14

Financing Your Studies

Arranging the required finances is the biggest strain on Indian applicants who wish to apply to foreign business schools. So we had thought of starting the book with this chapter. A good MBA programme easily demands an investment of more than USD100,000, which is significant for most Indian applicants. In the past, this factor alone was enough to force a change in plans for an applicant, making him/her appear for CAT for the Indian Institutes of Management and even settle for a lesser known Indian B-school if he/she was not able to clear it.

The financial commitment required for a top MBA programme is, to say the least, taxing. Compared to most other graduate courses, a globally recognized MBA programme is more expensive and intensive. And working in any way (job, teaching or research) while doing the MBA to support yourself is much more difficult than it is for courses such as an MS/MA or Ph.D. For students from developing countries such as India, this level of expense poses even more problems. Income levels in India are lower than other countries (implying lower savings). Often the maximum limit of loans that can be obtained from banks in India (without collateral) does not cover even half of the total costs incurred during the MBA. However, the situation is fast changing as awareness levels increase and as economic conditions improve in India. Today, people are able to enter middle management after completing their MBA from a well-recognized B-school abroad with a significant pay package. Also, there are now numerous opportunities for people who wish to work abroad.

Slowly the focus is shifting from the cost perspective to the value of a global brand in education and the relevance of education as an aid in improving career prospects. People are increasingly turning to loans to fund their management education at well-known universities around the world, knowing fully well that in a best-case scenario, they would be able to pay off this loan within a year or two after graduating from a top-tier business school with a five or six digit salary in dollars. All top universities offer aid to students, either in the form of fellowships or student loans, with or without a co-signer based in the country and in most cases, without any need for pledging collaterals. There are also many sources of funds available in the form of gifts as well as loan scholarships through a number of trusts based in India, which can help you in funding your studies to some extent. We suggest that students do not give up on the idea of pursuing their dream education or getting an MBA at a renowned university, simply for want of financial support. Rather you should, after securing an admission, contact the university and explain the need to the financial aid officials (most universities have dedicated resources for this purpose) and take their help in figuring out ways and means to fund your education at the said institute.

Tables 14.1 (a), (b) and (c) give an estimated summary of expenses at the top B-schools. These figures are only indicative and may increase or decrease from year to year as projected by the university, office of admissions and financial aid.

Popular belief is that the level of financial aid and scholarship support for any of the MBA programmes is low and not substantial. However, if you look into the sources of financial aid available for foreign students at the top US B-schools, the scenario is much better. This differs for European and Canadian business schools where you would need to support your studies in most cases except at well-known B-schools like LBS and INSEAD. Tables 14.2 (a), (b) and (c) summarize the policies for financial aid at the top B-schools and is meant to provide a feel of the help available at top universities. The admission to any of these places is without regard to your financial condition (unbiased). Only once you are admitted, the issue of financing your education comes up, which then can be dealt with in many ways in today’s world. There is always a way if the will beckons.

Table 14.1(a) Summary of Expenses at Some of the US B-Schools

Table 14.1(b) Summary of Expenses at Some of the European B-Schools

Table 14.1(c) Summary of Expenses at Some of the Canadian B-Schools

While the total number of scholarships disbursed by schools to international students is not very high, many of them have attractive loan programmes with soft rates of interest that they initiate either through their own funds or through tie-ups with banks. In fact, the number of schools that make arrangements for these disbursements without the need for a cosigner (sometimes the biggest hitch for Indian students) is large. A co-signer is a citizen of the country in which you are pursuing your education who takes on the risk of default of the loan on himself/herself. By obviating the need for this, these schools make an MBA much more accessible for students from the developing world. Even those without adequate financial resources to readily pay for their education can, therefore, acquire a world class education and repay the loans after they have passed out of the programme. Some schools also provide assistantships to MBA students. This, too, is a good way of funding your education as you are earning while you get your degree. If you live a frugal lifestyle, you will be able to control your spending and cut down on costs, which will help you in reducing the overall investment. Do keep in mind that while you are indeed making a significant investment in getting a degree from a top school, it is an investment that you are making in your own self and your future and should always be seen in such light. Never make the mistake of attending a seemingly lesser programme based on the amount of scholarship provided by the school to you. Instead, make your decision based on the long-term impact of the degree on your career prospects.

Table 14.2(a) Policies for Financial Aid at Some of the US B-Schools

Table 14.2(b) Policies for Financial Aid at Some of the European B-Schools

Table 14.2(c) Policies for Financial Aid at Some of the Canadian B-Schools

Various Sources of Funds

For those pondering over the feasibility of borrowing money for an MBA, remember that financing your MBA through loans and external sources is a common practice, even for students in developed countries. If you are absolutely certain about the benefits an MBA will bring you, then you should treat the costs involved in the process as an investment. The reason why the top schools provide easy access to financial aid is because they want to attract the best students irrespective of their financial condition. Look closely at the various programmes instituted by the school. There is a chance that your school might have a loan-forgiveness programme meant for promoting people who come from a developing country and intend to return there and work in a low-paying sector for some time after graduation. You may want to take advantage of such opportunities, if you plan to come back to India after graduation. Also, look at the possibility of converting to a resident status in the state in which you are pursuing your programme to bring down your cost of tuition significantly during your second year of studies.

Alternative to funding from B-schools and banks that have tie-ups with them, you could also explore many other sources of scholarships and loans. Remember to always look at the money in terms of the currency in which you are going to earn after your graduation from MBA. So if you plan to earn in US dollars, then taking a loan is no big deal, but if you plan to earn in Indian rupee in the social sector, then think twice before opting for this source. You also need to be aware that while you may not have received any financial aid to start with in your first year, a large number of schools would be able to provide some or the other form of aid later, depending on your performance. Also, your summer job is another source to pay for a part of your overall expenses, where you earn a significant amount in a short period, when you work in a foreign country (compared to Indian remunerations). Finally, remember that depending on the job you secure on your graduation, your employer might be willing to pay for your tuition at the university based on actual expenses incurred by you. Some others would pay you hefty joining bonuses which would help pay-off the loan as well. It is indeed important to keep an open mind and consider all such sources of funding which would ease the pressure for you to pay-off the student loan, as early as possible.

International Avenues

Many international sources of scholarships and loans exist and can be availed by students irrespective of their nationality. The most popular among these include CitiAssist (www.citiassist.com), Salliemae (www.salliemae.com) and educational loans that need a US co-signer. When choosing a loan, check for the best rates on offer which include a minimal origination as well as processing fee. Also, look for any agreements that the companies have with your school which might offer a better deal to you and look at ways and means to bring down your payments by a few percentage points with agreeable add-ons such as making 48 consecutive payments or arranging for direct debit to your bank account. Other sources such as British Chevening Scholarships (www.chevening.com) for studies in the UK provide scholarships and one-time grants. Many schools, such as Wharton and LBS, have compiled lists of agencies providing loans and scholarships for business studies and posted them on their financial aid Web sites. As these lists can get dated easily (these firms are not as permanent as the schools), it is best to do a detailed research for up-to-date.

Also look at the following resources:

• www.finaid.org
• www.fastweb.com

Domestic Resources

The first domestic source is the organization you are working for, if it is a multinational corporation or in some cases, even a local industrial concern. It is indeed difficult to imagine that any business would be willing to donate such a significant amount towards funding your studies, but it all depends on your importance to the organization and your willingness to return to it after your studies. It pays to discuss the same with your boss if you managed to maintain good relations with him/her and the firm during your application process and exit phase. A number of banks in India offer educational loans for pursuing higher studies abroad. These are well advertised and awareness about these sources is quite good. But the amount given out is significantly lesser than what might be required for an MBA programme at a top school (maximum limit is INR1.5 million, and requires collaterals). However, there are a number of trusts, societies and organizations that disburse financial assistance to Indian students going abroad. Many of these do not release the information through the media, except maybe some local print media. Hence, it is better to contact them by sending a cover letter and/or requesting an application form. If there is none, then you could send a letter directly to consider you for grant of scholarships. Such a letter should typically be accompanied by:

1. Statement of purpose
2. Updated résumé
3. Confirmed letter of admission to the programme
4. Copies of degree certificates from college or university
5. Copies of mark sheets of Class 10 and 12
6. Copy of the GMAT/GRE and TOEFL score report

There are around 20,000 charitable trusts/societies in India dealing with education in some way or the other. The list below, thus, is not exhaustive but contains the name and addresses of trusts that are supposed to be active in providing education-related grants, especially for studies abroad. The list does not give details about the amount of scholarship offered or whether it is in the form of a gift or a loan. In most cases, for MBA programmes abroad, the organization would only approve a loan scholarship (zero interest), which is still a very good option. Again, some of the addresses might not be current as the information has been compiled from various sources such as the Internet, other trusts and university records. These are mentioned here to illustrate the kind of information that can be researched and made use of.

In most cases, expect a reply from the trust only if you are eligible for their scholarship and funds are still available to be disbursed for the current year. It’s generally a good idea to send out a letter of enquiry around early November (for programmes starting in September of next year) to most of these, the reply to which would then guide you with regard to the final application procedures. (See list of trusts at the end of the chapter.)

Financial Preparation for the Visa Process

Apart from arranging your finances to pay for your education, applicants also need to show their financial preparedness during the visa process. Very few students get substantial scholarships to ease their way through this (and still fewer can afford the whole deal themselves). For the others, the visa documentation for financial aid is normally perceived as more demanding and tedious than arranging the actual loans and assistantships. This is because visa authorities look not only for availability of ready funds (through one’s own savings, scholarships, loans or assistantships) but also for genuine intentions of studying and your overall financial ability to either incur the expenses yourself or repay the educational loans you take.

Though this perception is true to a large extent, we feel that the impression generally created among students and professionals alike in India is that this is a formidable obstacle that you should not even attempt unless you are from a wealthy industrialist family. Mind you, we are not advocating that you take the visa process lightly. We are, rather, suggesting that you explore the possibilities thoroughly before you decide to go either way. Please go through the ‘Myths and Facts about the Visa Process’ below for a general understanding about the visa process and to know of your financial readiness. Again, as the visa process for different countries change from time to time, you should find out the latest requirements and treat all advice in its light, with due research of your own. We believe that the following section would answer most of your doubts.

Myths About the Visa Process

Myth One

Financial reserves of an individual are the single determinant of whether a candidate gets a visa or not.

Fact

Visa authorities look at a range of criteria and not just your savings and properties. For one, the quality of the school and the programme you are planning to attend has significant impact on how strictly the visa officers look at other parameters. In the case of an MBA degree, the visa authorities can assess your overall standing in the job market after you pass out reasonably. A good school can often get you through in spite of you not being rich enough to pay for your entire education yourself. In such cases, your future earning potential is considered good enough to cover up concerns about your immediate financial condition.

Myth Two

Even if you have the necessary loans, you need to show current liquid funds to prove that you can pay the loan back.

Fact

While funding your MBA through a loan, it is highly recommended that you have ready liquid funds to show that your current financial condition allows you to pay it back. You could also take help from relatives, close friends and/or contacts that might be willing to stand guarantee for you and pledge their resources for this purpose.

However, if you cannot do any of these, it does not mean the end of the world. In such cases, we suggest that you have adequate proof of other properties and invested funds as well as an estimate of how you would pay back the loan in the future through installments (while working in India). While this does not guarantee a smooth sailing, it can sometimes help, especially if your school is a good one.

Myth Three

Schools do not assist you in any way with the visa process and it is your own responsibility to manage this leg of the MBA journey.

Fact

This is not true of all schools. We recommend that you check with your schools about how they assist students with the visa process. You could do this with the financial aid office directly or through current students who have undergone the process themselves and, therefore, know what really happens. Some schools offer need-based scholarships (and a scholarship is mostly considered favourably by the visa authorities), others stand guarantee for your loans (that is they are the co-signer for your loan) and still others disburse loans through the school itself. This is not meant to be an exhaustive list of policies but only an indicative one that highlights how some schools support students through the entire process. It is our belief that one should check out these thoroughly before rejecting the thought of an MBA just because of financial limitations.

Key Points Related to Financial Resources Towards Your MBA

• Start the process of searching for financial aid in the form of scholarships, loans and assistantships, as early as possible.
• ave as much as you can and work till the very end, before joining the school to reduce your dependence on a loan.
• Work on preparing a stellar application so that you get into the race for merit-based fellowships, which are solely based on your application and/or GMAT scores (typically in higher 700s).
• For applying to need-based fellowships, look closely at your assets, savings and salary earnings as presented in your application. The less you have, the more you can get in aid. Take the help of your family to address this issue.
• If you are planning to get married, avoid doing so until you are well into your second year or do it when you pass out of the programme. It will help you to avoid an expected increase in assets as well as earnings, which will result in reduction of your financial aid package. Also, it’s usually cheaper to live as a single student in dorms than taking up an apartment for the family.
• Apply for as many outside scholarships as possible. Start early so that you do not miss important deadlines. Loan scholarships provide for interest-free loans, which do provide a helping hand to manage the overall finances.
• Focus on securing a grant during your second year at business school based on performance/merit/need.
• Look out for the possibility of converting to a resident status, which will help reduce the burden of the hefty tuition fee at some of the instate schools.
• Public schools tend to be less expensive than private ones (UCLA Anderson, UCB Haas, UNC Kenan-Flagler). So make your decision after a thorough research and make a suitable choice.
• Find a well-paying summer job and avoid duplicity of rentals by working in the same city as your school (if it helps). This will help you significantly to bring down the overall costs.
• Manage your lifestyle and control your expenses while at the school.

In short, financial considerations should not dissuade you from pursuing an MBA if that is truly your ambition. As explained above, there are many avenues available to access financial resources and almost all the top schools have dedicated financial aid offices that help students in this process. So if you have the willingness to reach out for your dreams then there would be many avenues where you can look for possible support to realize the same.

Some Trusts that Provide Financial Aid