All education financing is not created equal; there is a generally-accepted hierarchy that goes roughly like this: 1. First, the freebies: scholarships and grants. Obviously. 2. Next, your own cash savings - including Education IRAs and 529 plans. 3. Federal student loans - stafford loans - are your next best bet. These loans have fairly low interest rates (now fixed at 6.8%), you won't need to make payments while in school, the interest is tax-deductible, and there are very flexible repayment options once you've completed your education. With subsidized loans, the gov't pays the interest for you while you're in school. The interest on unsubsidized loans accumulates while during this period, and can greatly increase your prinicpal by the time you are ready to start repaying. (Hint: if at all possible, at least make a monthly interest payment while you're in school.) Maximum per year: $18,500. (Of which $8,500 can be subsidized. Subsidy is determined by need.) 4. Grad PLUS Loans. These are additional federal loans - PLUS used to mean Parent Loan for Undergraduate Students, but recent changes mean that grad students can use Grad PLUS loans to fund their own education. These loans have fixed rates, at about 8.5%. You can borrow as much of these as you want, up to the total annual cost amount (tuition, fees, and cost of living) determined by the school, less any other aid received. Unlike stafford loans, eligibility for these loans is not just based on your FAFSA - lenders will also consider your credit history. Your payments are derred as long as you are enrolled at least half-time. However, interest will be accruing. Nice repayment options. 4. Private student loans - these loans offer some of the benefits of federal loans, but not all. The interest will not be subsidized (again, do try to make payments to avoid capitalized interest), but you should not be required to make payments as long as you are enrolled at least half-time. Rates can be variable or fixed, and will vary a great deal. Maximum loan amounts will also vary. Your credit history will certainly be used to determine eligibility. Repayment options will vary. 5. Non-student loans: home equity, personal loans, credit cards. Yikes! Use wisely! No special repayment options, and payments due within 1 or 2 months after disbursement. Generally speaking, you should always shop around for federal student loans. While the government sets the rates and many other features, different loan companies offer different kinds of borrower benefits, including rate reductions. Since new laws went into effect last summer, the word on the street is DEALS DEALS DEALS, so look for the lender that can offer you the best package. And care for your soul - lenders make money off your loans; think about who you want to have your money. While schools may have preferred lenders, you can borrow from ANYONE, no matter what line they school feeds you. At my credit union, we've been referring people to https://www.MyRichUncle.com for private loans. Private loans especially deserve lots of scrutiny as they can vary so much from one lender to a next.

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Financing Your MBA

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MeddlingKid

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24 Jan 2009, 17:52

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aaudetat

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I recall reading, some time ago, that one should try to postpone any financial gifts when attempting to secure Federal aid for B-School. When I receive my Financial Aid package, will the amount I have in my 401(k) and/or savings account affect how much the Federal government would be willing to loan me? I recall hearing that one could borrow up to the full budgeted yearly amount from the Fed, but I'm guessing the amount of money in my accounts would determine how much Uncle Sam gives me in unsubsidized loans.

they do not count qualified retirement accounts (401k, IRA) or the value of your home. They will look at non-qualified accounts, such as savings, money market, stocks, etc.

The subsidized/unsubsidized part is determined by need.

So a person could, theoretically, take out the full amount in Plus loans even if he didn't receive any need-based Stafford aid?

solaris1

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24 Jan 2009, 17:58

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Yes, but why would you want to do that if you can take $20,500 in unsubsidized Stafford loans at 6.8% each year, as opposed to the GradPlus loans at 8.5%.

Eligibility for unsubsidized Stafford loans is not need-based. And even if you qualify for subsidized Stafford loans, you can only borrow $8,500 a year under the auspices of that program.

MeddlingKid

So a person could, theoretically, take out the full amount in Plus loans even if he didn't receive any need-based Stafford aid?

aaudetat

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24 Jan 2009, 19:00

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solaris1

Eligibility for unsubsidized Stafford loans is not need-based. And even if you qualify for a subsidized Stafford loans, you can only borrow $8,500 a year under the auspices of that program.

not need-based? my bad. I know that in undergrad my friends from wealthier families got all of their staffords as unsubsidized while mine were all subsidized.

liubhs02

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Updated on: 25 Jan 2009, 06:35

Originally posted by liubhs02 on 25 Jan 2009, 03:39.
Last edited by nink on 25 Jan 2009, 06:35, edited 1 time in total.

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I read this article talking about financial aid and loans are down this year. This hasn't hit me yet, since I applied in R2. For those of you that applied in R1 and got admitted, have you guys started looking into how to finance the education? Is financial aid and loans really down? I think Kry said his loan jumped to 11%, that's crazy, my credit card rate isn't even that high. Any anecdotes you would like to share?

https://news.yahoo.com/s/ap/20090125/ap_ ... PCw_Gs0NUE

Jerz

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25 Jan 2009, 07:14

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From what I understand, the federal loan programs (Stafford and GradPLUS) are still readily available, at 6.8% and 8.5% fixed rates. It's the private loans that are the problem.

I won't know for certain what my situation is until I get my financial aid letter from the school with my "expected family contribution." But I expect that just using federal loans and savings I'll be able to afford school. It's more a matter of if I can get private loans as well at a reasonable rate, I'll be able to keep more of my savings and/or live more comfortably at school.

isa

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25 Jan 2009, 10:05

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aaudetat

solaris1

Eligibility for unsubsidized Stafford loans is not need-based. And even if you qualify for a subsidized Stafford loans, you can only borrow $8,500 a year under the auspices of that program.

not need-based? my bad. I know that in undergrad my friends from wealthier families got all of their staffords as unsubsidized while mine were all subsidized.

From a non-official website (https://www.staffordloan.com/stafford-loan-info/graduate-stafford-loan.php):
Subsidized Stafford Loans are awarded to graduate students based on financial need. You will not be charged interest before you begin repayment or during periods of deferment. The federal government "subsidizes" the interest during these times.

Unsubsidized Stafford Loans are not awarded based on financial needs. Any eligible graduate student can take out unsubsidized stafford loans. You will be charged interest from the time the loan is disbursed, to the time the loan is repaid in full.

And the rates (school year/subsidized rate/unsubsidized rate):

2008-09 6.00% 6.80%
2009-10 5.60% 6.80%
2010-11 4.50% 6.80%
2011-12 3.40% 6.80%
2012-13 6.80% 6.80%

solaris1

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25 Jan 2009, 10:18

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Just a quick comment, the official website for federal student aid programs is:
https://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp.

Everything else is just some lender posing as an "official" resource. StaffordLoan.com is just a site owned by one such lender, and is not affiliated with the Department of Education's Stafford program.

While you are free to go with any lender for Stafford and GradPLUS loans (the incentives and rates virtually all lenders offer are now identical), it's probably a good idea to pick a Stafford/GradPLUS lender "recommended" by your school's financial aid office.

This doesn't apply to private education loans however.

isa

From their website (https://www.staffordloan.com/stafford-loan-info/graduate-stafford-loan.php):

And the rates you posted isa apply to undergraduate Stafford loans. Stafford loans for graduate study are fixed at 6.80%, they don't come down gradually like the undergraduate ones will in coming years.

isa

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25 Jan 2009, 10:24

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solaris1

isa

From their website (https://www.staffordloan.com/stafford-loan-info/graduate-stafford-loan.php):

Woah - good to know that there are sites posing as "official" resources. Thanks for the heads up.

isa

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25 Jan 2009, 10:26

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solaris1

Good to know solaris1 - I was actually going to ask why they come down gradually. I had heard that the rates were fixed so that was confusing.

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26 Jan 2009, 14:04

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FYI

BW is hosting a chat with with Dan Thibeault, president and co-founder of Graduate Leverage, a student lending organization launched by Harvard Business School students. He’ll be answering questions about everything from how international students can find a co-signer to how much money you’ll really need to fund your MBA education.

https://forums.businessweek.com/n/pfx/fo ... &tid=79078

aaudetat

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26 Jan 2009, 14:29

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ninkorn

FYI - I met this guy and thought he was pretty cool. We talked about teaming up to do something at Fuqua, but somehow first year slipped away from me....

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28 Jan 2009, 09:27

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Stimulus Plan Would Provide Flood of Aid to Education

The economic stimulus plan that Congress has scheduled for a vote on Wednesday would shower the nation’s school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year investment that would more than double the Department of Education’s current budget.

https://www.nytimes.com/2009/01/28/educa ... ml?_r=1&hp

nink

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30 Jan 2009, 08:49

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Financial Woes Force B-School Cutbacks
Plunging endowments and reductions in state funding are leading to layoffs, salary freezes, even program shutdowns. And the worst is still to come

https://www.businessweek.com/bschools/co ... =rss_daily

Chat Transcript: MBA Loan Crisis
Dan Thibeault, co-founder of Graduate Leverage, fields questions on the loan challenges facing international MBA applicants

https://www.businessweek.com/bschools/co ... =rss_daily

DimpBiz

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05 Feb 2009, 17:56

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I have no problem covering the tuition and estimated living expenses through scholarship and Stafford loans. However, I am very confused as to how one covers car payments and credit card debt through the two years without income. I know it is illegal to direct education loans to such expenses, but I also find it hard to believe that no one has ever attended grad school who hasn't owned their car in full or had zero credit card debt. Also, I know federal loans can't be taken out over the school's estimated expenses. My particular school's estimate seems paltry at best...can private education loans be taken out to cover expenses above the estimated amount, or are these too capped off at what the school estimates?

bigfernhead

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09 Feb 2009, 11:57

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Has anyone tried to take a loan against their current mortgage to fund their education?

solaris1

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09 Feb 2009, 13:29

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Private education loans are capped up to the estimated cost of attendance figure calculated by your school's financial aid office. You can try and have your school's financial aid folks adjust your budget to account for car payments and credit card debt (not sure if they'll agree, but worth a try) but unless I'm mistaken you're expected to pay existing debt (with the exception of existing student loan debt) with your personal savings I suppose.

DimpBiz

Toubab

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09 Feb 2009, 14:33

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I'm going into B-school with no debt, save a leased car that I'll be making payments on for another year and a half or so. The payment isn't bad. I know it'll make things a little tighter budget-wise, but who's to know if I use part of my cost of living allowance from my loan to pay for my car (and save on, say, rent or something else)? Surely others have done this.

Jerz

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10 Feb 2009, 05:50

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bigfernhead

Has anyone tried to take a loan against their current mortgage to fund their education?

Assuming people still have enough home equity to borrow against, I think the downside to this is that you'd have to start making payments as soon as the loan is disbursed, whereas student loans you can generally defer payments until after graduation (interest still accrues during the deferral period).

I'm also going into school with a car lease, and will be making those payments out of personal savings. However, since money is fungible, I don't think anyone could ever track whether the payments for car-related expenses came from savings or from my loans.

bigfernhead

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11 Feb 2009, 07:06

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I'm going with the idea that you can take the loan out at the rate of financing for the home, which would be cheaper than the rate of loans for school....

jb32

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11 Feb 2009, 07:07

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bigfernhead

I'm going with the idea that you can take the loan out at the rate of financing for the home, which would be cheaper than the rate of loans for school....

Just remember that there is no grace period on home loans. You'll have to take out more to be able to make payments on the loan while in school.