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Who will pay my fees? aka No loan, No MBA

October 12, 2008

When I mentioned the salary in USD in the various application forms, I used the conversion rate of 1USD = 40INR, and by the time of submission that rate went upto 50 INR !! Its expected to go upto 60 INR. My salary thus became even more negligible in dollar terms. Assuming 150000$-200000$ to be the total cost I would incur for an MBA from US if I bring my family along, we are speaking of 1 crore INR. To give you an idea, dividing that by a number more than 10 would get you to my current annual salary (No I won’t tell you that exact number). 1 crore is an unimaginable sum of money for me. If I were to somehow manage to get a loan for that amount in India, even my whole lifetime wouldn’t be enough to repay the same. Even considering a 10% increase in my annual salary every year and continuing to work beyond 60.

Getting a loan in USD for say, half that amount for an MBA, can be paid off by a)either working in US for 3-5 years or b)working in India with a much higher post-MBA salary within 10-15 years.

So in any case, going for a US MBA for candidates from my pool hinges on the guarantee that a) we would manage the required funds through a combination of scholarships/fin aid/loans/personal savings, and b) the post MBA job would justify and pay for the huge loans that we have incurred. This is the reason why I had to drop some very good schools from my list because they did not guarantee a non-cosignor loan option, or their loan amount did not extend upto the living expenses. Despite all the talk about ‘fit’, this concern became the most defining basis for selecting or eliminating a school.

Exactly a month ago, having finalized my schools, I was knee deep into their essays without the knowledge of what would hit us a few days later. When things came tumbling down, I was glad that I had made the decision to apply to these schools so much in advance because now the applicant volume would begin to surge. And then came the realization that it was going to hit me in more ways than one. Banks have already begun to announce the end of their loan programs to some of the schools.

Hows the changed scenario going to affect things on the ground ? Here’s what I think –

  • Banks, and schools, would increasingly shift from a non-cosignor to a cosignor loan option.
  • Such a move would hit international applications, mostly countries whose PPP relative to US are like ours where affording the whole cost on our own is out of question.
  • It can be presumed that schools would work out some loan program for international applicants.
  • Would it hit the schools’ diversity for class of 2011? To a miniscule extent, yes. They would still get enough Indians, Chinese, Koreans, South Africans, and all the various other nationalities, but they may not be from India, China, Korea, South Africa anymore. US itself has enough of them.
  • The diversity can easily be traded off with the new volume of US applicants who would apply to these schools. Most of them would be people with a highly successful career before the wall collapsed and put them on the street, and hence schools wouldn’t have to compromise on quality.
  • In the above case, would the schools really care about diversity for diversity’s sake?
  • Most international applicants already had to face visa issues post their MBA, and the increased competitiveness now at making it into your MBA school would continue to haunt you during post MBA employment as well.
  • I see no incentive for the banks to stick with the non-cosignor options anymore, unless the schools push them for the same.
  • Do the schools see an incentive in pushing the banks for the same ?

In the best case scenario, perhaps the schools would work out a solution before the first deposits are due by March-April. For me, the guarantee of a loan at this stage is as important as the loan itself. Else it would be haunting my minds when I interview for that school. The reason I’ve applied for all schools in R1 is because I need to arrive at a decision by December. It wont help to have no clarity about the finances. And what about the uncertainty of what might happen when the time comes to pay the fees for the second year ?

First things first. Getting an admit is the priority, I’ll definitely have time to think over everything else later.

Though it has never looked riskier. In fact, it might just go further downhill from here.

Would I have still applied had the crisis occurred before I began the process? Not if I came to know that there’s no way now or in the future for me to arrange the funds.

 What would I have done instead? I would have had to apply to schools in asia pacific.
Would that have helped? Perhaps, cos I have decided to leave my job and industry by year end in any case.
Wouldn’t it be wiser to hold on to my job and wait until things improve? Wiser, yes. Possibility, zero.
Why do I get the feeling that I’m in deep shit now? That’s always been the case. Good to realize it sooner.
How would I come out of it? By waiting until December, and then considering my options for the future.
No loan, no MBA ? Yes. Definitely.
Am I worried ? Yes. Apprehensive ? Yes. Scared ? A bit. Why? Because this dream is bigger than anything else.

15 Comments leave one →
  1. October 12, 2008 2:51 pm

    I know how you feel. Am riding the same boat. And unlike you I did not even apply to ISB in the first round 😦

  2. October 13, 2008 1:38 pm

    Same ‘crisis’ feeling gripping me. Now the question after – would you get in? is – would you want to get in? 😐

  3. ahembeea permalink*
    October 13, 2008 4:34 pm

    Goyal , Maverick – Go ahead and blog about it.Let us know your points of view as well 🙂

  4. October 13, 2008 8:03 pm

    I hope you don’t get too discouraged by the financial situation. I am sure that any school that admits you will do their best to work with you to get the money needed to pay. If they didn’t want you to come, they wouldn’t have admitted you!

    I would encourage you to contact the admissions people at your top choices to talk with them in depth about loan and scholarship options – once you are finished writing your application essays of course. You’re not alone in worrying about money.

    Best of luck!

  5. ahembeea permalink*
    October 13, 2008 9:06 pm

    Matt – thanks for the encouragement. I agree, its going to pinch all of us, and the best way forward is to talk with people who can actually help us salvage the situation.This concern though is very real now and I hope the schools are best poised to resolve the same for all of us.

  6. October 13, 2008 9:25 pm

    I just had a meeting with some of our admissions people and expressed the financial concerns with them. (I work for Ross in case you didn’t know.) Our admissions director has been working closely with the dean to get some real plans for the next couple of years. I would imagine they will have a real solution in the near future.

    And they said to me the same thing I said to you – when they admit you, it is because they want you to come, and they will work with you to make that possible. I will keep you updated with what I find out.

  7. ahembeea permalink*
    October 13, 2008 10:48 pm

    Matt – thanks so much for the reassurance. Especially since it comes from you being an insider(No I didn’t know that!). The good thing(!) about this situation is that the schools would this time get international applicants who are really serious about their plans, and that we as applicants would have to be crystal clear about our reasons for our MBA.
    I can see panic setting in, and it should separate the weak from the strong hearted! Thats too many points in favor of the situation, so will hold the thought until my next post(which’ll be a positive one!).

  8. October 14, 2008 12:48 am

    Fear not the things that lie ahead. On what maverik said “Would you want to get in?”, I think the decision to do an MBA is not governed by external factors, such as the current credit crisis for example, but is completely internal (totally my opinion though :P). So go ahead and apply with the same rigor as before to the schools that you had planned to. You chose these schools because you connected with them and other factors should not make you think twice :). All the best and thank you Matt for your inputs.

  9. ahembeea permalink*
    October 14, 2008 10:29 am

    Pramod – thats a good point. Though the internal and external are affecting each other in these interesting times!

  10. anon permalink
    October 14, 2008 11:55 am

    Tryst, did you give toefl? Kellogg app asks for proof to verify language of instruction. How did you go about it?

  11. ahembeea permalink*
    October 14, 2008 12:09 pm

    Anon – No I didn’t give TOEFL. I gave them the website of my UG institution since my transcript does not mention the language of education.

  12. anon permalink
    October 15, 2008 1:51 am

    Thansk tryst. Even my transcript does not mention. None of our transcript does I think. But they were asking for some kind of place where they can verify.

  13. October 15, 2008 1:08 pm

    Hey Ahembeea….
    Thanks for the comment on my blog, and more importantly, thanks for your concern.
    I am on a sabbatical from atleast the first round of apps as i have known for quite some time that loans will be hard. See its not about schools not trying hard enough, its about sheer availability of loans. In an environment where banks are reluctant to lend to each other, what are the chances that a bank will be willing to take a chance on an international student without backers, especially when wall street has collapsed and the employability post-education is in some doubt. I though it better to apply in Asia, especially with an eye on the IIMs…..

  14. ahembeea permalink*
    October 15, 2008 1:44 pm

    Star – I’m sure you’ve considered everything and decided whats the best for you. Just saw no activity on ur blog for quite some time! Its sad to see though that you’re not going ahead after what you sought earlier. Do let us all know your views by a post on your blog. Atb for your applications.


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