Footing the Bill for B-School

Three experts offer some sound advice on negotiating the complicated process of financing that costly MBA education

Wondering how you'll pay for the MBA education you just signed up for? The cost will be a shock, but finding money to pay it is hardly impossible -- if you know where to look.

To give new and future MBAs a head start, BusinessWeek Online recently invited three financial-aid experts to answer questions from an audience of more than 100 people. Ann Richards, director of financial aid and associate director of admissions at Cornell University's Johnson Graduate School of Management, offered a school's point of view. Karen Kurtz, manager of graduate professional loans, and Laura Hardman, manager of private credit loans, joined BW Online from Sallie Mae, the nation's largest educational lender. Kurtz and Hardman told students what they need to show banks to persuade them to loan out big bucks. They also administer the 17-year-old MBA LOANS private program, which is run by Sallie Mae and sponsored by the Graduate Management Admissions Council (GMAC).

Richards, Kurtz, and Hardman fielded questions from a live audience and from Mica Schneider, BW Online's reporter covering management education, and from BW Online consulting editor Jack Dierdorff. Here's an edited transcript of that event:

Q: Ann, you've been working in financial aid for more than 20 years. Do MBAs have more access to loans and scholarships in 2004 than they did five years ago?


There are more opportunities for loans to help cover educational expenses, particularly for international students [studying at U.S. schools]. And in addition, I think there are a lot of expanded opportunities for international students for scholarship funding from schools and from private resources and foundations.

Q: Karen or Laura, what's the maximum amount of money MBA LOANS can provide students over the course of their graduate business degree?


Sallie Mae encourages borrowers only to borrow what they really need. Borrowers eligible to receive Stafford Loans can borrow up to $18,500 each year, and the aggregate education limit is $130,500, as determined by U.S. Congress. To qualify for the Stafford Loan, you must be a U.S. citizen or noncitizen (with) permanent-resident status, and attending (university) at least half-time.

Borrowers for the MBA LOANS private loan can borrow up to the cost of the education determined by your school, minus other aid received. To qualify for the MBA LOANS private loan, you must be a U.S. citizen, a noncitizen permanent resident, or an international student who applies with a credit-worthy co-borrower who is a U.S. citizen or noncitizen permanent resident.

The aggregate education-loan limit on the private loan without a co-borrower is $175,000. With a co-borrower, there isn't any limit. On the private loan, borrowers can also be attending part-time.

Richards: The amount that you can borrow is determined by the school that you attend. Some schools have made arrangements with MBA LOANS, Sallie Mae, or other lenders to provide loan funds for international students without a co-borrower. That does vary by school.

Q: Is it too late to apply for scholarships for fall 2004?


No, it's not. Begin to search. Resources may be out there. Check with community organizations you belong to, or paternal organizations, religious affiliations, employers, and the schools that you're considering.

Q: When is the best time to apply for MBA loans through Sallie Mae, and what is the maximum amount that can be borrowed?


Students should apply for their loans through Sallie Mae no more than 180 days before the start of your program.

Q: Could you share resources or companies for loans for international students with U.S. credit history but with no co-signer? Access Group is one. Are there any others?


It depends on the school the student is considering, because some schools have arrangements with private lenders. An applicant may qualify for a loan on their signature alone, based on the relationship that a particular school has with a lender.

Q: What are some scholarship opportunities for MBAs and/or MBA women?


There are many places to search for outside scholarships independent of the school you're attending. One of the best places to start is to do a Google search for "scholarships." We also have some links to scholarship programs from the Johnson School's Web site. Check the schools that you're applying to. Many MBA programs offer scholarship funding for many of their candidates.

Kurtz: Sallie Mae has a "planning and paying for college" Web site called Graduate business students can visit that site and check out the online-scholarship search, where they can find out how to qualify and apply for scholarships worth millions of dollars.

Q: There seems to be a lot of curiosity about Web sites on this topic. Do you have any favorites besides those already mentioned?


One of my favorites is Students can create their own profile, and it will search for scholarships that they may qualify for. That's a free service.

Q: What are some of the other private loan options for students?


I think that honestly we have to say that there are many different loan products out there and students should compare services that lenders will provide for them. Also, look at interest rates. Look at any fees that the lender may charge as well. There is no one perfect loan -- it may vary by student.

There are many lenders in the private loan field. Some of the major players are MBA LOANS through Sallie Mae and other graduate loan programs that Sallie Mae offers. Citibank, the Access Group, Key Bank. Students who are curious should check with their schools to see which lenders they may have relationships with.

Q: What interest rate can a student borrower expect to pay?


That depends on their credit history, credit score, and in some cases the school they're attending. The range [of interest rates] would be approximately 3% to 9%.

Hardman: With the Stafford Loan, current interest rates during the in-school and [six-month] grace period is 2.82%.

Kurtz: Our private loan has tiered pricing to accommodate all borrowers and their various credit histories. We try to provide as much access to student loans as possible.

Q: How is your past credit history viewed when it comes to student loans? Is there more slack given as opposed to a car loan or credit card?


Even if the student doesn't have a credit history, or if they have poor credit, Sallie Mae can make a loan to that person with a creditworthy U.S. citizen or permanent resident co-borrower.

Richards: My initial answer would be it depends on the school you're attending, because some schools do have guarantees with particular lenders, so your credit history may not be scrutinized as closely as it would be for a car loan.

Generally speaking, your credit history plays an important part in access to student loans, but most importantly in receiving the most attractive pricing for a student loan. This relates exclusively to private loans, because credit is not a factor in federal loan eligibility, except in the case of student loan defaults.

Kurtz: Revolving lines of credit (i.e. credit cards) often have lower credit requirements. So, potential MBA students should not assume that just because they might be preapproved for a credit card, that they will automatically qualify for a private student loan. However, the tiered pricing that is offered provides MBA LOANS borrowers higher approval rates and better pricing than you would get on other types of consumer loans.

[Editor's note: In general, more than 85% of applicants are approved for MBA LOANS.]

Q: What financial aid is available to executive MBA students?


It's primarily loan assistance for executive MBA students, but check with the school you're attending. There may also be funding from your employer.

Kurtz: Sallie Mae's MBA LOANS program is available to EMBA students because the private loan can be used for less than half-time study, which is often the enrollment status of an EMBA candidate.

Q: Are you familiar with programs available to military veterans?


There are many benefits available to military veterans from the federal government, and in some cases directly from the school. In some cases, military veterans also qualify for unemployment benefits while they're enrolled as a student.

[Editor's note: Cornell's admissions office has said it is working to recruit MBAs from the military.

Q: This audience member is unfortunately carrying debt into the MBA, and asks, "Can I take out extra private loan funds to reduce or pay off that debt while in an MBA?


It depends on the school. Generally speaking, schools hesitate to allow students to borrow education funds to pay off consumer debt.

Kurtz: The purpose of the Sallie Mae MBA Private Loan is to pay the expenses a student has while going to school. It's not meant to pay off previous debt. One thing to keep in mind is that students borrowing Stafford Loans in addition to private loans are constrained by federal regulations to only use loans for educational purposes.

If the previous loans being referred to are undergraduate student loans, the student may be able to defer those loans while in graduate school. Students should only take out what they need to get through school.

Q: What loan and other resources exist to cover living expenses during your two years [of study], as opposed to tuition expenses? Or is it all considered together?


Schools construct a budget for each student that includes tuition and living expenses (books, health insurance), and they look at that as a package when calculating eligibility for scholarships and federal and private loan funds.

Q: This question came in earlier this week, and I see its author is in the crowd today. He asks, "What business-school expenses are tax deductible? Tuition? Books? Application costs? Other?


I am not a tax accountant or a CPA, but tuition may be deductible depending upon your circumstances. And you may also qualify for a lifetime-learning credit on your tax return. But you should check with a tax professional regarding credit or tax deductibility.

Kurtz: The interest on federal and private education loans is tax-deductible. You can work with your accountant on that when you file your tax form. also details all tax benefits for higher education.

Q: Looking globally, this audience member asks, "If I plan to study abroad, where is the best place to start searching scholarships for U.S. citizens?"


Check first with the schools you want to attend. They may have some resources, or they may be eligible to certify you for federal loan assistance. Then I would search for private scholarships via the Web or Sallie Mae's scholarship search.

Q: I have been a diligent saver and can nearly pay for B-school without loans. However, I feel I'm being penalized in the financial-aid arena. What are my best options for taking advantage of low-interest loans and financial aid?


Many schools award scholarship funding based on academic merit as opposed to financial need. Interest rates for federal and private loans are at historic lows. Because the rates that you qualify for are very often dependent on your credit history and picture, a diligent saver will often be rewarded with the most attractive interest rates.

Q: Is there any way to borrow over the school budget, which I know isn't going to be enough?


Check with the school that you're considering. There may be circumstances in which a school would increase your budget. But generally speaking, schools won't increase a budget for a student's discretionary or lifestyle choices. Live like a student now -- start cutting your expenses now.

Q: I'm interested in learning more about credit scores. How are they computed, and can they be improved?


In general, borrowers can access or to get tips and guidelines on how to manage their credit history and get a copy of their credit report. If you know you may have issues with your credit history, you may want to get a copy of your credit report to try to correct any mistakes on that report and try to understand that report prior to applying for your loan.

Richards: Limit the number of consumer credit cards you have, pay your bills on time, and pay more than the minimum payment each month. Or don't carry a balance.

Q: Does it hurt my credit history if I have a lot of balances on my credit card?


There is no "one size fits all" answer, but the smaller balances and the fewer credit cards you have, the better.

Kurtz: does have FICO modeling, so students can see the effect of closing accounts on their overall score.

[Editor's note: Kurtz clarifies that when people close numerous credit-card accounts in a short period of time, it raises a flag to lenders, as it could be a sign that the person is in some sort of financial trouble.]

Q: You said early that there were especially good opportunities for international students. Is there a way to find out about these? (And I don't suppose they offer any help with the current visa problems.)


I'd like to tell students, international students in particular, to look to their government, private foundations like the Fulbright Foundation or the Soros Foundation, community activities, religious affiliations, and their employers. Many schools list scholarship links specifically for international students on the financial-aid section of their Web site. Unfortunately, schools aren't much assistance in fixing visa problems.

Q: Any final thoughts before we wrap this chat up?


Sallie Mae's MBA LOANS provides some of the highest approval rates in the industry. Check with your school on how to apply. The MBA LOANS program can be applied for via the phone (888-440-4MBA) or on the Web at Good luck in school!

Richards: Thanks to everyone for participating in the chat. Feel free to contact me or the financial-aid office at your school if you have additional questions. My e-mail address is My phone number here is (607) 255-8915.

Before it's here, it's on the Bloomberg Terminal.