Financial aid is one of the major factors that can affect your choice of business school. MBA financing is so important that you need to consider it before you even think about applying to business school. In this article, financial aid directors from UC Berkeley’s Haas School of Business and Columbia Business School offer their advice for MBA applicants.
1. Look at your individual circumstances
While it’s tempting to Google ‘best MBA loan’ and hope for a quick fix, there is no one-size-fits-all solution when it comes to financing your MBA. Each student is different, points out Sarah Lopez, director of financial aid at Berkeley-Haas: “Not every student will come in with the same resources. Not every student is comfortable taking on debt at the same levels.”
In addition, each student coming into business school has a different set of circumstances and a different financial situation, so the best financing option for one person won’t necessarily be the best for another. Even on an individual basis, there may not be one perfect solution, since deciding how to pay for your MBA isn’t as cut and dry as knowing when to start saving for retirement. There are a lot of different factors that affect your MBA financing choices, including your intended post-MBA career, living costs, your credit situation and the amount of money you have saved. That’s why you should run through all the different potential MBA financing scenarios and make decisions based on your individual situation.
If you have problems finding the best plan to fit your circumstances, the good news is that you’re not alone. According to Lopez, the financial aid office can help “students craft a plan so they understand the specific sources of aid as well as their individual circumstances.”
2. Save your money
“‘Save, save, save,’ would be our best advice,” states Marilena Botoulas, assistant dean of financial aid at Columbia Business School. Specifically, Botoulas advises that “students come into school with a level of savings that will allow them to achieve the personal, community and interpersonal goals they have set for themselves."
Attending a top MBA program is an expensive endeavor, and having money saved up beforehand helps with living costs and reduces your reliance on loans. Students also have to consider potential costs beyond tuition and cost of living. Having money saved can help you prepare for the different scenarios that could occur during your MBA program. For example, familial obligations may require you to travel home more often than you expected, or you may need money to cover expenses associated with recruiting or spring break trips.
3. Look for MBA scholarships and “free money” before loans
Before applying for MBA loans, “all MBA students are encouraged first to look for any grant, scholarship or fellowship assistance in order to keep their loan borrowing at a minimum while they are enrolled,” states Botoulas. Most business schools offer need and merit-based MBA scholarships. Business schools also usually keep lists of external scholarships and programs which can help students pay for their MBA.
It is well worth the extra work to find MBA scholarships and grants, because, as Lopez states, “it’s free money, essentially, and it’s better than taking out loans.”
4. Ask your family and company for help
As with MBA scholarships and grants, receiving money from your family or company can help lower your dependence on MBA loans. That’s why you should consider asking your family and/or company for help towards paying for your MBA. Whether or not asking for money is a good idea, however, depends on your own situation, particularly when it comes to sponsorships. Lopez states that sponsorships are “a good option when someone knows that they’ll be going back to that company and they’re comfortable making that decision.”
5. Review your living expenses
In addition to paying for your program, you also need to have money for a place to live, food to eat, plus other living-related expenses that come up during your MBA. In fact, the cost of living is the second-highest cost associated with attending an MBA program. While your MBA program will provide you with a suggested budget which includes tuition, fees and living expenses, those factored-in living expenses are moderate. That’s why, according to Botoulas, “anything that could be considered a lifestyle choice should be reviewed carefully.”
6. Estimate your post-MBA salary
“Before committing to business school, students should research the kind of salaries they can expect to receive, post-MBA, in their chosen industry and position,” states Botoulas. Estimating your post-MBA salary is the first step towards being able to evaluate you capability to pay off a loan, as well as the maximum amount you should borrow in the first place.
7. Go to the financial aid office
“We recommend that students contact the financial aid department as soon as they’re admitted,” states Lopez. After that, “any point a student has confusion about the process is a good time.”
There’s a common misconception that financial aid offices are only open when classes are in session when, in fact, most offices are open year-round. Indeed, Lopez says that summer is a particularly busy time for Berkeley-Haas’ financial aid department.
8. Know what factors to look at when evaluating MBA loans
According to Botoulas, students should look at the following factors in order to evaluate whether or not an MBA loan is right for them: “Origination fees, interest rates and whether they are fixed or variable, the term (length) of the loan, grace period but also whether a loan product offers repayment flexibility for economic hardship or unemployment, income-based repayment, loan forgiveness for death or total disability as well as for working in a nonprofit or government agency.” Another major factor to consider is the maximum loan amount.
9. Don’t wait and apply for your MBA in the last round
According to Lopez, it’s “really critical” that students apply early instead of waiting for the final round. Individual business schools only have a certain amount of scholarship money available each year and some fellowships are likely to be awarded very early in the admissions cycle. Even if you are a superstar student, applying late could mean that you will miss out on a scholarship you might have been able to get had you applied earlier.
10. International students should look for financial aid options in their home country first
When it comes to MBA financing for international students, Lopez advises students to look to MBA scholarship and grant options in their own country before looking at options within their intended host country. International students may be competing with domestic students for scholarships and fellowships, so it’s important that they know the full array of options available to them.
In the US, for example, international students can’t apply for a federal MBA loan, which puts them at a disadvantage. At the same time, however, international students shouldn’t rule out private MBA loans entirely, since some business schools (such as Columbia and Berkeley-Haas) will act as a co-signer. Some business schools are more hands on about helping international students find financing than others, so it’s important to find out what services your school provides.