Education Loan and Alternative Funding Information for Indian MBAs

There are many options to consider when looking at how to fund your postgraduate studies. You can apply for an education loan, exclusive MBA scholarships for Indian students, and also alternative subsidizations. Often, however, not all of these choices are readily visible with a broad Google search and the process can be time consuming.

Depending on the program, the price of studying for a MBA can easily reach between US$50,000-US$60,000 per annum – if not more. And, despite the fact that an MBA will provide you with better career prospects and therefore a good chance of paying off your student debt quickly, it is very valuable to know your options when it comes to initially covering this cost. There are many different types of funding for each individual situation; choose the right one and there’s a chance you could end up saving hundreds of dollars. You might even gain a scholarship or fellowship into your chosen school and end up not having to spend very much money at all.

MBA scholarships for Indian students.

A number of top business schools around the world offer MBA scholarships for Indian students which are available to browse on their respective websites. Like undergrad scholarships, MBA scholarships are given on the basis of need or merit and can either provide either full or partial living expenses. A partial scholarship would require the student to find additional funds.

The downsides to scholarships are that they are often restrictive in terms of eligibility criteria, and are few and very competitive. Also, in order to be considered, you must apply early and within certain deadlines. You should also bear in mind that often students can only apply to receive a scholarship once they have been accepted to their chosen school.

Here are some particular postgraduate scholarships for Indian students looking to study abroad:

Aga Khan Foundation ​

An international scholarship aimed at academic achievers in developing countries who have no other means of funding their studies. Priority given to master’s students.

Fulbright program

This is a US government funded program aimed at foreign postgraduate students looking to study in the US.

AAUW – International fellowships for women

These fellowships from The American Association for University Women are aimed at postgraduate women from international backgrounds.

Stanford Reliance Dhirubhai Fellowship

A needs-based fellowship aimed at Indian nationals looking to obtain an MBA at Stanford GSB in order to become a business leader in India and effect positive change in India’s economy.

Here are some quick links to broader financial support offered by a few of the leading business schools;

HBS

Kellogg School of Management

Stanford Graduate School of Business

Wharton

Columbia Business School

INSEAD

ESADE Business School

HEC Paris

IMD

A bank loan.

Many banks in India and across the world offer education loans for Indian students wishing to study abroad or at home. The amount you are eligible to receive depends on the program but it can be up to approximately US$16,000.

The clear downside of a bank loan is that it will only cover partial student fees and often students must be reliant on family members to pay the rest. Banks also do not readily give loans to all applicants; a successful applicant will have to have been accepted into his/her chosen school and hold a solid academic record. Indian education loans are also subject to many terms and conditions and the borrower is required to provide security for any substantial loan he is offered. See ‘collateral requirement’ below.

Additional costs that you may not have budgeted for will also affect how far your loan will get you. Aside from the obvious tuition fees, students should also consider factoring in the cost of living, study equipment (books, computer etc.), commuting, socializing and emergencies. There are also other unavoidable fees such as the business school application fee, GMAT fee, visa fees and airline tickets.

If you do opt to get a loan, you can either choose to go with an Indian bank or a bank from your place of study. The main things to consider with both are:

Interest rates.

Interest rates fluctuate wildly depending on which bank you opt for. Often interest rates are considerably higher for education loans from Indian banks than they are in countries such as the US. A number of Indian banks offer education loans with much more competitive interest rates than a regular bank loan; here is a rough guide to education loan interest rates from leading Indian banks (based on loans between US$6,500-US$12,000 at current rates, per annum - November 2013):

IDBI – 11.25%

Bank of Maharashtra – 12%

Indian Overseas Bank (IOB) – 12%

Canara Bank – 12.45%

Bank of Baroda (BOB) – 12.75%

State Bank of India (SBI) – 13.5%

Punjab National Bank (PNB) – 13.75%

Most of these rates are unfixed or ‘floating’, meaning they are liable to increase. This causes your overall repayment to be determined by the future market economy. Using a free online education loan calculator will allow you to work out the exact amounts you’ll be charged in interest and altogether throughout your studies. If you are not locked on a fixed interest then there are helpful options which let you calculate reasonable annual rate increases.

American banks often provide lower fixed rates, but since the economic crisis of 2008/9 more US companies are reluctant to lend, especially to international students without the insurance of a creditable US resident as a cosigner. There are some banks however that waive the need for a US cosigner for certain schools. For example, Citibank does this for international students attending Harvard Business School and Bank of America does this for those attending Kenan-Flagler, University of North Carolina. US federal bank loans are mostly restricted to US residents but there are extreme exceptions. The other option is to go with a private US bank which is a more common way for international students to fund their studies in the US as they are reliant on credit ratings rather than residency. These loans tend to have good competitive interest rates but in some cases there are additional fees which may make the loan more expensive in the long run.

Flexibility of repayment terms.

What should be kept in mind here is the date you are required to start your repayments and the timeframe you have to repay it. Often for Indian banks repayment begins six months after the completion of the program or one month after the borrower gets a job, whichever is sooner. Often the maximum tenure of repayment is 15 years, beginning from the day you receive your first loan payment.

Prepayment penalty.

A prepayment penalty may sound illogical to someone who considers faster payment better, but it is implemented to protect the bank from losing out on the money it would have received in interest if you had taken the full term to repay your loan. Often the penalty is based on the rate of a certain number of months of interest. If you are planning on paying off your loan with a lump sum, you may want to find out exact figures from your chosen loan provider.

Collateral requirement.

Indian banks tend to ask for collateral on your loan. Specific information is available from their respective websites but generally this is what they ask for;

• Loans of up to approximately US$6,500 – No collateral required.

• Loans of above US$6,500 – Requirement of a guarantor (e.g. a parent to sign a contract should you waiver your payments)

• Loans of above US$12,000 – Requirement of a guarantor along with an assessment of future income. In some cases this includes proof of assets such as a house, shares or an insurance policy up to 200% of the overall loan amount.

A non-bank education loan.

There is also the option of receiving a full education loan from a non-bank finance company either in India or abroad. Here are some options available to Indian students:

Credila.

Credila offers loans to Indian students studying abroad or at home. Credila is a subsidiary of HDFC, the largest mortgage lender in India. The loan is given in Indian Rupees to be converted into whatever currency the student requires but it must be repaid in Rupees. The loan is given with a floating rate of interest (currently at 9.33% pa) and must be paid within a ten-year period. Credila loans require extensive supporting documentation and collateral such as proof of a house, apartment or non-agricultural land. For further information on Credila go here.

Global Student Loan Corporation.

GSLC offer loans for international students studying in the US without the requirement of a US citizen as a cosigner. The company works closely with institutions and banks located in the borrower’s home country. For more information visit the website.

International Student Loan Program.

ISLP is a program aimed at international students who wish to study at an approved US institution. The program is funded by the PNC Bank and guaranteed by The Education Resources Institute. Students can borrow as little as US$1,500 per annum and may take up to 25 years to repay it. However, the loan must be cosigned by a creditworthy US citizen or a permanent resident of the US. For terms and conditions visit the website.

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