A Step-by-Step Guide to Refinancing MBA Student Loans

Molly Carapiet, VP of Eagle Lending Product and Operations, First Republic Bank
November 11, 2019

As far as graduate degrees go, obtaining an MBA will almost certainly open the door to a lucrative and fulfilling career, but there is also one disadvantage: MBA student loans. According to the National Center for Education Statistics, MBA students finish school with an average of $66,300 in student debt, which is almost double the national average of $35,359, according to Experian. Plus, since the reputation of the program and school directly impacts graduates’ job prospects, those hoping to land top jobs must attend top (read: expensive) schools. That’s likely why, of the 200,000 people who graduated with an MBA in 2018, 18% borrowed more than $100,000, according to a Bloomberg Businessweek survey.

Of course, the news for MBA students isn’t all dire. Student loan debt aside, the median starting salary for new hires with an MBA degree is $105,000, according to the Graduate Management Admission starting salary is only a small consolation for graduates who now face the burden of repaying their hefty loans along with other financial obligations. If you carry high debt from your MBA loans, refinancing could be a smart financial move. Here’s what you need to know to decide whether or not it’s the right move for you.

The benefits of refinancing your MBA loans

Refinancing often carries both short- and long-term benefits for any type of student loan debt repayment, but the more money you have in loans, the greater the potential to save more. For example:

  1. Refinancing to a lower interest rate can save you significant money over the long run. Lowering the amount of interest you pay on your total debt means paying less in overall interest over the life of your loan. With rates at First Republic starting as low as 1.95% APR with discounts,1 you’ll be hard-pressed to find a lower interest rate anywhere else. Use our student loan refinancing calculator to find out your rate and start calculating your savings.
  2. Refinancing can bring down your monthly payments. Depending on the terms of your refinance, you may find that you can pay less each month toward your student loans, which is especially helpful as you’re getting started in your career and working toward a higher salary.
  3. Refinancing can help you keep better track of all of your student loans in one place. For MBA graduates who also have undergraduate student loans, or who have MBA student loans from multiple places, keeping track of multiple loans from many providers is an unnecessary burden. Refinancing multiple loans into one consolidated payment is an easy way to not only potentially lower overall costs but to also streamline the number of payments you have to make each month.

How to get started

If you’re an MBA graduate with student loans and you’re concerned about how much debt you have, rest assured that there are good repayment options. In order to find the best one, start here.

Step 1: Research your opportunities.

A few repayment options available to MBA graduates include:

  • Student loan forgiveness and repayment assistance. Such programs are great if you qualify, and, luckily, there are both federal options available for this type of repayment plan, as well as the potential opportunity to apply directly through your MBA program. For example, Stanford Graduate School of Business offers an MBA loan forgiveness program for graduates employed in the nonprofit or public service sectors. (Check with the MBA program at your school for similar offers.) For federal loans, public service loan forgiveness may kick in after 120 eligible payments have been made while working full-time for an eligible employer, such as a government or not-for-profit organization.
  • Income-driven repayment. A good option for graduates with federal loans who owe more than twice their income, this type of repayment plan reduces monthly payment amounts and forgives student loan balances after they’ve been paid for a certain number of years. Learn about your income eligibility for this repayment option.
  • Student loan refinancing. Refinancing your existing loan (or loans) with a new lender can be a great way to potentially save more each month and/or lower the amount of money you pay in interest over time. Graduates with good credit scores and secure, high-paying jobs make the best candidates for the lowest refinancing rates.
  • Continue making payments as usual. For graduates who can afford to pay back their loans quickly (thus reducing the amount of accrued interest), leaving your loan as is and putting as much money toward paying down student loan debt each month may be the best option.

Step 2: Get the full picture of your loan debt.

Before you can decide which path is best for your MBA student loan debt, you’ll need to do some digging. Start by compiling a student loan balance sheet that includes the following information for all of your outstanding loans:

  1. Total amounts owed
  2. Type of loan (public or private)
  3. Interest rate of each loan
  4. Type of interest on each loan (fixed or variable)
  5. The remaining term of each loan
  6. Whether you have a co-signer

With all of this information on hand, you can figure out how much longer it will take you to pay off your loans as they currently stand, as well as see how your terms stack up against the other options available today. This will not only help you determine whether refinancing is the right option, but it will also make it easier to apply if you do decide to go that route.

Step 3: Determine if you’re ready for a refinance.

There are a few other factors to consider before deciding if you should refinance your MBA student loan, both in terms of whether it’s right for your specific needs and whether you’re the best candidate. For example:

  1. Do you have a desirable credit score? Graduates with the best credit scores make the best candidates for refinancing since lenders will use a credit score to help determine eligibility for rates. Keep in mind that a credit score of 700–800 is considered good, while 800 and above is great. If your credit score falls below the criteria for good, you may want to wait until you can increase your credit score before applying to refinance your loan.
  2. How secure is your job? The best candidates for a refinance will also be relatively secure in their jobs, and the more income you bring in, the better. Additionally, if you hold a certain type of job — for example, in government or at a not-for-profit — you may be eligible for other debt repayment options, such as student loan forgiveness. Showing a steady track record of work will also be important since an application to refinance will likely mean submitting last year’s tax return, as well as potentially your most recent pay stubs.
  3. Do you have additional liquid savings? Besides your income, some lenders like to see demonstrated financial security through other means. Being able to show liquidity in the form of a checking or savings account can help you be a more attractive MBA refinance candidate.
  4. Do your current student loans have a 6% interest rate or higher? If they do, now is the perfect time to move. Student loan refinancing interest rates have been hovering well below 6% — consider locking in those good rates today.

How to refinance your MBA loans

Once you’ve determined that refinancing your MBA student loans is the right move, the process is fairly easy.

Step 1: Evaluate lender options.

Not all student loan refinance providers are created equal. Shopping around for an MBA student loan refinance opportunity is your best bet for getting the best deal. Some of the variables you’ll want to weigh include:

  • Fixed rate vs. variable rates: Which are you more comfortable with, and what are the interest rates associated with each option?
  • Features of the loan: Since you already have a lender for your current student loan, consider what features you’d like to carry over from it. For example, most loan holders could benefit from a deferment option, which allows borrowers to temporarily stop making payments or temporarily reduce the amount paid during a specified period if necessary. You may lose some of these features if you refinance your MBA loans.
  • Loan term: This will traditionally be 5, 10 or 15 years, and your overall loan term will determine how much you pay in interest over time, as well as what your monthly payment looks like.
  • Service of provider: Easy access to customer service — and an actual person, not just an email — always helps when dealing with a student loan refinance, since having your questions answered in a timely manner can be essential.
  • Ease of process: A company that makes it easy to apply for an MBA student loan refinance and readily responds to customer service requests is likely one that will be easy to work with throughout the life of your loan.

Step 2: Apply.

Once your numbers are gathered and your research is done, you’re ready to apply. Applying should be the easiest part of the process since you’ve already done all the legwork. In addition to a short online application, you’ll typically be asked to provide documents — like a government-issued ID, as well as your tax returns, recent bank statements and other paperwork validating your overall financial standings.

There are a lot of options for graduates with MBA student loan debt to lessen their financial burden. Taking the time to research your options and find the right lender can help you better navigate the specific challenges MBA graduates often face. Learn more about how First Republic can help you refinance your MBA student loans today.

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1.Annual Percentage Rate. Rates effective as of October 30, 2019, and are subject to change. The terms of this loan may differ from terms of your current loan(s). For example, this loan does not contain special features such as forbearance periods or income-based repayment plans available for some student loans. If the debt you are refinancing was all incurred for qualified higher education expenses or to refinance a qualified education loan under the Internal Revenue Code, the interest you pay on this loan may benefit from certain deductions thereunder, and it may also be the case that this loan will not be dischargeable in bankruptcy. Applicants should contact their legal, tax and financial advisors for advice on deciding whether this is the right product for them.

Borrower must open a First Republic ATM Rebate Checking account (“Account”). Terms and conditions apply to the Account. If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: 1) 2.00% for maintaining automatic payments and direct deposit with the Account, 2) 0.50% for depositing and maintaining a deposit balance equal to the greater of 10% of the approved loan amount or $5,000 into the Account, and 3) an additional 0.25% for depositing and maintaining a deposit balance equal to the greater of 20% of the approved loan amount or $10,000 into the Account.

Product is not available in all markets. For a complete list of locations, visit firstrepublic.com/locations. Applicants must meet a First Republic banker in person to complete paperwork. This can be done at any First Republic Preferred Banking Office. This is not a commitment to lend, all loans are subject to First Republic’s underwriting standards. Applicants should discuss loan terms, conditions and account details with their banker.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document. This information is governed by our Terms and Conditions of Use.