, we’ll focus on student loans, the category of loans that are most broadly available and effective for MBAs.

There are two types of student loans: federal and private. U.S. citizens and permanent residents are eligible to apply for federal student loans and many private student loans, while international students cannot obtain financing from the U.S. government and should look to their schools’ financial aid office and private programs for financing sources.

The key federal loan programs are Direct Unsubsidized Loans (commonly known as the “Stafford for grad students”) and Direct PLUS Loans. Both offer fixed interest rates, which are set annually following the government’s auction of the 10-year Treasury note in May. At the time of writing, the interest rates are 6.21% and 7.21%, respectively, for these loan programs, and each comes with an added origination fee. This fee is common when borrowing both federal and private student loans, and is usually charged as a percentage of your total loan principal. For example, a 2% origination fee on an $80,000 loan means that a fee of $1,600 is added to your loan balance before your interest rate is applied. The origination fee is 1.073% for the Direct Unsubsidized Loan and 4.292% for the Direct PLUS Loan. Another federal loan program for which some borrowers may be eligible is the Perkins Loan program (which has no origination fee), but this is only available for those with exceptional financial need. If you’re eligible, you’ll be notified after you complete your FAFSA, or the Free Application for Federal Student Aid. Completing the FAFSA online is the first step to obtaining any federal aid.


Why would someone choose federal loans, or choose one loan program over another? Federal loans feature the government’s borrower protections, such as Income-Based Repayment to help those who struggle to meet their monthly payments under the standard loan plan. You can read all about these loan options and protections on the Department of Education’s website. When it comes to the specific federal loans mentioned above, you can only borrow up to $20,500 annually in the lower interest rate Direct Unsubsidized Loan – a limit that many MBAs will easily exceed given the costs of business school. Therefore, aside from the relatively few borrowers eligible for a Perkins Loan, it can make sense to borrow the first $20,500 of your loans via the Direct Unsubsidized Loan program before looking at other loan options.

The other option that many MBAs consider is private student loans from a financial institution like a bank or credit union, or a lending platform such as CommonBond. Private student loans come in more shapes and sizes than federal loans, including fixed and variable rate options. When taking out a loan through a private lender, as a rule of thumb, you’re likely to get lower interest rates on loans with shorter terms. (Lenders charge less interest for shorter terms because they assume less risk in lending for a shorter period.) Depending on the lender, you may find that private loans offer lower rates than the government options, so you might opt for private loans if you want to lower overall interest costs.

The tradeoff when choosing a private lender is that private loans do not come with the same borrower protections as federal options, e.g., you might get deferment and forbearance with a private lender, but you probably will not have an option to adjust your monthly payments based on your income (as you can using the government’s Income-Based-Repayment plan, for example). You should spend time researching private lenders to make sure that it offers basic borrower protections you need, such as in-school deferment. Our recommendation: Call up a lender’s customer service team and talk to someone there. This is a great way to explore your options and make sure you feel comfortable with the lender, especially if you need to ask questions in the future.

In the case of CommonBond, we offer an MBA Student Loan with two options at rates of 6.40% or 6.85% APR, respectively. As mentioned previously, CommonBond borrowers forego federal loan protections but have access to CommonBond-specific protections, like CommonBridge, a program where we help borrowers who are in-between jobs. If you have any questions at all about private loans, get in touch with our Care Team at care@commonbond.co or give us a call at 800-975-7812, and we’ll be happy to help.

MBA 5 Fatal Flaws

Kaitlin Butler is Content Manager at CommonBond, a student lending platform that provides a better student loan experience through lower rates, superior service, a simple application process and a strong commitment to community. CommonBond is also the first company to bring the 1-for-1 model to education and finance.

Related Resources:

Know Before You Go: Paying for Your Columbia MBA
• CommonBond’s Story: A Revolution in Student Loans
• Is it Worth it to Get an MBA?

5 Mistakes To Avoid In A Cover Letter

Click here to download your quick admissions guide

Think of your cover letter as the appetizer for what you know will be a great meal.

You only have one chance to make a first impression. If the first impression you need to make is through a cover letter to a prospective employer, school admissions office, or internship sponsor, make sure it shines a light on your qualifications and displays your enthusiasm for the position or that seat in the class. Unfortunately, too many cover letters I see are dull as dust, containing only generalities or jargon and lacking confidence. These letters hurt your cause.

Here are 5 common mistakes in cover letters. Don’t make them in yours!

1. Sound as if you’re bored.

“I am writing in response to your opening for a marketing manager, listed on Job Site website.” This response is honest and to the point, but it also lacks a sense that you really want this gig. Better: “I am enthusiastically applying for the position of marketing manager for Best Company Ever. My experience as a top saleswoman for the last three years for an organic beauty supply is an ideal match for your needs.” Feel the energy of the second sentence? The reader will, too.

2. Don’t make any effort to get inside knowledge about the company or school, or explain why you want to attend their program/get hired by them. Also omit your most relevant experiences that should make them want to give careful consideration to your resume.

There could be a dozen different reasons why you’ve chosen to apply for this job or to attend this program. For example, if it’s a start-up, you’ll have more opportunity to perform multiple roles and gain a broader view of small businesses. In a larger company, you may have more chances for travel or longstanding career growth. Perhaps the company has innovated a technology, product type, or employee-friendly atmosphere that you strongly admire. Identify these things, as well as your most relevant experience/qualifications that match what they are looking for. Don’t go into too many details; keep it short. For example:

“My friend Bonnie V. told me how much she learned about digital media sales and marketing as a result of her internship with Best Company Ever last summer. My experience with the Streaming Live Network in building their salesforce over the last year will make me an ideal fit for your team.”

“As a future entrepreneur in green technology, I admire Live Green Now’s innovations in environmentally friendly plastics and am eager to learn more about these innovations from the inside. My master’s degree in Environmental Studies and research into new techniques for recycling plastics without water makes me a strong candidate for this position.”

3. Ignore the stated requirements for acceptance or position.

If a company says that knowledge of a particular software knowledge, skillset, or academic record is required for a position, don’t waste your time or theirs by submitting a letter if you don’t have it. If you feel you are still qualified, you had better have a compelling explanation and say so up front. Otherwise move on. Pay attention to what companies and schools say they are looking for. They mean it.

4. Sound needy or wishy-washy about getting a call back for an interview. 

A recent cover letter I edited – by someone whose professional experience spanned more than 20 years, numerous awards and 10 patents in his name – ended his letter like this: “If after reviewing my materials you believe that there is a match, please contact me.” This sentence is passive and sounds insecure, as if he doesn’t really expect them to call. And they probably wouldn’t.

I suggested he end the letter like this: “I look forward to the opportunity to meet you to discuss this position and how I can add value to Best Company Ever.” See how the simple change of writing in active voice (“I look forward. . . “) exudes confidence in his ability to demonstrate value.

5. Make them take the extra step of going back to you to get references.

This is one of the mistakes that drives me crazy every time I see it, which is often. Why in the world would you write “References available upon request” instead of providing the actual references in the letter, and/or the resume? List names, titles, phone numbers and emails. If a reference doesn’t have a title, put the person’s relationship to you so the caller will know in what context he or she is providing the recommendation.

Finally, keep the letter short – preferably only a half to three-quarters of a page. This is an appetizer only to get them to want to give your resume careful review, and then call you for the next step. Using active voice, specific facts about your qualifications and the reasons you like the company or school, will demonstrate you are not sending cover letters in a scattershot way, but in a thoughtful, carefully considered manner. And this should help you bring your job search to a swifter and happier conclusion.

Download your free copy of the Quick Guide to Admissions Resume now!

Judy Gruen

By , MBA admissions consultant since 1996 and author (with Linda Abraham) of MBA Admission for Smarties: The No-Nonsense Guide to Acceptance at Top Business Schools.

 

Related Resources:

5 Fatal Flaws to Avoid in Your Application Essay or Personal Statement
Ten Do’s and Don’ts for Your Resume 
Sample Resumes and Cover Letter

Last Day to Beat Accepted’s Price Increase!

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Effective at 12:00 AM PT on September 1, 2014, we will increase our prices on our editing and consulting services.

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Heads Up: Price Increase Ahead

We just wanted to give you a head’s up that we’ll be increasing our prices September 1.

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Move forward with your applications. Starting ASAP on your grad school or college applications means less stress, less rushing, and fewer careless mistakes. The early bird gets the worm!

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M = Motivation

MBA Admissions A-Z: 26 Great TipsA good application essay is comprised of both anecdote and analysis, the what and the why of your personal experiences. Telling a straight story (anecdote without analysis) will leave your essay flat, with no depth or insight into your character or motivations; on the other hand, an essay that rattles on about the why but omits the what will be boring and overly theoretical, lacking substance and voice.

Your goal: To create an essay that balances these two components, that’s full of descriptive details about what happened (your experience) AND why such things occurred (or how you reacted or responded).

Essay Component #1: Anecdote
The first component of a compelling essay is the retelling of what happened to you. This is the story
element of your MBA essay. Most applicants launch their essays with an anecdote to draw in your
readers. Good idea. (For important storytelling tips, please see our free special report, From Example to Exemplary, or the on-demand webinar, Essays that Stick.)

Essay Component #2: Analysis
For this second component, you’ll want to talk about your motivations for pursuing the experience
in question or the lessons learned as a result of it.

The questions below will help you shape the analysis component of your essay. After thinking of a
good anecdote, a key experience that you’d like to share, make sure your essay also addresses the
following:

  1. Why is this experience one that you wanted to bring to the adcom’s attention?
  2. What makes you tick? Why did you make the decisions you made?
  3. How did a particular experience motivate action in the future?
  4. What did you learn from this experience?

You’re applying to b-school, so your quant skills are probably pretty good – so let’s put this in solid
math terms:
Anecdote + Analysis = Your Awesome Application Essay

For more essay writing tips, please see MBA Application Essays 101, a resource guide containing
special reports, webinars, and blog posts on every aspect of the MBA essay writing process.

“M = Motivation” is excerpted from the Accepted.com special report, MBA Admissions
A – Z:26 Great Tips.  To download the entire free special report, click here.




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