The United States Department of Education offers student loans for graduate studies including the MBA. These loans are offered at lower interest rates, with ?exible repayment terms that include repayment starting after graduation and deferred payments. Loans are awarded in conjunction with the Business School, and payment is made directly to the institution, usually in 2 installments per year. All loan funds must be used only for education expenses. Every Year, the entire Federal Student Aid program disburses more than $150 billion in grants, loans, and work-study funds. Students must complete the Federal Financial Aid (FAFSA) form to determine if they are eligible.
Earlier, subsidized loans at less than 4% interest were available, with the government paying the interest until the repayment period. In August 20111, the US Congress signed The Budget Control Act of 2011, which states that graduate studies cannot be subsidized from July 1st 2012 onwards.
Points to note while applying for federal aid:
1. There is no parental income cut-off that prevents a student from qualifying for student aid. Eligibility is determined by a formula that besides income includes factors like age of parents, especially the older parent and family size.
2. By filling FAFSA, students are automatically applying for state funds, as well as aid from the school.
3. Almost all of the federal student aid programs do not consider a student’s grades for eligibility. A basic record of satisfactory academic progress is enough.
4. Age is not a criterion for federal aid.
The basic eligibility for Federal student aid:
• Be a U.S. citizen or Green Cardholder
• Have a valid Social Security number
• Be working toward a degree or certificate
Types of Federal Aid
1) William D Ford Direct Stafford Loans - The Direct Unsubsidized Loan
This loan is available to MBA students who are enrolled at least half-time. Students can borrow a maximum amount of $20,500 per year, at a reasonable, fixed interest rate of 6.8%, and students do not need to demonstrate financial need to be eligible.
The repayment period begins 6 months after graduation, leaving the university, or dropping below the specified half-time enrollment, which varies from program to program. The Department of Education is the lender, and interest starts accruing from the date of release of the loan.
The interest payment can be deferred until the repayment period starts, and the interest amount is capitalized.
Students must note that there is a fee of 1% of the loan amount, which is deducted from the amount paid – only 99% of the loan request is paid to the school. The loan requested for must include this amount.
No collateral, credit check, cosigner, or endorser is required for the Direct Unsubsidized Loan to be sanctioned.
Do note that students cannot cross a total credit of $138,500, which includes undergraduate subsidized / unsubsidized loans.
2) The Federal Direct PLUS Loan
MBA students who are enrolled at least half-time can avail of the Direct Plus loan that has a fixed interest rate of 7.9%. The maximum amount that can be borrowed is calculated by deducting financial aid received from the total cost.
Expenses that can be included under the cost of attendance are tuition, room, board, institutional fees, books, supplies, equipment, dependent child care expenses, transportation commuting expenses rental or purchase of a personal computer, loan fees and other documented, authorized costs.
Repayment must begin 2 months after the final loan installment is disbursed. The borrower must repay the Department of Education, and interest accrues from the date of disbursement of the loan. If it is not paid until the repayment starts, the total interest is added to the capital amount.
A loan fee of 4% of the principal amount is charged, which is proportionally reduced from each loan disbursement.
If the student has an adverse credit history, an endorser without an adverse credit history must be obtained to avail of the loan. No collateral is required.
Credit check
• Any credit repayment delayed by 90 days or more
• Any of the below in the last five years: default, foreclosure, tax lien, bankruptcy, discharge, repossession, wage garnishment, write-off of a Title IV debt or open collection.
3) The Federal Direct PLUS Loan for Parents
Students have the option of getting their parents to pick up loans on their behalf. For parents who are inclined to do so, the loan conditions are identical to the students’ Direct Plus Loan, except that the parent is responsible for loan repayment. In case the parent has an adverse credit history, an endorser without an adverse credit history must be found.
4) Federal Direct Consolidation Loan
The Direct Consolidation Loan allows students to combine two or more federal student loans. This simplifies the repayment process by allowing one consolidated monthly payment. Such a loan will have a fixed interest rate, calculated based on the weighted average of all the interest rates involved, rounded up to the nearest one-eighth of 1%. It cannot exceed 8.25%.
The repayment period can be extended, in some cases up to 30 years, alternative repayment plans may be opted for and any variable interest rate loans can be moved to a fixed interest rate.
On the other hand, more payments may have to be made and the total interest paid may increase.
Once loans are combined, they cannot be separated. In addition, a PLUS loan made to a parent cannot be transferred to the student by consolidation.
Loan Repayment
There are various flexible and highly convenient options to repay the loan. If a student can prove that the below repayment plans are unable meet his or her special circumstances, an alternative repayment plan may be possible. The repayment plans can be changed at any time after the loan repayment has begun.
Standard Repayment Plan
• Fixed monthly payments to repay the loan in full within 10 years
Graduated Repayment Plan
• Start with lower payments which gradually increase over time to repay the loan within 10 years
• No one payment can be more than three times any other payment.
Extended Repayment Plan
• The loan is repaid in a period not exceeding 25 years
• One can choose to make fixed or graduated monthly payments
Income Contingent Repayment Plan
• The monthly payment will be based on factors like annual income (including spouse's), family size, and the total of Direct Loans
• Until the information required to calculate the monthly payment amount is available, the payment will equal the interest accrued
• As income changes, the payments may change
• If the loan is not repaid in 25 years, the unpaid portion will be forgiven. Income tax on the outstanding amount may have to paid Income-Based Repayment Plan
• Monthly payment will be based on income during any period when a partial financial hardship occurs.
• Monthly payment amount can be adjusted annually
• The loan must be repaid within 10 years.
• Under certain circumstances over a 25-year period, the outstanding balance on loans may be cancelled
Loan Deferment
The repayment of the loan may be deferred for:
1. The period of studies
2. A period of up to 6 months after graduation
3. Up to 3 years in case of unemployment / financial difficulty
4. Service in the Government / Armed forces / Peace Corps / Certain other volunteer work
Resources
1) Student Aid
2) FAFSA
About the Author
I am Atul Jose - the Founding Consultant at F1GMAT.
Over the past 15 years, I have helped MBA applicants gain admissions to Harvard, Stanford, Wharton, MIT, Chicago Booth, Kellogg, Columbia, Haas, Yale, NYU Stern, Ross, Duke Fuqua, Darden, Tuck, IMD, London Business School, INSEAD, IE, IESE, HEC Paris, McCombs, Tepper, and schools in the top 30 global MBA ranking.
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Contact me for any questions about MBA or Master's application. I would be happy to answer them all
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Review Skills # Writing Skills
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F1GMAT's Winning MBA Essay guide will teach you how to transform your essay into a life journey with trials and tribulations that will move the admission team.
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+ The Art of Storytelling
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+ How to prepare and present for the Video Essay
+ How to write about your Strengths
+ How to write about your Weaknesses
+ Leadership Narratives
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+ The Secret to "unleashing" your unique voice
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+ How to write about your Strengths
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Want to try the individual school Essay Guides before upgrading to the Winning MBA Essay Guide? Try below.
F1GMAT's Essay Guides
Harvard MBA Essay Guide (20 Sample Essays)
Growth-Oriented Essay: Curiosity can be seen in many ways. Please share an example of how you have demonstrated curiosity and how that has influenced your growth. (up to 250 words)Example #1: Persistence Narrative
Background Information: The applicant – a design and music talent, shares her journey through several setbacks. She attributes curiosity to her growth.
Curiosity: Philosophy
Curiosity (Explained): Curiosity as a philosophy is tough to translate into a narrative unless you are from the creative industry or your contributions had an influence on a solution or an initiative.
MBA Essay Strategy: I wanted to capture the humanity of the applicant and her influence in music instead of just highlighting how she overcame multiple roadblocks to gain attention as a designer.
Theme: Persistence
Read: Harvard MBA Curiosity Essay – Life Starts at NO (Growth-Oriented HBS MBA Essay Example)Example #2: International Community Building
Background Information: The applicant, a Machine Learning (ML) entrepreneur specializing in healthcare diagnostics, shares how his curiosity to learn other ML algorithms’ evolution in diagnosing Alzheimer’s, cancer, and heart disease transformed his platform into a global community.
MBA Essay Strategy: I wanted to show the applicant’s contributions in diagnostic from 2020 to 2024 by citing two events. Such examples build credibility instead of engagements that were recent. The evolution of the platform from an AI development community to a community for discussing the application of AI in diagnostics is captured through a ‘curiosity’ angle.
Read: Harvard MBA Curiosity Essay – Growth through Collaboration (AI in Healthcare) (Growth-Oriented HBS MBA Essay Example)Example #3: Culture
Background Information: The applicant, an Entrepreneur from India narrates his first entrepreneurial experience – facilitating exchange of stamps in the late 1990s.
Theme: Culture
MBA Essay Strategy: Instead of addressing the biases in the investor community that could turn preachy, I wanted to focus on the applicant and his entrepreneurial journey by citing two entrepreneurial experiences – a platform(club) for stamp collection and his Grocery delivery App.
Read: Harvard MBA Curiosity Essay – The American Dream (Growth-Oriented HBS MBA Essay Example)Example #4: Addiction
Background Information: The applicant – a beneficiary of the foster home system, captures the sacrifice his adopted grandparents made to save him from a path of addiction. Paying it back through early intervention among teenagers and community engagement is the curiosity narrative.
Theme: Addiction
MBA Essay Strategy: My strategy is to capture a gratitude narrative in the first one-third of the essay to demonstrate motivation for starting the venture and dedicate the latter part of the essay to the unique solution
Read: Harvard MBA Curiosity Essay – Drug Addiction and Gaming (Growth-Oriented HBS MBA Essay Example)Example #5: Scarcity
Background Information: The applicant, an education major, recognizes that 70% of all students in Kenya don’t have a computer. The curiosity that drives him to pivot from one solution to another is the growth narrative.
Theme: Innovation
MBA Essay Strategy: Often, innovation is captured with a ‘hero’ narrative where the applicant is the sole originator of an idea. I wanted to break that cliché and include a person from whom the applicant learned to use a concept called ‘scaffolding.’
Read: Harvard MBA Curiosity Essay – Scarcity (Growth-Oriented HBS Essay Example)Example #6: FinTech
Background Information: The applicant captures a vulnerable moment of a beneficiary to compare his journey of side hustle before a technology giant noticed his talent. Although cryptocurrency is not a flavor for the year, capture niches where innovation is still happening.
Theme: Education, Child Welfare
MBA Essay Strategy: Empathizing with a techno solution is tough without a strong backstory around the beneficiary. For the essay, I wanted to clearly establish the beneficiary – Rami, before the applicant narrates the similarities to his journey and finally shares the solution that emerged from his curiosity.
Read: Harvard MBA Curiosity Essay – FinTech as a Tool for Good (Growth-Oriented HBS MBA Essay Example)Example #7: Learning from the best
Background Information: The applicant – a Remote Engineer in the Oil and Gas industry, reflects on a value that has helped her learn from the best regardless of her geographical limitations.
Theme: Learning
MBA Essay Strategy: The effectiveness of the case-study method depends on the assumption that peers in a Harvard MBA class will help elevate your learning experience. For the essay, I have highlighted the applicant’s recognition of this value proposition with three examples.
Read: Harvard MBA Curiosity Essay – Learning from the Best (Growth-Oriented HBS MBA Essay Example)Example #8: Military & Search for IMPACT
Background Information: The most common narrative for US military applicants is to quote 9/11 and the reaction your immediate family had while watching the events unfold. The horrifying moment is captured as a motivation to join the Military. On digging deeper, most applicants would share that their motivations were diverse.
Theme: Career Choice
MBA Essay Strategy: I wanted to quickly highlight that the applicant had the choice of entering any industry. One achievement to demonstrate his curiosity that I shared in the first half is the invention of a game. Since the game is mentioned in the resume and verifiable through search, I didn’t quote the name. By clearly highlighting the person’s curiosity and career options, the family legacy is used as a factor in joining the military.
Read: Harvard MBA Curiosity Essay – Career Choice after a Military Career (Growth-Oriented HBS MBA Essay Example)
Leadership-Focused Essay: What experiences have shaped who you are, how you invest in others, and what kind of leader you want to become? (up to 250 words)Example #9: Small Business Values
Background Information: The applicant - a second-generation Asian American, is familiar with the values of fiscal conservatism, building relationships, and understanding the daily struggles of the community through his family’s department store.
Theme: Customer-Centric
MBA Essay Strategy: The applicant’s role in developing an App for the store is highlighted in the essay at a crucial part of the narrative so that the essay is not all about his father. I have also humanized the journey – by sharing how upset the father was when the revenues fell by 40%. The essay is about the transformation in the applicant’s value from a person chasing productivity and optimization technique to someone who is truly thinking about the customers.
Read: Harvard MBA Leadership Essay – Small Business Values (Leadership-Focused HBS MBA Essay Example)Example #10: Breaking Away from Family Business
Background Information: A unique challenge that applicants whose parents are public figures or CXOs of businesses or entrepreneurs are the pressure to live up to the parent’s standards or milestones. For the leadership narrative, the burden of legacy is established before the narrative addresses his leadership principles.
Theme: Authenticity
MBA Essay Strategy: For the essay, I want to capture an entrepreneur’s journey to rise above his entrepreneur father’s image. But I didn’t want to make the entire essay about this complex dynamics. The narrative is around the applicant’s focus on customers and surrounding with teams who keeps him grounded.
Read: Harvard MBA Leadership Essay – Breaking Away from Family Business(Leadership-Focused HBS MBA Essay Example)Example #11: Creativity and Communication
Background Information: When the overall percentage of users with internet access is 62% in South Africa and the inequality accentuated by the rural and urban divide, the applicant endured the lack of digital infrastructure, and spending close to 22% of the family income on gaining relevant information on schools, global exams, and financial assistance.
Theme: Creativity, Communication
MBA Essay Strategy: The strategy is to share why the applicant values no distraction in a child’s home for optimum education experience. Then I highlight the many roadblocks the applicant’s non-profit faced in receiving fee waiver for their cooperative run ISP.
Read: Harvard MBA Leadership Essay – Non-Profit (Telecom) (Leadership-Focused HBS MBA Essay Example)Example #12: Mental Health
Background Information: The applicant like most didn’t pay much attention to the mental health epidemic until tragedy hit home.
Theme: Communication, Innovation
MBA Essay Strategy: A question we frequently get from applicants is whether they should cite tragedy in the family as a motivation for a venture or a non-profit initiative. As long as you don’t linger too much on the tragedy and offer a balanced narrative, there are no restrictions on leveraging unique stories from your life.
Read: Harvard MBA Leadership Essay – Mental Health (Leadership-Focused HBS MBA Essay Example)Example #13: Trauma, Healing & Finding Authentic Self
Background Information: The applicant narrates the absurdity of war in the narrative about the duties in Kabul, and the trauma. Instead of wallowing in on the horror, the applicant takes what makes military applicants strong and guides unprivileged children build life and leadership skills.
Theme: Resilience
MBA Essay Strategy: Capturing PTSD in an essay, the healing process, and the cues that helped the applicant are too sacred to be shared in a Harvard MBA application essay. However, with the right motivation and narrative arcs, you can capture the essence of your journey without sharing the darkest secrets. That is what I did by merging two stories – the horrors of the war with a non-profit engagement.
Read: Harvard MBA Leadership Essay – Military & PTSD (Leadership-Focused HBS MBA Essay Example)Example #14: Addiction, Setback and Leadership Mantra
Background Information: In this narrative, the applicant captures Peru’s Silver mining boom of 2006. The growth experienced in her father’s business shifted the family’s economic status to a new stratosphere. Through the changing economic and family dynamics, the applicant finds her voice in a unique way, initially to record her unheard voice but later as one of the youngest subject matter experts in mining and commodities.
Theme: Failure
MBA Essay Strategy: For the essay, the strategy is to show how life’s unpredictability is a blessing. By narrating two setback events, the essay demonstrates the applicant’s resilience and her acknowledgment of people who made a comeback possible.
Read: Harvard MBA Leadership Essay – Addiction, Setback and Leadership Mantra (Leadership-Focused HBS MBA Essay Example)Example #15: War, Immigration and Starting Over Again
Background Information: Despite a raging war in Syria, the family of the applicant was unblemished by the chaos. The strategic government assets near the applicant’s house would have made the region an easy target, but it was not. The calmness of her journey is shattered in one event. From the privileges of a cocooned life, the applicant is forced to think about survival, her sister’s future, and her future in the US. The second half of the narrative captures the change that was forced on her.
Theme: Gratitude, Resilience
MBA Essay Strategy: I consciously chose not to start the essay with a dialogue or trauma. Two lines are allocated to set up the narrative before the trauma event.
Read: Harvard MBA Leadership Essay – War, Immigration and Starting Over Again (Leadership-Focused HBS MBA Essay Example)Harvard MBA Business-Minded Essay: Please reflect on how your experiences have influenced your career choices and aspirations and the impact you will have on the businesses, organizations, and communities you plan to serve. (up to 300 words)
Example #16: Creative or Finance
Background Information: The applicant starts the narrative with the origin of her talents. The unbridled enthusiasm receives a reality check when in high school, the applicant’s father has a conversation with her about academics. While the applicant picked up her quant skills, she was reaching over 50,000 loyal fans, and her videos captured 1 million views.
Theme: Passion, Talent
MBA Essay Strategy: Capturing vulnerability is the toughest part for Harvard MBA applicants. For this essay example, I have captured the applicant’s uncertainty about career choice throughout the essay. Here the goal is to show vulnerability in the career choice essay while for leadership and growth essay, I could capture one example each from creative and PE industry respectively to balance the narrative. So don’t follow this example without a strategy.
Read: Harvard MBA Business-Minded Essay – Creative or Finance (Business-Minded HBS MBA Essay Example)- Stanford MBA Essay Guide (24 Sample Essays)
- Columbia MBA Essay Guide (21 Sample Essays)
- Wharton MBA Essay Guide (15 Sample Essays)
- INSEAD MBA Essay Guide (19 Sample Essays)
- Darden MBA Essay Guide (21 Sample Essays)
- Yale SOM MBA Essay Guide (15 Sample Essays)
- Tuck MBA Essay Guide (15 Sample Essays)
- Haas MBA Essay Guide (18 Sample Essays)
- NYU Stern MBA Essay Guide (15 Sample Essays + 6 Examples - Visual Essay)
- LBS MBA Essay Guide (6 Sample Essays)
- MIT Sloan MBA Essay Guide (6 Sample Cover Letters + 3 Sample Video Statement Scripts + 3 Sample Optional Essays)
- Kellogg MBA Essay Guide (11 Sample Essays)
- Chicago Booth MBA Essay Guide (12 Sample Essays)
- Ross MBA Essay Guide (31 Sample Essays)
- Duke Fuqua MBA Essay Guide (10 Sample Essays + Two 25 Random Things Samples)
- Cambridge MBA Essay Guide (12 Sample Essays)
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