Securing Country-Specific MBA Loans

Financing an MBA is never as easy as it should be. It’s especially difficult for international students because the complete range of MBA loan options isn’t available. You may think that there should be more choice given there are two different countries involved, but options are usually quite limited.

Information is wildly lacking in many countries of origin and loans are often unavailable in countries of study. To secure a loan for an international MBA program, understanding the playing field is often the first step.

Understanding the different MBA loan options for international students

Broadly speaking, there are three types of loans available to international students.

• MBA loans from country of origin to study abroad
• MBA loans in the host country made available to international students
• Borderless MBA loans available to students studying abroad

Within these options, you’ll find huge discrepancies in availability. It all depends on where you’re from and where you’re going.

Loans from your country of origin

Until the development of borderless loans offered through innovative platforms such as Prodigy Finance, most international students had only the option of financing an MBA  through banks (or the government) in their home country.

Country of citizenship makes a big difference in this instance. American students, for example, can still pursue government loans as long as they enroll in approved international institutions.

Other international students don't have this option. In many countries, the government will not offer or subsidize study abroad loans. Most study abroad loans are only available through private institutions.

And, private loans typically come with strict requirements and limits. In India, loans over Rs750,000 frequently require applicants to offer up immovable properties as collateral. Amounts under this threshold still require a cosigner – and some institutions will attempt to recover the balance outstanding from that cosigner if you leave the country during repayment.

However, outside a handful of countries (including the United States and India), you shouldn’t expect it to be easy to find information regarding international study abroad loans. More often than not, internet searches will point towards scholarship opportunities; although this sounds like a benefit, too often scholarships fit a narrow group of international students.

Where there is a central body (governmental, private, or public) for financing international study, such as COLFUTURO in Colombia, loan amounts are often tied to repatriation. In the case of COLFUTURO, up to 50% of loan amounts are eligible for forgiveness (transference into scholarship amounts) provided recipients return to Colombia and remain there for a minimum of three years. Sadly, there is a cap of 25% loan forgiveness for students undertaking MBA or MiM programs abroad. (But, an additional 10% will be deducted for a year of public sector employment post-return.) And, it’s worth noting that applicants for these loans are selected based on their personal academic rankings; loans don't link to need or repayment ability.

International students from developing countries often find their domestic options limited to one or two institutions with strict requirements and high interest rates.

Financing an MBA with loans available in host countries

Still, if you think financing an MBA with  a loan from your country of residence is difficult, just wait until you look at the options in your country of destination.

It’s no secret why. Banks don’t lend arbitrarily; it’s not good business. If you have no record of employment in a country coupled with a lack of credit history, financial institutions just don’t have enough information to determine whether money will be repaid and how closely the conditions will be met.

While there are loans available for international students in the destination country, they’re difficult to obtain. In the United States, as in most countries, you will need a local cosigner with a good credit history (and enough credit eligibility to qualify for the amount you need). Obtaining such a loan is hard enough to organize after you’ve begun your studies, and harder still before departing your home country. And, students requiring MBA loans for most of their educational costs usually don’t have the option of waiting.

There are ways around these regulations, of course. Some universities and programs act as a cosigner for loans taken locally. You’ll find these programs at institutions such as Tuck Business School at Dartmouth, Wharton Business School at the University of Pennsylvania, and yes, even Harvard Business School. Loan amounts and stipulations do vary. Programs outside of the United States don’t tend to offer these options as a matter of course. However, every institution offering loans to international students make one thing very clear – students should always check for financing options in their home country first.

For many students, it’s a head-scratching catch-22 and the cause of endless, stressful hours searching for another way.

Finding a country-specific loan

The absolute best advice for any prospective international MBA student is to apply to their top-choice programs as early as possible – and to explore options surrounding financing an MBA before sending off those applications.

Obtaining country-based international loans (whether from your home country or your country of study) is a lengthy process. It often requires extensive paperwork and long waiting times. Additionally, scholarships and bursaries are often doled out to early applicants (as are on-campus housing assignments).

All that time spent gaining clarity regarding “why MBA?” and “why [insert school choice]?” is going to come in handy. If you’re a student from Colombia enrolled at Wharton, and you don’t plan to return immediately following your studies, you may not want to pursue a loan from COLFUTURO. If your post-grad plans keep you in the United States, pursuing a loan through the university may make more sense.

However, it makes the most sense to investigate (and perhaps apply) for any and all loans available… once you figure out exactly what those options are.

And, the financial aid office should be your first port of call after receiving that coveted admission letter; they often know more about the options available for students from specific countries better than the governments themselves.