Financing Your MBA

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 .

My employer supported my decision for the evening MBA but wouldn't pay a penny, though some guys get the $5,000.00 tax free voucher at other companies.

@novanative: That's unfortunate, I'm sorry to hear that =/.

From what I've been led to believe, it seems that many companies have tightened their purse strings since the economic collapse in 2008, and even if that had no real impact at a particular firm, it sure sounds like a legitimate reason for denying employees aid in there here and now.

@cecilpaladin32

Yup. The good news is that my supervisor and dept head, even the CEO all gave me their blessings on the MBA. I work at a small company of about 80 folks so that's how the CEO is on a first name basis with everyone.

And yes, fewer companies give financial sponsorships to their employees. I wish they would pay my enrollment deposit at least, but no avail. It's all on me either way, and the only financing I have is with the DOE, but at least the financing options are very flexible, and no way am I going with a private loan which was the only way people could finance a graduate education before 2006 when GradPLUS came out.

If you go back to page 7 of this thread, there's a discussion about this. Seems like an intelligent strategy to me.

How soon after you filed your online application did you ger approved from Sallie Mae??

Can/should you compete the Federal application before you have even taken the GMAT, let alone decide which schools you are interested in.

Yes, you can complete the FAFSA before the GMAT and before you apply. If the school you are interested in requires an additional questionnaire, you can often send that in before you are accepted (hopefully) to that school.

he Perkins loan program is a federal loan program that provides low interest (5%) loans to students who demonstrate exceptional financial need. No interest accrues on the loan and repayment does not begin until nine months after the student graduates or is no longer enrolled on at least a half-time basis. Perkins loans are administered through the Tepper School of Business and funds are limited.

I know Perkins offers a good deal for students who possibly qualify, but at most universities that have these loans, they are dished to the undergrad students because all aid tends to go to undergrads, except stafford and GradPLUS. I would also think that perkins is usually given only to students who make relatively low incomes, and/or have a family when entering school, but I may be wrong. I wouldn't qualify anyway based on where I'm applying.

Has anyone encountered the problem of the posted MBA budget being too low? For NYU Stern, the cost of living is stated as $23,534 for room and board, $7,206 for personal expenses, and $936 for local travel (a total of $31,676 for a nine-month academic year, or $3,520 a month; if you spread it across 12 months, it's only $2,640). While you could probably achieve this on a budget (i.e. living like a college student), if I went there I would most likely spend way more than this. My non-retirement savings are quite small and may not cover the excess, especially when you take the summer into account, since you can't simply move out of your apartment if you don't have an internship. Is there any way to borrow over and above this amount, either from the gov't or private lenders?

If you take summer classes, your cost of attendance will be adjusted to reflect a higher living allowance. You would be allowed to borrow up to $42,234 or so for a 12 month year. Otherwise, you can't borrow extra money. You also still get the full living allowance as long as you are enrolled at least half time at the school, generally speaking as far as I know. Don't borrow too much if you don't have to.

I know you can request a budget adjustment, but only for the months you are going to be in class, no exceptions.

You cannot use any type of student loans in order to borrow more money than the cost of attendance, period. And though some of you may disagree with me, I believe that you should only use the Stafford and GradPLUS loans because of the built in federal protections. You don't get that with private lenders.

Thanks for the reply. Has anyone run into the problem of not having enough in loans + non-retirement funds to pay for school + living expenses? I even have a fairly hefty scholarship, but ironically that doesn't help my financial situation at all during business school.

To the private vs. federal loans issue, the way I see it is this: you're paying a hefty premium for the federal "protections" (e.g. forbearance, forgiveness, deferment, etc.). But the probability of you not being able to repay a reasonable amount of student loan debt is (we hope) fairly small. For many of us we have parents, relatives, or loved ones who would most likely help us in such a dire situation. In this case, I would certainly take the lower private rates, since those rates in themselves lower the probability of falling into a dire situation.

I get that private loan rates may be lower if your credit qualifies (or with a cosigner). Yes, my family will help me out if I'm really dire and needed to put down a deposit in school, but they're not going to pay my student loans and see their credit go in the crapper because of me.

Private loans will demand that you pay an ex amount to them regardless of our income, etc., and the payment terms are therefore inflexible as opposed to the federal loans (10 yr forgiveness if in a public service job, IBR/ICR, etc.). Discover and Sallie MAe won't do that for you. All of these loans are non-dischargeable as well, so god forbid you had to file Chapter 7 or 13, these loans are still on your backs after discharge unless you are paralyzed and can't work for the rest of your life.

Granted, the MBA market looks better than the JD market, but given how uncertain job prospects can be, I find it best to have the most flexible payment options are available. I don't intend on going $300K in the hole, but I don't want to see the worst case scenarios pile on me and hear sallie mae come knocking at my door if I can't pay. They make a killing with college students who choose to go to private or out of state public universities, because their parents will only pay so much (EFC), and the students can't borrow federal loans to cost of attendance. Only mom and dad can through PLUS. So the student must use Sallie Mae or go to a cheaper institution (through financial aid and/or tuition price).