Melbourne Business School, Australia

Alright, we now come to the part about financing one’s MBA after having focused on the relevance of GMAT, pre-MBA academics and MBA applicant profiles in earlier posts.

Most Indian applicants think that the GMAT registration fee of $250 is high. Then they realise that each MBA application needs an additional application fee. Depending on the number of applications, this can burn a bigger hole in their pockets. But the one expense that takes the cake (perhaps the entire bakery) is the actual MBA tuition fee. And the constantly fluctuating USD:INR exchange rate isnt helping either. A small change in the rate can mean a few lakh rupees up or down in the overall MBA budget. So its important to size up the potential damages first and then plan further. This post covers basic questions that can help you start the process. Well use one puys question to set the tone.

Q1. abhi2911 asked: Can you throw more light on how to finance your MBA?

Before addressing that question, you would need to find out how much financing you are going to need. There are two categories of expenses. In the application phase, youll need to shell out a considerable amount of money some categories are optional (such as GMAT coaching and admissions consulting), while the others arent (such as the GMAT fee, b-school application fee, visa fee, airline tickets). For all of this you are dipping into your personal savings.

For the main MBA program, apart from the tuition fee, you should also factor in the cost of living, books, laptop, local expenses (commuting, socialising, emergency fund). Once youve got an estimated list of expense categories in your Excel worksheet fill up the individual amount cells with what YOU think the expense would be.

Dont strictly go by the numbers mentioned on the school website as these can vary quite a bit for Indians. If your spouse is accompanying you, the cost will be higher. If your personality and track-record predispose you towards spouse-hunting in foreign land, the expenses (dates, expensive gifts) go up further.

Financing this has to be a combination of,

– Personal savings: The wealth youve accumulated from your salary (or inherited from your long-lost-suddenly-discovered, rich uncle).

– Domestic loans: You can borrow from Indian banks (theyll ask for collateral).

– International loans: Many schools have tie-ups with local banks of that country to offer educational loans. Often at interest rates that are much better than those in Indian banks.

– School specific funding options: Tuition waivers, scholarships, part-time work on the campus.

Until a few years ago, the financing scene used to be different. Banks were more than happy to hand out thousands of dollars in education loans purely on the basis of a top b-school admit, without worrying too much about the repayment risk.

Now, since the 2008 recession, theyve become tight-fisted. They expect students to manage a major part of the financing on their own (savings, domestic loans). In schools, where the workload isnt too heavy, students are allowed to work part-time (for up to 20 hours a week) in return for a modest stipend.

Q2. abhi2911 went on: What about those who do not want to do odd jobs to finance their living costs?

In that case, either you should be in a position to pay a higher proportion of the fee from your own pocket or apply to schools where the fee is still within your reach or target schools where your chances of getting scholarships are higher. Several Indian applicants, who have managed their school selection and application strategy well, manage to get MBA scholarships that cover their expenses partially or fully.

Of course, do keep in mind that your primary yardstick to prepare a shortlist of schools should be FIT. Ask yourself if you really need a Harvard or a Stanford to reach your goals? Or will a lower ranked, but good school get you there?

Q3. abhi2911 continued: What is the scenario like, in scholarships and financial aid field?

All b-schools offer scholarships in some form or the other. In the top schools, the really mouth-watering scholarships are also the ones that attract the most brutal competition.

Most of these are merit based, though some are need-based. A few might be linked to specific nationalities, industries or ethnic backgrounds. As an Indian MBA applicant, you belong to an overrepresented applicant pool. Rather than bank on a need-based scholarship, try to differentiate yourself on the basis of talent and merit.

Q3. abhi2911 opens the floodgates: What precautions must one take, while taking an education loan? And what should I do if my family lives in a rented accommodation is there a way I can get collateral-free loan?

Many top schools used to offer collateral-free loans, but these have become more difficult to come by now. Most banks dont want to take the risk with international applicants. But you could check the financing section of each MBA program. They list out the various ways you can fund your MBA. For US-based b-schools, the popular option is to go for co-signor backed loans. That is, someone who you know in the US who can provide the guarantee for your education loan. Which means that if you cant pay the loan back, the bank still knows someone locally who would pay on your behalf.

The most basic precaution is dont borrow any amount thatll give you sleepless nights. Dont burn all your resources (and your personal bridges) just to fund your education. If you are struggling with finances, work for a few years more, get some more disposable income and then re-consider investing in an MBA.

Decide whats import in your list of priorities food, clothing, shelter first. Mental, physical & financial well-being later. And then somewhere down the road comes higher education.

Are there any other burning questions in your mind that youd like us to address in subsequent posts? Write them in the comments below.

Author Sameer Kamat is the founder of MBA Crystal Ball, an admissions consulting venture and author of the bestselling MBA book Beyond The MBA Hype where he shares insights and pitfalls that aspirants should be aware of before they embark on their international MBA journey. He completed his MBA from the University of Cambridge in 2005. You can connect with him on Twitter @kamatsameer