financing

The question of how to finance your MBA in USA can be one of your biggest worries even after getting the prized admission letter. With the top US MBA programs costing well in excess of $100,000, the decision to attend one is not just based on career needs but also financial resources. How can one get a loan? Where should one get the loan from – the USA or from one’s home country? Is a co-signer required? How long will it take to pay the loan back? All of these are questions that race through the minds of successful applicants, often dampening the celebration of having gotten the admission in the first place. For some, worry on how to finance your MBA in USA becomes a bigger issue than planning their career and deciding on how to make the most of the time they have. With proper planning and research, though, each of these concerns can be fully addressed. Funding your MBA is a critical part of deciding to go, so planning for it is important.

Major sources of student funding for US MBA programs

Here is a list of the major sources of funding that you can tap for your MBA in the USA:

– Scholarships: These usually come in two flavors – school-driven and external. School-driven scholarships are usually announced around the time that the admissions decision is communicated to you (there may sometimes be a lag of a few days). In some other cases, schools may require you to apply for scholarships after you get in, and you may be required to submit additional documentation (including further essays) for this. Beyond school-driven scholarships, there are also external ones from social and educational organizations that want to promote top talent. The amount and eligibility criteria can vary, and you should take out the time to go through each in detail. Remember to start early – most scholarships go out quickly.

School loans: This should really be the first avenue that you should explore after looking at scholarships. Most top US schools will offer you loans that have much lower interest rates than those available from foreign banks. Typical interest rates for these loans hover around ~7-8%, and can be further reduced if you can get a US co-signer for the loan. Some students do not have friends or family in the US, and must rely only on non-cosigner loans. Some top schools that offer these are MIT, Booth, Wharton, Yale, Haas, Fuqua, Darden, Anderson, Cornell, Kenan Flagler, and Emory [this list is NOT exhaustive – please check the particular school you are looking at to be sure]. The repayment periods for these loans vary from 10-20+ years. Typically, students are able to pay back loans in a period of 5-7 years after they graduate (assuming that they continue to work in the US in this period).

– Independent credit unions and societies: Non-bank institutions like Credila(India) and GSLC offer the option to borrow money in the US without a US co-signer (rates are usually more competitive than those at private banks). There is also the ISLP loan but this requires a US co-signer. Please note that organizations like CommonBond and SoFi, which provide crowd-funded student loans, are NOT options for international students (they require the borrower to be a US citizen or Permanent Resident).

– Bank loans: A bank loan is the next option you would need to look at, either separately or in combination with the others. Depending on the interest rates in your own country, you might like to consider whether a US bank loan will be cheaper or one taken from a local bank. Most US private banks will require a co-signer if you are an international student, and interest rates will be in the 7-9% region (there may be exceptions). That is still competitive when compared to, for example, Indian banks, that currently disburse only limited amounts as student loans and have interest rates in the 12-14% region. Some local banks will be willing to lend much higher amounts against collateral pledged.

– Personal savings: Top MBA programs admit experienced professionals, and if you have been saving regularly, you would have some saving to fall back on. This includes not just the money in your (and your spouse’s) bank account, but also that in public saving schemes and short-term investment schemes. It is wiser to use this money rather than take a larger loan from the bank – there is little chance that your money will earn the kind of interest in your home country that you will need to pay for the education.

The bottomline – start early, and plan deep

Most people end up choosing the school loan option where it is available, though a significant percentage use multiple sources to pay for their MBA. A small minority also tap into work on campus or assistantships to earn some more money. In our opinion, that may not be the best thing to do – the money won’t be much, and there is little time available at top MBA programs to also work alongside. Judicious financial planning done early can ensure that arranging funds does not get in the way of your MBA dream. This will help you not just to have a better MBA experience, but also give you a more realistic picture of the time you would need to spend working abroad to be able to pay the loan off.

Understand the landscape for student borrowing and funding better. See which schools suit you. And how we can help you make it to your dream choices. Contact us: info [at] gyanone [dot] com

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