Financing your MBA

Resigning from a secure job, moving country, even leaving behind family and friends; potential MBAs seem to take such obstacles in their stride. But with programmes at top-flight school now costing as much as US $75,000, one question seems to occupy business school applicants more than any other: just how can I find the money to pay for my education?

Every year, TopMBA surveys nearly 4000 aspiring MBAs around the world to establish whether finance is likely to prove a barrier to study. The latest survey found that most had already looked seriously into how they would fund business school. A wide variety of methods were cited, from scholarships to personal loans. Worldwide, 74% of respondents favoured scholarships. Next came a student’s own savings at 68% followed by some form of external loan at 61%. Overall, only 28% expected to get financial help from their employer.

Favoured funding methods vary considerably from area to area. Help from family and friends appears to be most common in the Asia-Pacific region, where it was cited by 48% of those questioned, contrasting with 43% in the USA and Western Europe. Personal loans were the preferred source for over 81% of US students, but for fewer than 57% of those from Latin America. Company sponsorship was expected by 36% of respondents in the Middle East and Africa, but by only 21% of those in Latin America. Own savings were the favoured method for 80% of Western European candidates, but for only 62% of those from the Middle East and Africa.

However, whatever a student’s initial preference, in practice, the most common source of finance is now the education or career loan. We look at some of the sources of such loans across the globe.

Selected sources of MBA Finance around the world

UK

UK citizens can borrow up to two thirds of their pre-study salary in any twelve-month period from NatWest to fund an MBA. Applicants need to contribute at least 20% of the course fees from their own resources and repayment periods range from 7 years for sums under £20,000 to 10 years for sums over £20,000. Interest is currently 6.9% APR. HSBC offers loans to students of a number of British based schools, including Cranfield, London Business School and Manchester Business School. Unlike many other schemes, this facility is open to students from anywhere in the world. Interest is charged at 2% over HSBC’s base rate for the duration of the loan. There are no upfront commissions or early repayment charges.

USA

There are several sources of aid for US students studying at home or abroad and for overseas candidates looking to study in the USA. These include:

Citibank has a very well developed student loan division, which provides standard loans and also partners with individual schools to provide tailored packages. The Wharton School at the University of Pennsylvania, for example, offers funding through Citibank, which guarantees most accepted students a prime plus 0.5% interest rate, with a 15-year payback period, and no co-signers or credit check required. www.citibank.com

IEFC – Students interested in studying at one of nearly 400 institutions around the world may be eligible for loans of up to US $45,000 from the IEFC (International Education Finance Corporation). The IEFC has three loan programs: the Stafford for US citizens or permanent residents, Can HELP for Canadians and ISLP for foreign students. To be eligible for ISLP you must be able to provide a guarantor, who is a US citizen or permanent resident. www.iefc.com

GATE Universal is a student loan program managed by First Marblehead Corporation and Bank of America. www.gateloan.com

MBA LOANS is a private loan program run by Sallie Mae and targeted specifically at US citizens. www.salliemae.com

Austria

CA-Post-Graduate, Creditanstalt offers some loans. www.creditanstalt.co.at

France

French residents of any nationality who have worked in the country can apply to FONGECIF (Fonds de Gestion du Congé Individuel de Formation) for up to 90% funding of tuition fees plus a part of their current salary. www.emse.fr/ASI/AIDES/fongecif.htmlGermany

Since 2001, the German Federal Ministry of Education and Research has offered a low interest (currently 3.3%) loan of € 7,200 to all graduate students seeking to study in Germany. www.bmbf.de

Certain banks also provide MBA loans. EU students on the MBA programme at HHL-Leipzig, for example, are eligible for loans from Sparkasse Leipzig at 5%, while potential MBAs from the EU, USA and Canada can also apply for funding via the HHL’s partner, CareerConcept .www.hhl.de

Italy

Banca Commerciale Italiana offers MBA loans for Italian nationals.

Spain

Several of the key Spanish schools have negotiated loan agreements with Spanish and overseas banks to help students with funding. IESE, Barcelona has a loan scheme offered through Banco Santander Centro Hispano, which is open to students of any nationality accepted by the school. Instituto de Empresa, Madrid has similar arrangements to cover fees and iving expenses with repayment periods up to eight years.

Russia

Banque Société Générale Vostok offers loans to Russian citizens to help with MBA study, either at home or abroad. Students can postpone repayment (though not interest) until up to 24 months after graduation. www.bsgv.ru

Latin America

The Organisation of American States (OAS) provides a wide range of financing options for nationals of member states to study for masters degrees both in and outside Latin America. For further information or assistance, candidates should contact the National Liaison Office (ONE) of their country of origin, the appropriate office of the General Secretariat of the OAS or the Educational Portal of the Americas.

Financial institutions in several of the region’s major countries also provide loans geared to the needs of MBA students.

Mexico

FIDERH – provides loans of up to MXN158,500 per annum to cover tuition fees and living expenses. Candidates need to hold a first degree, be aged under 30 and be able to supply a guarantor of Mexican nationality, who owns a property with a value of at least 150% the loan amount. www.fiderh.org.mx

Fundación Healy provides loans and scholarships for residents of Sonora or Baja California. www.fundacionhealy.org

Peru

Banco de Credito offers loans of up to US$50,000 to cover the cost of an MBA and up to US$20,000 towards living expenses. www.bcp.com.pe

Australia

Through its partnership with ANZ Bank, AGSM can provide access to credit for MBA fees and living expenses for permanent Australian and New Zealand residents. Repayments are deferred and eligibility is based on 70% of earnings over the previous 12 months. The Commonwealth Bank of Australia does not have a specific student loan programme, but will consider applications on individual merit up to AU$5,000 at branch level. Head office considers higher amounts.

India

Indian nationals have access to a wide range of educational loans geared to fund MBA study. Key suppliers include State Bank of India, Allahabad Bank, State Bank of Mysore, Bank of Baroda and the Industrial Development Bank of India. Loans can be used to cover the cost of fees, travel to an overseas school, the cost of books, computers, etc and living expenses. In most cases, candidates will already need to have secured a place at a recognised institution and may need to supply a guarantor, such as a parent or close relative, with sufficient funds to cover the loan. Repayment ranges up to four years after graduation and interest rates are currently around 8.5 to 8.75%.

Canada

Domestic students at the Rotman School of Management in Toronto can access interest-subsidised loans from Scotiabank to cover the full cost of their tuition. Each provincial government in Canada also administers and maintains a student financial aid program in cooperation with the federal government's Canada Student Loan Program. Eligibility requirements, maximum borrowing amounts and loan repayment policies vary from province to province. Usually, assistance is in the form of interest free loans while a student is in school, although some provinces award grants to students or offer additional assistance to students graduating with debt over a certain amount. http://osap.gov.on.ca.