Financing Your MBA

Congrats meechigan! If you can get a competitive rate on a private loan, it is definitely more competitive than a Grad Plus loan these days.

Also, for those going into their first year, you always have the option to go with a federal loan for Year 2 if Libor or Prime rates shoot up. I think some hedging of loans between private and federal is a good move.

Good luck to all of you at school!

I guess this discussion is relevant to American residents.

What about international students? What financing options are there for them?

Sorry, could not resist posting this BWeek article about a revolutionary source of funding for BSchool - your parents .... seriously?

Actually, most of the discussion here about private lenders would be equally applicable to international students as well. The only additional data point internationals would need to research is whether they 'require' a us-based (citizen or permanent resident) co-signer or not. I would look at the specific schools' website as well since in a lot of cases, schools negotiate directly with private lenders to waive the requirement for co-signers.

Quick question - when getting funding from wells/sallie mae/citi are you getting it for both years or one year at a time? It seems like it would make sense to do 1 year at a time because you wouldn't want to accrue interest on money you don't need yet. However, do you get better rates on a larger sum of money versus two smaller sums?

they only do one year at a time.

Is rate shopping for student loans similar to mortgages, insofar as all applications within a 30-day timeframe count as one credit application? I'd like to check rates with a couple places, with and without a co-signer, but I don't want to screw up my credit by doing so.

Short term - having a lot of credit inquiries may lower your credit slightly but I don't think it will have a detrimental effect, especially not long term.

If I understood you correctly, what you're saying is that once you get in, you can get a loan from the US bank even though you're not an American resident?

That's correct. Most of the top 15-20 (if not all) have developed loan programs in partnership with US/International banks. Specific details would of course be available on each school's website. Keep in mind, that you may still have to show proof of funding (covering your first year expenses) for your student visa, which does not rely on the use of loans.

And also, the bank loan can cover all the expenses?

What if I have absolutely no money (except for my family's property)?

thanks to those who mentioned salle mae, just got approved for a 2.25% apr (2+LIBRO) with a cosigner.

plan to decline the higher unsub. gov loan for this.

It is just the online application.

Can some current or past students provide me with some insight on this...

Wouldn't it make the most sense to combine a GradPlus loan with a private loan in order to pay for school?

Then you'd owe half of the amount at a 7.9% fixed rate and the other half to a much lower variable rate. So if interest rates skyrocket 5 years from now, you could pay down your private loan first. But if interest rates stay low, you'd pay down your grad plus loan first.

This makes the most sense to me, but after speaking to the Financial Aid Director at Booth, she advised against doing this. Her reasoning was that it would be too complicated to keep track of 3 loans (Stafford + GradPlus + Private). I pressed her for a more thorough explanation, but didn't give one. I don't see why this would be a bad idea and I'm looking for some advice.

I wouldn't bother using private loans under any circumstances. I would go with only Stafford and GradPLUS for these reasons:

1. Federal loans give much easier consolidation options
After you finish school, you can combine your loans together for one payment. A private loan won't do this unless you have multiple private loans with the same lender (ie - Sallie Mae)

2. There are much better safeguards with the federal loans than the private loans
In today's economy and work environment and for the foreseeable short and long term future, you can't guarantee what kind of a job you're gonna get. Federal loans offer Income Based Repayment (IBR) where you combine your loans, and then only pay up to a certain percentage of your monthly income (usually no more than 10% for folks making under 100K/year). After 25 years, if the borrower still qualifies for IBR the whole time, and there's still a balance, everything is forgiven. If the borrower pays loans for 10 years and is in public service, then his whole loan balance is forgiven too. In a standard repayment plan of 10 years, if someone owes $200K in loans, he or she is paying $2500/month for them, and IBR and income contingent programs help ease that burden.

Private loans may create some contingent plans based on income, but forget about getting any balance forgiven.

*****

In short, private loans are more risky, and yet, are still non-dischargeable, if god forbid, you had to file for bankruptcy. The lender protections are still there but you have no borrower protection. So just take the fed loans and if you pay them off sooner, then great! But if not, then at least the protections are there.

With the costs of tuition these days, it's never too early to start saving. My father fortunately forced me into very disciplined investing and saving habits. He encouraged me to begin investing in the stock market from around the time I turned 18. I finally started right around the time I turned 21, and have seen fortunate enough to see some fairly decent returns (God, I love Apple stock).

After hearing nightmare stories with students loans from grad school from friends and family members (one relative went to UCLA - Anderson a few years ago for an EMBA), I will try and pay for all of my education up front without loans, even if it costs every penny that I have. Needless to say, being 24 years old without a full time job at the moment, this may take a while...

Of course, the much preferred plan B would be to have an employer sponsor me and foot a lot of, it not all of, the bill .