Trying to figure out how you’re going to afford your Harvard MBA can feel very scary – I definitely remember the sticker shock I felt when I read the expected student budget for the first time.
Luckily, there are a lot of ways for you to get support as you decide how you want to finance your time at HBS. Many students, myself included, aren’t able to pay for business school out of their savings and instead utilize a combination of financial aid, scholarships, and loans to get themselves through the program. Here is an overview of what I learned when I went through the process – I hope it’s helpful!
HBS has an incredible need-based financial aid program. The administration firmly believes that funding should not be a barrier for anyone to attend business school and they ensure that no student is required to take on too much debt. To achieve this goal, HBS asks all admitted students to submit their financial information. The financial aid office uses this information to assess each student’s unique situation and then offers fellowship grants to those with a demonstrated need to offset the cost of the MBA program. You do not have to pay the grants back – they literally reduce the price of tuition – so they can make the MBA much more affordable. HBS wants everyone who is admitted to be able to come and therefore the aid is awarded solely based on financial need. Nearly 50% of the class receives an average of approximately $32,000 per year in need-based grants.
External Scholarships and Fellowships
There are a wide range of scholarships that can also help offset the cost of business school. Some scholarships are offered through Harvard, but there are more available that you should be able to find through an online search. I’d especially recommend checking out FinAid and Fastweb, both of which have extensive scholarship directories. You can receive up to $10,000 per year in external funding before HBS adjusts the amount of your need-based fellowship.
A certain level of educational debt is expected with the HBS need-based fellowship formula. There are many loan options out there, and selecting the right one can feel overwhelming. Here are the basics to get you started.
Domestic Students If you are a U.S. citizen, there are essentially two types of grad school loans for you to choose from: Federal loans and private loans. While they have some similarities, there are a number of important differences that are worth considering. Many people base their decision about which loan to get based on interest rates and payment plans.
||Private Educational Loans
|What Are They?
Educational loans you can take out from the Federal Government. Most grad school students will be eligible for two types of Federal loans: the Federal Direct Stafford Loan and the Federal Direct Grad PLUS Loan. They have fixed interest rates, which means that rates will stay the same regardless of what happens in the market.
While Federal loan interest rates may be higher than what you could find right now through private loans, their most important advantage are their flexible payment plans.
Education loans that you secure through a private bank or lending company. Private loan terms (i.e., payment options and co-signer requirements) vary a lot from lender to lender, so make sure to really read the fine print!
Private loans typically have variable interest rates, which means you may be able to secure a private loan with a lower interest rate than a Federal loan. Adding a co-signer with good credit to your loan will also go a long way toward reducing your interest rates.
Payment options for private loans vary depending on the lender. While they don’t typically offer the flexible payment plans you can get through the federal government, they may have a longer payment period that will allow you to reduce your monthly loan bill.
|Who Are They Best For?
Federal loans are the best for people who want to take advantage of fixed interest rates, perhaps because you are exploring a variety of career options or may need to pay off loans over a longer period of time. Because Federal loan interest rates are currently higher than those of private loans, you may end up paying more in the long run—but their flexible payment plans take a lot of the pressure off if you go into a less-lucrative field. They are also good options if you have a credit score on the lower end or do not have a credit history and don’t have access to a co-signer.
Given that private loans have variable interest rates which can go up at the lenders’ discretion, they can be best for folks who feel certain about paying them down more quickly. You also may be interested in private loans if you feel comfortable adding a co-signer and refinancing the loan after graduation so that you can take advantage of the initial lower interest rates.
The government has limits on how much total money you’re allowed to borrow from them, which includes any loans you took out for undergrad, so you’ll need to do some research on how much funding you would be eligible for before applying.
StudentLoans.gov is the one-stop shop for all things related to Federal student loans, from learning more to ultimately applying (and paying back down the road). A final recommendation is to do your best to maintain a solid credit history before attending HBS to have the most financing options possible (you can pull your free annual credit report to see where you stand). If your credit score is too low or if you are in default of a previous loan, it can be difficult to obtain a future loan.
You can always mix private and Federal loans. Harvard does an annual RFI (Request for Information) and the results are shared with students to help them get started with their loan search.
International Students You have a couple of different options when it comes to educational loans. First, international students can sometimes secure a private loan, especially if they have a US co-signer. If you do not have a US co-signer, Harvard University Employees Credit Union (HUECU) provides private educational loans. There may also be other private educational loans available to you, and you are encouraged to investigate all options, including in your home country and/or country-of-residence loan options. Harvard does not prefer, recommend, or endorse any particular lender and accepts loans from any lender (unless prohibited by law).
Unlike some schools, you won’t receive your financial aid package from HBS when you receive your offer letter. Instead, you’ll apply for your loans and fellowships once you have been accepted into the program.
I hope this helps as you come up with a plan to pay for your MBA. Good luck!