Our guest on February 14, 2001, was Eric R. Pfeffinger, associate director of MBA financial aid for Indiana University's Kelley School of Business (No. 20 on BusinessWeek's 2000 Top 30 B-School list). Prior to joining Kelley in 1998, Pfeffinger worked for IU's Office of Student Financial Assistance in a variety of capacities, including financial-aid counselor and assistant director of the scholarship clearing house. He is also a playwright, cartoonist, film critic, and freelance journalist. He earned a BA in English and theater from the College of Wooster and a Master's degree from IU. Pfeffinger was interviewed by Lucia Quartararo for BusinessWeek Online. Here's an edited transcript of their conversation:
Q: Eric, the Kelley school sets a flat fee for tuition and guarantees it for both years of study. It's also one of the most reasonably priced B-schools in BusinessWeek's Top 30. What is the tuition for 2000-01?
A: For 2000-01, a first-year, out-of-state student is paying $19,258 in tuition and fees; a resident is paying $9,908. [Tuition] is a flat fee for two years, as long as [students] take the standard load of 12 to 15 credit hours any given semester. [That figure] is frozen in place, so that whatever [a student] pays their first year, it is guaranteed that they are going to have the same tuition their second year, even if the class coming in behind them experiences an increase. It makes it a little easier for [students] to plan. There are not going to be any unpleasant surprises in their second-year fall tuition bill.
Q: Some institutions encourage students to apply for in-state residency, significantly decreasing a student's second-year tuition cost. Is that something that is possible in Indiana?
A: The vast majority of students at IU (not just in the business school) retain their residency designation for the duration of time that they're students. We have one or two MBAs each year who [attain Indiana residency], but most students who come in as out-of-state students are out-of-state students when they graduate.
Q: How much would you recommend a student budget on top of tuition costs for a year at the Kelley School?
A: The estimate this year for an out-of-state, first-year student's total budget is $34,020 for two semesters in Bloomington. That includes estimates for room and board, books and supplies, transportation, and miscellaneous costs, as well as tuition. This is just an estimate, but it's a good yardstick for students to start from. Bloomington is a fairly affordable community, and students coming from San Francisco or Chicago or New York are usually delighted when they see what rent they are looking at for an apartment.
It varies pretty widely, but it is not at all uncommon for someone to get a one bedroom for $500 to $600 [a month]. We have a lot of apartments that are very close to campus which are right on a free bus line that drops [students] off in front of the business school. These tend to be among the more affordable but highly livable options. We also have more than a few students who choose to take advantage of campus housing, either in graduate-student housing or family housing.
Q: Could you outline the different types of financial assistance that Kelley offers?
A: The merit-based aid that we offer falls into one of two categories. Scholarships, which essentially are construed as free money that is applied directly to [a student's] bursar account, and assistantships. The assistantships tend to be a bit more substantial in value. Students work five to 12 hours a week in a Kelley School business office or department in exchange for a tuition reduction and a monthly stipend.
Q: How does one go about obtaining a merit scholarship?
A: [Applicants are] automatically considered for merit-based aid as soon as they are admitted as an MBA. [Applicants] don't have to do any additional paperwork or jump through any additional hoops. We apply the same evaluation standards that we use when we consider an applicant for admission: test scores, work experience, academic record, the interview, essays.
We are usually able to let [candidates] know whether we can offer them assistance within a few weeks of [sending] the admission letter. In the final analysis, about 35% of the incoming class will receive some kind of aid. Scholarships average between $3,000 and $5,000. Assistantships [can be worth up to] $11,000 in total value.
We have a handful of scholarships that are corporate or individually funded that have specific eligibility criteria in terms of intended major or background, but those are the exception rather than the rule. The main portion of our pool of merit-based aid does not have any strings attached, so we consider both international and domestic admitted students across the board, based on the overall competitiveness of their file.
Q: A lot of schools tend to discourage assistantships due to the potentially heavy workload they create, especially for first-years. Is that a concern at Kelley?
A: We certainly don't discourage them. We have as many as 150 to 180 MBA students performing assistantships in the Kelley School of Business at any given time. [Editor's note: The Kelley School enrolls 564 MBAs.]
All positions are limited to no more than 12 hours per week, and the vast majority of students who come in with an assistantship are still working that assistantship when they graduate, so it's doable. It's worth it to [students], both in terms of the rewards of the work and the money that they are receiving.
Q: Does Kelley have a program designed to encourage minorities or other underrepresented students to pursue an MBA?
A: We are one of the 12 schools that participate in the Consortium of Graduate Study in Management. Students that apply through this program and attend Kelley are awarded tuition remissions. The Consortium is designed to encourage under-represented minorities to apply to graduate business school. It has been set up to enable African-American, Hispanic-American, and Native-American applicants to apply to up to six of the 12 participating schools with a single application.
Q: A lot of B-schoolers rely on loans to help defray the cost of investing in an MBA. What percentage of students have taken out loans to cover the Kelley price tag?
A: About 54% of our students have a loan of some kind. That includes domestic students who are borrowing federally, as well as the students who borrow privately. The number actually has gone down a little bit over the past couple of years. Our student body has more and more work experience and may be drawing on personal resources that are enabling more of them to avoid having to borrow.
Q: Still, in the 2000-01 academic year, the median loan that a Kelley graduate was saddled with was $33,000.
A: I have actually noticed that our average loans have been trending down slightly, which might just have to do with the population that is coming back to school. MBAs are, with rare exceptions, very savvy and very aware of what they are getting into. They are often not in desperate need of counseling from us about [debt.] Also, a lot of our MBAs are graduating into starting salaries that make them feel fairly comfortable about their debt load, so that can ease their concern a little bit.
Q: Are there any preferred lenders that Kelley recommends that students contact for a competitive loan rate?
A: We don't have an explicit relationship with any lender. A lot of our students have had good experiences with the MBA Loan Program and the Citibank CitiAssist Program. Those two loans tend to outnumber any other private loans that our students choose.
We currently don't have a special loan for international students, who make up 38% of the class. But they can usually find funding through the same private lenders that our domestic students use.
Q: The average age of a student at Kelley is 28. How does marital status effect someone's eligibility to receive financial aid?
A: Need only comes into play with the federal money. Again, all domestic students can qualify for $18,500 [in Stafford Loans], but the portion of that, if any, that is need-based and non-interest bearing is going to be dependent on the level of need that the student demonstrates based on the information on their FAFSA. If [an applicant is] married, then a spouse's income will show up as an asset, which is most likely going to increase the student contribution and decrease the level of need. On the other hand, spouses and dependents will increase family size, which can have a direct reduction on their student contribution and a corresponding increase in their need.
Q: What are the career opportunities in Bloomington for students' spouses and partners? Is there a network on campus to help these new arrivals find appropriate resources?
A: We do have a partners' club, which provides students and their partners with a built-in network. A number of people in the partners' club also have kids, so that creates a subset of that population that schedules family-friendly outings, pools babysitting resources, and so forth. There's also a fair number of adult-oriented activities that the partners' club coordinates, like dinners, book clubs, and things like that.
They also are involved in helping to keep everyone apprized of employment opportunities in the community, as well as child-care and housing. There is a relocation coordinator on staff who [will give students and partners] contact information for landlords, information about housing opportunities, and resources for job opportunities, so they can start looking into those types of things before they arrive in Indiana.
Q: Are the roughly 560 students at Kelley in direct competition with the 35,000 students enrolled at Indiana for one-on-one financial counseling?
A: The exact reason that I am here in the MBA office is because the Kelley School of Business did not want their MBAs to have to compete with those 35,000 other students for financial-aid services. [Students] can just drop by our office in between classes if they want to find out what their options are in terms of a new development. I am available to talk about options and have the capability to process new loans. [Students] have responded positively.
We are trying to make sure that MBAs have access to all the resources that come with being in a large university. But because our MBA student body is not particularly large, their experience here in the business school can sometimes be a little bit more like being in a small college.
Q: Do you have any words of wisdom that might make financing and MBA a little easier for business school aspirants?
A: The recommendations we make to students coming back to school are not huge secrets. They are to pay down consumer debt, accumulate savings, [try to avoid having to] make large monthly payments for things like car loans.
People generally prepare pretty well, but things do come up that surprise them. [Some students may want] to take advantage of an educational opportunity overseas or have other unexpected costs, so it is good save some money [for these kinds of] developments.