The Money Will Follow: A Short Guide to MBA Financing Options

When you attend informational sessions for top business schools or visit an QS World MBA Tour event, the question of MBA financing inevitably arises as soon as tuition costs are revealed. More often than not, prospective students are told, “Worry about getting in first; the money will follow.”

That’s small consolation when applicants are staring down the barrel of a US$100,000-plus education.

But, the money usually does follow. However, it often takes as much effort to secure as it does a seat at top business schools. It’s not just the paperwork and time spent checking credit scores; it’s also tracking down the right places to apply.

MBA financing options vary according to your country of origin (or residence), study destination, school and program, any government or military affiliations you may have, and your savings and credit history.

It’s a lot of legwork and it makes sense to begin looking at MBA financing options in distinct groups, even if you focus on your MBA application first.

Family loans

In some parts of the world, it’s a cultural norm for families to support students with finance for their education.

Students from other parts of the world don’t have this luxury; it’s a stretch to ask for assistance from parents and grandparents, particularly at the graduate level. But, it’s still an option, even in the United States where there are IRS guidelines for family financing. Loans over US$10,000 must carry a minimum IRS-set interest rate (variable based on duration and month of dispersal).

Family loans, despite being personal in nature should still carry legal responsibility to ensure that all parties stay on the right side of tax law, regardless of the country of origin or study.

Country-specific MBA loans

It would be near impossible to cover all the different country-specific MBA loans available to students. What’s available to an Ecuadorian student studying in France is vastly different to the options for English students in Singapore.

Broadly speaking, however, there are three types of country-specific MBA loans:

• Loans for students studying in their country of citizenship/residence
• Citizen/resident loans from the country of origin to study abroad
• International student loans provided by the destination country.

The first MBA loan is the most common. But, the financial waters become a little murky when dealing with international students, even at the MBA level.

Students studying in their country of citizenship or residence

For students studying in their country of citizenship or residence, MBA loan options can be broken into different avenues:

• Federal/governmental and state/provincial loans
• Bank and credit union loans
• Other private and third-party loans

In the United States, Federal Direct Loans are available in the form of Stafford and PLUS Loans. Applicants that received financial aid during their undergraduate years will likely understand the process, and more information is available on the Federal Student Aid website.

Both in and out of the US, banks usually offer unsecured personal loans in addition to student loans. Typically, the latter is a stronger option as these financial products typically allow for repayment deferrals until after graduation and often carry lower interest rates.

Regardless of the other MBA financing options on the table, admitted MBA candidates should investigate the loan terms, interest rates, and minimum requirements to secure a study loan from their banking institution. This will provide a baseline comparison for all other possibilities.

Additionally, there are private and third-party options available to students in certain countries. Commonbond, for example, offers loans to American students studying at American universities. This platform enables students to receive funding at competitive interest rates. The trade off? Lower interest rates for shorter repayment schedules.

MBA scholarships

There are more MBA scholarship options than one probably realizes. This requires a lot of research and time but these can come in different forms:

• Country specific MBA scholarships. For example in Spain there are about eight different entities offering scholarships to top students: from foundations, rich family endowments or regional entities. In Saudi Arabia anyone accepted to a top program can get their tuition paid by the government, while in some Latin American countries there are government-funded MBA scholarships
• School-specific MBA scholarships: One of the first points of research should be the school website where there are in some cases over 50 different scholarships donated by different entities – INSEAD, for example.

MBA loan options for international students

As much as international education has become a norm, even at the graduate and MBA levels, loan options for foreign students can be difficult to obtain.

In some cases, it’s a matter of national fiscal policy, with governments feeling the pressure to develop the domestic financial environment. It’s also difficult for banks to comprehend the value of an international MBA education and to manage the risk appropriately. In many countries, not enough students attend top business schools in London or New York for the banks to develop the predictive models required to assign rates and risk factors to study loans.

There are exceptions, of course. American citizens can still apply for Federal Direct Loans to study at institutions registered with the US Department of Education.

And, some American universities, such as Duke’s Fuqua School of Business, have taken measures to assist international students by co-signing on their loan, a requirement in the United States.

All MBA programs endeavor to provide as much information as possible through their financial aid departments. Universities, such as INSEAD, often offer lists with as many country-of-origin specific resources as possible.

Alternatives to address the international MBA financing gap                                                 

However, a significant number of international MBA candidates still battle to secure loans through traditional financing channels. And it’s this dilemma that prompted the development and growth alternatives, such as Prodigy Finance.

While banks base their loan decisions on historical salaries, we look to the future, assessing each applicant’s future earning potential to determine their loan affordability. This innovative platform offers loans to international graduate students attending leading business schools. Through a community platform, alumni, institutional investors and qualified private investors earn competitive financial returns, while students gain access to higher education they otherwise may not have been able to finance.

To date, Prodigy has provided 3,209 students from 112 countries with US$140 million in loans to pursue their education. Financing options are in place for over 100 programs, including the world’s top business schools. Admitted MBA candidates to any of the Prodigy-supported programs from 150 countries are eligible to apply.

MBA applicants should consider

And, whether you are planning to study around the corner or on the other side of the world, there are always scholarships and bursaries available although competition is fierce. All candidates are encouraged to explore the options available with their financial aid office.

However, there is a caveat; cut-off dates for MBA scholarships and school-funded bursaries often fall early on the acceptance timeline. If you wait too long, these options are likely to have disappeared into the pockets of other deserving students.

That is, of course, why prospective candidates are told to worry about their application first and the financing will follow.