When applying to an MBA school, one of an applicant’s first concerns should be how he or she will pay for the education. MBA programs are expensive. The cost of tuition alone easily can exceed $100,000 for the entire program. While enrolled in an MBA program, students also must pay for housing and food. Even though an MBA can pay great dividends, the cost of acquiring the degree will be earned back over years, not immediately. Therefore, a principal concern of an MBA applicant is financing.
Students can cover the costs of MBA school in a variety of ways. Some may use family money and resources. Many also work full or part time while going to school. These options ensure that a student will face a smaller debt load upon graduation and can begin cashing in on the advantages of an MBA. For many, however, the strain of working while attending school or the prospect of draining family coffers is unacceptable. These students turn to alternative methods of financing their educations.
Financing is an important consideration when applying to MBA school.
Most schools offer financial aid to certain students, based on need, so that the student’s total costs end up being less than the average student’s. Grants are offered to many students who apply. They cover the needs of students from different backgrounds and often are given to those pursuing a specialized field. Scholarships are awarded to students who demonstrate academic achievement or some other ability. Most students, however, are forced to turn to student loans to finance at least part of their education. Student loans are of various types, and many have deferred payments, meaning that graduating students have a window of opportunity to find a job before they must begin repaying their loans. Regardless, student loans must be paid back with interest, frequently equaling the amount of principal borrowed in the first place.
Financial Aid
Students entering MBA schools may receive financial aid in a multitude of ways. Some forms of financial aid need to be paid back while others do not. Financial aid usually is divided into five categories: grants, scholarships, loans, employment opportunities, and veterans’ benefits. Many students use multiple types of financial aid to fund their education. They may first attempt to qualify for scholarships and grants, which do not need to be repaid, then look to work-study programs to fill the void. Loans are taken out to cover any unfunded expenses and tuition.
Most MBA schools and other institutions offer students a great deal of assistance in securing financial aid. They do not have a vested interest in how students finance their education, so the institutions are largely impartial as to the source of a student’s tuition. In addition, schools value diversity in their student body and encourage qualified applicants to apply, regardless of need. Having seen so many students pass through their systems, these institutions are uniquely positioned to assist students in finding financial aid. Consequently, the school itself is often the best place to turn to when seeking financial aid.
Many schools provide their own financial aid in the form of employment opportunities. These can involve wages along with reductions in tuition or other expenses, like housing or food. Work-study programs might involve working with a professor as a graduate assistant–leading discussion groups and grading papers–or serving as a resident assistant at a dormitory or other student housing.
Scholarships and grants often are available through the university itself. Alumni may have donated money for students of a particular demographic, gender or ethnic background, and such funds are distributed in the form of scholarships.
Scholarships tend to pay a portion of a student’s entire school costs. Undergraduate scholarships usually are given as a sign of merit to students who have achieved a high GPA or scored well on their SATs. They also require strict adherence to their rules, such as maintaining a certain GPA. Scholarships also are given for non-academic achievement, like athletics.
Schools often give grants to support education in a particular field. Students may apply to have their expenses covered for studying a particular problem or doing original research.
MBA schools also assist students in securing and receiving financial aid from outside the institution. The U.S. government is a big provider of financial aid, offering grants, scholarships, and loans to students based on need. In addition, the U.S. Armed Forces offers scholarship money to veterans for serving their country.
As a last resort, students may opt to apply for student loans. Schools are an invaluable resource for securing private loans.
The five major types of financial aid are described in detail below.
Grants
A grants is a form of financial aid that does not need to be repaid upon graduation. The cost of attending MBA school can be partially financed through public or private grants to the student. A grant is money set aside by a non-profit institution, a private company, or the government to help students study a particular problem or issue. Grants can offset expenses, often beyond tuition–related to a particular field of study.
Students must submit a proposal to the donor foundation explaining how they will use the money. Often the proposal is in response to a request made by a prospective donor. A student might want to do research on a particular aspect of consumer behavior, for example. Such research might advance the donor foundation’s own interests in some way, so the company or agency is justified in assisting the student financially. Grant proposals require a good deal of work and are an art in themselves. Students should research effective grant-writing as part of this process. Admissions offices at MBA schools make lists of grants available to their students.
The most common kind of federal grant is the Pell Grant. However, these are available only to undergraduate students who have not received another professional degree. Far fewer grants are available for graduate students. (However, you should still fill out and send in your FAFSA.) Many of the grants that are available are in the form of fellowships. A fellowship often pays the entire cost of a student’s tuition and is associated with a person or institution that endowed it.
A candidate’s first step in seeking financial aid is discovering what grants or fellowships apply to him or her. Many institutions have a straight need fellowship available to all their MBA students. Those demonstrating financial hardship can qualify for up to $10,000 a year that does not need to be repaid. The amount of such fellowships often declines in relation to any other financial aid a student receives.
Candidates would be advised to search for grants related to their heritage. There are many grants for students of a certain ethnic background. Students studying a specific aspect of business should search for grants and fellowships in their industry. Many industries try to increase the number of potential candidates for certain positions by encouraging study and research. Students can search for private grants on online databases. The more grants and fellowships a student can use to pay tuition and expenses, the better, Student loans should be the last option. The debt repayment on loans can be an onerous lifetime burden.
Scholarships
Scholarships are a kind of financial aid that reward a student’s achievement in scholarship, athletics, service, or some other effort. They can pay for part or all of a student’s tuition and sometimes include stipends for housing and even food. They must be applied for, so students need to research the kinds of scholarships for which they might qualify. MBA and other graduate school admissions offices are a good place to start looking for information on scholarships. Applying for as many scholarships as possible is an option, but if a student’s efforts are not rewarded it may behoove him or her to save time and effort by paring down the search.
Many scholarships for women and men are linked to a particular field of study or a particular company. Many states offer a number of scholarships in health care, for example, in order to increase the number of students studying medicine. This ensures that the state will have sufficient qualified health-care workers to meet statewide demand. Searches for scholarships can be targeted to a candidate’s own specialization.
Although some scholarships are awarded to minority candidates or those who fit a specific demographic, scholarships typically are merit-based. This is an incentive to keep the GPA as high as possible. Students who score high on standardized tests like the GRE also may be eligible for some scholarship money. Scholarships are available for other talents beyond academics. Athletic scholarships generally are used to pay for undergraduate education. Athletes who have athletic eligibility can use scholarship money for graduate school, however. Students who finish their undergraduate studies in three years, for example, can fund a year of graduate school with an athletic scholarship. Such talent-based scholarships, however, are not available to most people.
Scholarships can be used in conjunction with other forms of financial aid, although they may reduce the amount of need-based aid a student receives. Many scholarships are endowed by individuals, families, or companies. Such scholarships often have unusual stipulations, so the more information a student can gather, the better. Many scholarships are only for full-time students. Part-time students, who often are employed and therefore can show less need, may find it hard to qualify for many scholarships.
The search for scholarships needn’t end when a student begins an MBA program. Some scholarships can be earned in the middle of the program, offsetting expensive student loans.
Student Loans
Students may need to come up with several sources of financing to meet all their needs, which include tuition, books, housing, and expenses. Although student loans should be the last resort, they are the most common way for students to finance their education at MBA schools. Student loans should be viewed with caution because, depending on the terms of the loan, the student will leave school with debt that will increase with interest. Students should be aware of what the terms of the loan may be in the long run and how long interest payments and principal can be deferred. Federal regulations require lenders to be as transparent as possible regarding costs over the life of a loan, but students should heed the saying “buyer beware.” The terms of a loan can be tricky and complicated to understand.
Student loans fall into two major categories: public and private. Public loans often are need-based and can offer better terms than private loans. Many students apply for student loans through the U.S. federal government. The process usually begins with the student filling out a FAFSA (Free Application for Federal Student Aid), which will indicate what kind of loan the student is eligible for. Students who demonstrate great financial need may qualify for a Stafford Subsidized Loan, which offers the best terms to the borrower. This loan allows students to defer payment on interest as long as they are in school. In addition, they can defer principal payments for a certain number of years after they graduate to ensure they are settled in their careers and can afford to repay the loan. With a Stafford loan, a student may borrow a maximum of $4,250 a semester.
Other government loans , like the Graduate Plus Loan, are available with different, less generous, terms for the borrower. Although Graduate Plus Loans place no cap on the amount borrowed, deferments are limited.
Many students must turn to private loan companies to make up the balance of their tuition and expenses. The terms of private loans are often less generous and the interest is often more onerous than that of public loans. The advantage of private loans is that they are not need-based, meaning virtually anyone is eligible. Those with bad credit histories, however, often will get worse interest rates and terms. Interest rates are variable, but tend to be pegged to the federal prime rate. Many students find that their student loans take ten to 30 years to pay off–similar to paying off a mortgage.
In order to secure a loan, students sometimes must get a co-signer, often a parent or other relative. This is especially true if the student has not become established in a career before applying to an MBA school. In addition, all loans include fees, such as an origination fee, as an upfront payment before any monthly payments are made.
Employers
One of the best ways to pay for an MBA program is to work one’s way through school. An even better way is to have an employer pay one’s way through an MBA program. Many employers encourage employees to improve their skills through education by paying part or all of an employee’s tuition. This investment has conditions attached, and employees should be aware of them before accepting an employer’s assistance.
Candidates who work for a large company should check into whether the company has an institutionalized tuition assistance program. If so, the rules and commitments will be spelled out clearly. Small employers also may have a program set up, although it is less likely. When a company of any size has an established tuition assistance program, the rules will dictate how much money the candidate may receive and what he or she will owe the company in return.
Persuading an employer who doesn’t have an established tuition assistance program to fund an MBA can be difficult, but not impossible. Although an employee may need to make concessions, there are many good reasons why an employer would agree to this request. First and foremost is the desire to retain a good employee. An employer who tries to limit an employee’s job prospects cannot be considered loyal. By funding an MBA program, the employer is showing loyalty and commitment. In addition, the employee returns to the company as a value-added employee who not only is more capable but who already is familiar with the company and its practices. The company will not need to look to the outside for management prospects. Finally, the employee will return satisfied and grateful to the company.
Employer funding works differently in different companies. The employer may ask the employee to write a proposal. The company may put a cap on the amount it is willing to pay in terms of dollars or a percentage of tuition. It also might require an agreement that the candidate will continue to work for the firm for a certain number of years. No company wants to improve an employee’s productivity only to see him or her jump to a competitor. This agreement might include a clause specifying the amount the employee will have to repay if he or she leaves early for some reason. It also might include a non-compete clause to keep an employee from moving within the industry. Employers also might require employees to continue working while they pursue their MBA. Despite the conditions or stipulations, an employer-funded MBA may be preferable to student loans in the long run.
Veterans’ Benefits
Through its Department of Veterans Affairs, the U.S. government offers several education benefits programs for veterans as well as active-duty personnel. Depending on a student’s circumstances, he or she may be eligible for more than one program, including the post-9/11 GI Bill, the Montgomery GI Bill and the post-Vietnam Era Veterans’ Educational Assistance program. In addition, veterans and active-duty personnel with service-connected disabilities may be entitled to educational benefits under Vocational Rehabilitation and Employment. The Department of Veterans Affairs as well as the admissions office at an MBA school can help veterans determine which benefits programs are right for them.