Pay Your Way in the USA: MBA Loans

One major problem that all MBA candidates face is paying for their education in the USA. TopMBA.com looks at the different loans available.

Looking at a long list of MBA degrees in the US on TopMBA.com’s business school profiles, course fees vary drastically, reaching over US$120,000 in some cases for the best business schools.

Then one has to factor in the additional costs involved.

There are living expenses, especially if you’re thinking of a New York- or Boston-based MBA degree. There are the costs of books, computers and software, there may be essential travel, and administration charges by the business school that are often separate from course fees.

And all of this needs to be covered while the MBA student is out of the working environment for anything up to two years.

For US students this does not always present too much of a problem, as long as their credit history is decent enough. After all, American banks, even in these strained economic times know that MBA graduates are a sound investment when they start work.

Federal loans are also available to US nationals through the Federal Graduate PLUS Program via the US Department of Education.

International MBA students

For international students the issue is far more complicated.

While, during the boom years, overseas students could get sizeable MBA loans without a co-signor (an American citizen who effectively acts as a guarantor for the loan) this is all but impossible in 2011.

Despite this, the US is still the world’s number one destination for international MBA students. So, unless you want to pay for your US MBA degree from your own savings, or are one of the very fortunate few that have managed to get your company to cover the costs for you, what are the realistic loan options to study an MBA in the USA?

Talk to the business school first

The business school itself needs to be your first port of call. In fact, it may be that the business school has ways of accessing loans for MBA students and, in some cases, can even act as the guarantor for the private loan.

Alexis Mellon of the Fuqua School of Business, Duke University says: “We have ensured that the Duke MBA loan program has always been accessible to international applicants on the same terms as it is for our domestic [US] applicants.

“Duke University agreed to underwrite the loan – effectively acting as a co-signer – so that any student admitted to any of our MBA programs was automatically eligible for our loan program, which covers up to 100% of tuition. This way we have been able to protect our international applicants and afford them the same opportunities as our domestic applicants.

Paul Danos, dean of Tuck Business School at Dartmouth said to me last year: “Financing will not keep the right student from coming to our program.”

The school, after all, wants talented students that are concentrating wholly on their studies and not worrying about whether they can even continue with the program for financial reasons.

MBA funding from your home country

Andrew Scharf of Whitefield Consulting Worldwide says: “Most American and Canadian schools offer financial assistance or scholarships to foreign students. Most will expect you to pay something and you cannot receive a US visa without the necessary funding to stay in the country during your MBA studies.

“We often see Europeans contact their own banks for loans. If you are admitted to a top MBA program, [most] banks will only be too happy to lend you the money because they will see this as a good investment.”

Liz Wagoner, assistant director of admission at Boston University’s School of Management, adds: “Though international students aren’t eligible for federal financial aid there are a number of other ways to fund their education.

“At Boston University, we offer a number of merit-based scholarships which are available to both domestic and international students. Last year 73% of the class received some form of merit scholarship, so these types of opportunities are a great way for international students to help fund their education.”

Prospective employers can also act as guarantors so, if you know where you will be working after the program is completed, it may be worth speaking to the employer to guarantee your US MBA loan.

MBA loan program

An innovation by Deutsche Bank in late 2009, called the Affiliated Loan Program for Students (ALPS) also provides secured loans for MBA students at certain colleges. What makes this program unique, to students at participating business schools, was that a US co-signor is not necessary. However, as only a handful of US business schools have agreements in place with Deutsche Bank, applicants should be sure to check prior to submitting an application.

In addition, even when student loans for MBAs are available, rates for repayment can often be in double figures in the US now, making an investment in an MBA quite high and lowering the ROI of an MBA degree considerably, compared with a few years ago.

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External links:

Federal Graduate PLUS Program | Deutsche Bank's Affiliated Loan Program for Students (ALPS)