Friday, April 06, 2007

Funding your MBA

You might think funding is one thing you can think about after getting accepted to B-School. But think again! What if you get accepted and then realize there is a problem with arranging the funds needed to cover your MBA? I personally know people in this situation and hence I thought I should write this post to forewarn those who are just beginning their application journey.

As we all know, the MBA is an expensive expedition. Most applicants hope to fund their education through loans and scholarships. Scholarships are not easy to come by and they seldom cover the full cost of the education. Given the hectic academic and social schedule, it is not practically possible for MBA students to work for their living. So how will you fund the $100,000 - $140,000 you need to pay for your MBA? This is a question you should ask yourself even while you are selecting the schools you want to apply to.

If you are a US citizen or a permanent resident:
I am not an expert on this, but I believe there is federal aid/loans that cover a sizable portion of your expenses depending on your financial situation. So your financial concerns should be lighter than those of an international applicant.

If you are an international applicant, here are the things you need to consider:

Are you applying only to top 10 schools in the US?
If yes, rest easy! Almost all the top 10 schools in the US have a need-blind application process and have a guaranteed loan program for every incoming student. Most of these loan programs do not require a US co-signor. This makes life really easy! You can just go ahead and apply and worry about finances only during visa time (I promise a separate post on this if and when I get my visa :D).

But the top 10 schools are also the most difficult to get admitted into. So you might add a couple of lower ranked schools to your list. This is when you need to be careful. Typical questions to ask yourself before you decide to apply to a school:
  • Does the school have a loan program for international students?
  • Does the loan program require a US co-signor? Do you have someone willing to co-sign for you?
  • What is the interest rate for loans with and without co-signor? Is there a significant difference?
  • Does the loan have guaranteed approval or do you need to go through some credit check before your loan is approved?
  • How long does it take for the loan to be paid out?
  • How are you expected to sustain yourself till you get the loan money?
  • Will you need to bear the cost of tuition even before the loan money reaches you? If so, can you manage it?
  • Does the school offer some special financial assistance for people with your background (if you are a minority applicant)?
  • How do current students from a similar background as yours manage?
These are questions for which the answers may not be readily available on the school's website. After all everything in life cannot be handed to you in a platter :D. Google, current students/recent alumni, the school's financial aid office and fellow applicants (who have information) are the resources you should capitalize on to get your questions answered.

Other sources of funding you can explore:
  • Can you borrow enough money in your home country itself? Are the domestic loans competitive when converted to $?
  • Does the domestic loan cover living expenses also? (This may not be the case, the loans may be restricted to tuition and other academic purposes)
  • Do you have personal sources of funding (e.g. immovable assets, shares etc.) which you would be willing to liquidate/mortgage?
  • Will your parents/spouse/relatives sponsor you?
  • Will your employer sponsor you? If yes, what are the terms? (It is counter-intuitive if you want to switch careers but will have to go back to work for your employers if you avail the sponsorship)
As a future MBA student, you will want to make intelligent financial decisions. The answers to these questions will help you do just that and also save you the disappointment of realizing that you cannot attend a school you had your heart set on.

To reiterate, it is not enough to like a school's program. Attending the school should be financially viable too. So...Read the fine print. Look before you leap!

Some useful posts I unearthed right now :-
Clear Admit - admissions-tip-thinking-about-financing - Paying for your MBA
MBAPodcaster-Financing your MBA
An LBS student's experience