Our guest on June 5, was Marta Klock, director of financial aid for the full-time MBA Program at University of California, Los Angeles' Anderson Graduate School of Management (No. 12 on BusinessWeek's 2000 Top 30 B-school list). Klock entered the financial-aid field as a counselor in UCLA's undergraduate program. Later, she became the financial-aid director at the American Musical & Dramatic Academy in New York City, moving on to be Anderson's financial-aid director in 1987. Klock was interviewed by Lucia Quartararo for BusinessWeek Online. Here's an edited transcript of their conversation:
Q: First, there's some news in the world of federal loans: The U.S. Education Dept. announced that it will reduce interest rates for borrowers by 2.2%, to 5.99%. What does this mean for MBAs at Anderson and elsewhere?
A:It's fabulous for anyone taking out federal loans. About 45% of the full-time MBAs at Anderson are on federal aid.
Q: Anderson MBAs pay a cheaper tuition compared to their counterparts at other BusinessWeek Top 30 B-schools. For the 2001-02 academic year, resident tuition at UCLA's Anderson School will be $11,670 and non-resident tuition will be almost $22,000. The city of Los Angeles, however, isn't so forgiving, and other costs can add up quickly. How much should prospective MBAs budget for their total expenses?
A:For a California resident, the budget for a nine-month period is $30,740. For a non-resident, it is $40,980. Again, that is for nine months, but in actuality, these costs are low. Most students have to add $2,000 to $6,000 for a realistic budget [to cover miscellaneous expenses]. Those budgets do not include consumer debts or car payments. And the rent [estimate] is very low, because the university budget expects students to have a roommate or two.
Q: What merit-based aid does Anderson offer its students?
A:We have a set amount of funding that we give out in the Anderson and Dean's fellowships, which only first-year MBAs are eligible for. These are not awards a student applies for or can qualify for. They are hand-selected by our admissions committee. [Funding for merit scholarships] fluctuates from year to year, but is about $650,000 in total. [Awards] go to about the top 12% of the entering class. Based on the strength of the application for admission, [applicants] are considered for a merit fellowship. Those range from $10,000 to $15,000 and are for the first year of the program only.
Q: That implies that loans are the only option for funding the second year of B-school at Anderson.
A:No, we also have second-year donor fellowships that are also merit-based. Students apply for these in the spring quarter of their first year. About 160 students apply for these 45 fellowships. Seven to 10 of these fellowships are earmarked for non-U.S. students. The students apply by completing a simple application and submitting an essay regarding why they came to school to get an MBA and what they plan to do after graduation. The [fellowships are worth] about $5,000 each. [To determine eligibility,] we look at students' grades in the core courses of the fall and winter quarters. Some of our [second-year fellowship] donors do put restrictions as to an area of study or [restrict them to students in] need, but most of the fellowships are open [to all applicants].
Q: Does Anderson offer any need-based financial aid?
A:A lot of [domestic] students qualify for financial aid -- meaning their expected contribution is less than the standard budget -- [because we use] projected-year income, not prior-year income. That helps a lot of our students qualify for the subsidized Stafford Loan.
The very first thing that a student would get if they applied for aid and qualified would be a $900 [Anderson] grant. After that, we look at need-based funding to see if the student would qualify for any portion of the $8,500 subsidized Stafford Loans. Then, we go on to the $10,000 in an unsubsidized Stafford Loan. Most all of our students on aid have the fee grant of $900, the subsidized Stafford of $8,500, and the unsubsidized of $10,000. [Editor's note: A subsidized loan is one that doesn't accrue interest until six months after the student graduates from the program.]
We encourage students [from the U.S.] to make sure that they fill out the Free Application for Federal Student Aid [FAFSA] by Mar. 2. We also need a copy of their most recent tax return and W-2 forms and a letter from their employer verifying that they are terminating full-time employment.
Q: Non-U.S. students can sometimes have a harder time securing financing for B-school than their U.S. counterparts. Are any special loan programs in place for Anderson's foreign constituency?
A:Anderson has always had loans for international students, and the program that we primarily work with is called MBA Loans, in conjunction with Sallie Mae. We now have a no-cosigner loan available through the Anderson School and MBA Loans. That waives the cosigner requirement for international students if they have viable assets.
[International students] are also considered for our first- and second-year merit fellowships. In fact, one of our second-year fellowships goes to the student with highest GPA in the core courses, and more often than not, it has gone to an international student. Our international students do very well here. It fluctuates, but this year, 23% of our students are from outside of the U.S.
Q: Another way of funding an MBA can be through teaching and research assistantships. Does Anderson provide those opportunities?
A:We have about 30 to 35 TAs [teaching assistantships] and RAs [research assistantships]. [These positions] are primarily awarded to second-year students, because professors tends to select students they know. [Students are compensated with] a small paycheck and the school pays a portion of their registration fees, which include mandatory health-insurance costs of $720 for the academic year.
Q: A lot of public institutions tout second-year residency as a money-saving measure. What is Anderson's take on out-of-state MBAs applying for California residency?
A:When you look at our tuition variance, it makes a lot of sense to try to become a resident for your second year, which 95% of our non-residents do in their second year. That's almost a savings of $11,000. The only stumbling block that students have run into is where to find work in the summer. It is imperative that the student not go back to their home state during the summer. They are strongly encouraged to work in the state of California, but if they do work in another state, it can't be the state they came from.
However, [students] do have to document a lot of things [establish a bank account, register to vote, get a driver's license, for example] and show their intent to stay in the state of California.
Q: What is the housing situation like at Anderson?
A:The school has a lot of different housing options. The one that is the most popular is married-student housing, which is not always available. Sometimes there is a waiting list of a couple months up to a year. The university also has dormitories and apartments on- and off-campus for students.
One of the things that [Anderson does for incoming] students is to offer classified rental listings from current B-school students on our Web site. I estimate that someone could rent a one-bedroom apartment [outside of the university housing system] in the area for between $900 and $1,100 a month. About 70% of our students commute from the beach areas.
Q: Do you see a lot of married students enrolling these days?
A:I'm seeing a lot more than I used to. About 25% of our MBAs are married.
Q: Does that married status affect a student's eligibility?
A:It does. A lot of married students do not qualify for need-based aid if they have a working spouse because the budget does not increase if you are married. So a single student and a married student have the same financial-aid budget. Adjustments are made with the income of the spouse. Students who do not have children and have a working spouse generally don't qualify for the lowest interest financial aid.
Q: Is there a solid network for spouses and partners to tap into to help find career assistance once they arrive on campus?
A:There is a lot of good networking. Not just through the Anderson School, but through UCLA as well. We have something called "Instant Personnel" which can be a big help to spouses. [They might be able to find a position] relieving someone on maternity leave, etc. We also have a lot of part-time jobs on campus. So there are a lot of work opportunities. We also have an organization of married Anderson students, so spouses get to form a pretty good base and network, too.
Q: In your 13 years at Anderson, have you seen any long-standing trends in the financial-aid arena?
A:About six years ago, the UC regents imposed a differential fee on the professional graduate programs at all UC campuses. Our differential fee is $6,000, which is added [directly to the price of tuition]. Before that, the cost was so low that most any student just needed an unsubsidized Stafford to manage. [Now,] a lot more students are in need.
The trend I am seeing currently is very high assets. Our students have planned, saved, and invested. These are not necessarily liquid assets that are easy to get to, but many students have a good, strong asset base, which affects their ability to apply for or qualify for need-based aid. So I'm seeing more students borrow a higher amounts on the unsubsidized Stafford and private student loans, because they don't qualify for the need-based and subsidized Stafford loan because of their asset base. These are business-minded students before they even get their MBAs.
Q: Tell us about some common blunders to avoid along the way, so that prospective MBAs won't make the same financial mistakes as their predecessors.
A:My strongest suggestion is to work on paying off consumer debt. Get credit cards and car payments paid off or at least down to manageable amounts. Those two items can't be part of a meager financial-aid budget.
Also, [students should] keep an eye on using credit cards to supplement aid while they are in school. I have seen students' credit change drastically from their first to second year because they have relied on credit cards.
Although I do see students holding more assets, they are not liquid, so if they don't produce an income revenue, then they are not valuable to draw upon. It is more advisable for a student to have a savings network for going back to school.
Q: Anderson has a large fully-employed, part-time MBA student population, enrolling some 608 students in 2000. What assistance does the school offer those students?
A:Our school has a financial-aid director for the fully-employed student body, and they can apply for the same loans. They don't have fellowships for that program, unfortunately.
Q: When students hit dire financial straits, how does Anderson's financial-aid office help?
A:We are very accessible, not just to the students that are here on campus but to admits and also to applicants. Our office has two full-time people. We both answer our own phones. We also do a lot of e-mail responses. My assistant is available for walk-ins, I am available for appointments. Most of the time, we both have our doors open.
Also, our MBA Financial Aid Handbook is a great resource available on our Web site. It covers many of the topics we've discussed and has links to other helpful information.
Q: What would a first year, second semester MBA candidate say about their experience with your office, a separate entity from the university?
A:Our whole purpose at the Anderson School is to be the link for the student and the financial-aid process that is handled in the [university's] central office. We are available so students can get things resolved without walking across campus to a building that handles our entire undergraduate population as well. It's a real saving grace in terms of time and effort. Any entering, continuing, or hopeful student would say [the service] is well worth it and makes the whole process of funding an MBA a lot easier.