Our guest on Jan. 25, 2001, was Lauren Tracey, Director of Financial Aid at Carnegie Mellon's Graduate School of Industrial Administration (No. 14 on BusinessWeek's 2000 Top 30 list). Tracey started at GSIA in 1991 but has worked in the financial-aid field for over 15 years. She is a member of several national and state financial-aid associations, and is currently a member of Citibank's Educational Financial Leadership Council. She was interviewed by Lucia Quartararo for BusinessWeek Online. Here's an edited transcript of their conversation:
Q: Lauren, B-school tuition has been on the rise. Is a $26,750 price tag for yearly tuition at Carnegie Mellon's Graduate School of Industrial Administration a deterrent for many aspiring students?
A:I don't believe that it is. Students are well aware of the cost of business-school education. Many of our students, who average 27- to 28-years-old, have been working for as many as five years and are able to save some of that income for their education. Also, the institutions do a very good job letting students know about the costs [of an MBA] and preparing them to face it.
Q: What types of financial assistance does the school make available to prospective students?
A:There are two different categories of financial funding. At GSIA, we offer merit scholarships, which require no [separate financial-aid] application. Simply put, the admission application [alone] makes [applicants] eligible for consideration for a merit scholarship. Students who wish to be considered for other forms of funding should follow the three-step process of filing the FAFSA (Free Application for Federal Student Aid), submitting an institutional-aid application, and then submitting a tax return. That way, we can determine their eligibility for federal Stafford loans, different work-study programs, and other institutional grants and scholarships that are still determined based on merit.
Q: What percentage of students can expect to earn a merit-based scholarship from GSIA?
A:In the 2000-01 academic year, we have awarded approximately 76% of our full-time MBA students with institutional grants or scholarship awards. Our merit awards range anywhere from $2,500 up to full tuition.
Q: Given the stiff competition [for funding], does the school recommend that students also look outside of the institution to secure funding?
A:Institutional scholarships are the best means of aid for students. Many [prospective MBAs] spend a significant amount of time in libraries doing research and trying to find other resources. My experience is that that effort really does not pay off in the long run. Students applying for aid through their institutions have much better access to grants, scholarships, and fellowships.
Q: According to our records, graduates of Carnegie Mellon's MBA program left school with about $32,000 worth of debt. Which lenders does the school recommend that students contact for competitive loan rates?
A:All of our financial aid information is available on our Web site. But our preferred lenders are still the Access Group; Citibank; MBA LOANS, of which Sallie Mae is the parent corporation; and Total Higher Education.
Q: Is it true that funds increase as the school year progresses? Are more funds available in December than in May?
A:We award institutional funds once a year in the fall semester. Students can file loan applications anytime during the enrollment period, but our institutional money is [only] awarded for the fall term.
Q: Some say the poorer an applicant appears on paper, the better their chances of receiving funding. How does an applicant's salary affect his or her financial-aid application?
A:The trend is that [B-schools are] moving away from need-based financial aid toward merit awards. It's a very favorable [trend] for all of our applicants. At GSIA, we're not looking at how much money a student earned last year or how much money he or she has in a savings account. Instead, we're awarding funds based on professional as well as academic credentials.
Q: Let's cover some of the logistics. Could you give us a quick overview of the financial-aid application process?
A:Sure. Any [U.S.] student who wishes to apply for financial aid at GSIA should file a FAFSA for the current year, along with their regular GSIA application. If that student has been selected for verification on their student-aid report, we will also require a copy of their 2000 federal tax return. Each of those documents would constitute a complete financial-aid application.
U.S. applicants [should] fill out these documents as soon as they have the accurate figures that they are reporting on their federal tax returns. This would include adjusted gross income, taxes paid, untaxed income, and benefits. They can also submit our internal application and their tax return anytime after Jan. 1 of the year that they're applying for aid. We'll respond with an award letter within about a week to 10 days after their application is complete.
[Editor's note: The Student Aid Report (SAR) states the information that a FAFSA applicant submitted, as well as the Expected Family Contribution (EFC) to the applicant's education. The EFC is a figure that the government determines. From there, a school can determine how much money in scholarships, loans, or work-study arrangements they ought to award to the candidate.]
Q: What percentage of the class receives federal funding?
A:We have a fairly high percentage of students applying for aid. But probably 85% to 90% of applicants for aid receive federal funding.
Q: Of course, not all applicants are from the U.S. GSIA's international student percentage is 37% -- a high figure compared to the other schools on BusinessWeek's Top 30 ranking. Because non-U.S. citizens aren't eligible for federal aid, what avenues does GSIA suggest to help foreign applicants finance an MBA?
A:We have focused on trying to find other forms of assistance for [non-U.S.] students, and all of the preferred lenders that we discussed [above] do provide loan assistance to international students who can provide a U.S. citizen or permanent resident cosigner. Also, GSIA now offers a loan to international students called the Gate Loan. It's under special agreement with First Marblehead Corp. and funded through the Bank of America, and offers $15,000 per academic year to international students without a cosigner.
Q: Do international students have the same access to merit-based scholarships as their U.S. peers?
A:No, they do not. International students, not being eligible for federal funding, are not eligible to receive institutional aid. However, we have listed different resources on our Web site specifically for students [from outside of the U.S.]. We have a couple of scholarships that are available for students from different backgrounds. But the majority of [their] funding is probably going to be in the form of loans.
Q: Apart from financing straight tuition, B-school applicants should also have a budget in mind for living expenses. How much money should prospective first-years budget to cover the total cost of an MBA?
A:For the 2000-01 year, the first-year students' full-time budget was about $44,000. The budget is broken down on our Web site into tuition fees, room, board, books, and all of the miscellaneous items that students will need to cover during their two years here. The first-year budget also includes the expense of a computer, which is required at GSIA.
Q: And has that figure been steadily increasing during your tenure?
A:Yes. We anticipate a tuition as well as a cost-of-living increase each academic year. Often, the cost-of-living rate rises at the same rate as the consumer price index. We [also] do institutional surveys of our students every other year and use average actual costs for their living expenses.
Q: What about students with families? Does marital status affect the amount of assistance the school awards?
A:We offer additional loan assistance of up to $2,500 per family member to help meet living expenses. It's very important for students who have families to plan well before enrolling in a full-time graduate program. The budget that we have is really only meant to meet the financial needs of the student.
Q: Looking to the future, does GSIA plan to allocate more funds for scholarships, in order to grant more aid to MBAs?
A:I see an increase in funding resources. Again, our move to a merit-based award will provide additional funding sources to our students. Thanks to donations from alumni, as well as the income that our endowed funds produce, our institutional scholarships and endowments are growing all the time.
Q: To wrap things up, do you have any practical advice for B-school aspirants?
A:Our Web site has a comprehensive tips page that I would suggest students take a look at. Also, we really do advise students to be as financially prepared as they are academically. We encourage them to take stock of their financial obligations. Prior to entering an academic program, we ask students to make it a priority to pay down any consumer debt that they have accumulated.
We also advise them to contact their local credit agency and request a copy of their credit reports. If the credit report shows any negative information, we ask students to try to resolve that before coming to GSIA. It's much better to clear up any issues beforehand, so that they don't crop up during credit checks that students might have to undergo during the loan application process.
And our last bit of advice is that [MBAs need to remember that] it's going to be necessary for [them] to adjust their lifestyles from that of a business person, earning a good income, to being a student with limited financial resources.