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Timing of MBA Loans

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Timing of MBA Loans [#permalink] New post 31 Mar 2014, 18:11
All - I was wondering about MBA Loan Financing. I'm not sure if this is the norm, but I just had this thought about taking out loans.

A lot of assumptions I read about start off with borrowing money at the start of an MBA program (for this case, let's say ~$200,000). However, schools don't ask for the whole tuition payment upfront, correct? Don't students pay annually?

In some cases, I have seen schools with trimester schedules with different tuition due dates. In such cases, would it make sense for a student to borrow money when he/she needs it (ie, taking out the loan a week or two before the due date)? This way, you avoid accumulating interest on money you don't immediately need.

This could be significant, as ~6% interest on $100,000 is $6,000 (assuming you use $100,000 per year for tuition and other fees).

I understand that this assumes you'll be qualified for the same rate each time you take out the loan when you need it, which may not be the case (as each credit inquiry negatively impacts your score). But I wanted to get everyone's thoughts on this - is this what people do anyway? Or is there something that would prohibit one from doing this? It may affect the way I look at total loan costs and payback.
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Re: Timing of MBA Loans [#permalink] New post 31 Mar 2014, 19:09
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The way I understand it, is you apply for loans yearly, and then it gets released at the beginning of each tri-mester/semester. I don't think you get charged interest until it gets released each time.
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Re: Timing of MBA Loans [#permalink] New post 31 Mar 2014, 21:15
mgh234 wrote:
The way I understand it, is you apply for loans yearly, and then it gets released at the beginning of each tri-mester/semester. I don't think you get charged interest until it gets released each time.


Confirmed. With few exceptions, you can get approved for up to one year's COA (less the value of other aid) at a time. Every lender I've come across requires the school to certify the amount of the loan, so that you can't double dip with multiple lenders (although you can split the amount across multiple lenders). When the school certifies the loan, they provide a disbursement schedule to the lender. If a school is on the quarter system, a $60,000 loan will typically be split in (3) $20,000 payments to the school. Any money in excess of tuition and fees owed would then be refunded to you by the school. Interest only accrues on the portion that has been disbursed. Many schools require the 3 payments to be equal for each term, even if your tuition and fees aren't. This can create cashflow issues (because of 1st quarter, one-time expenses) if you're not paying attention.
Re: Timing of MBA Loans   [#permalink] 31 Mar 2014, 21:15
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