Financing Your MBA

Even if it did, it would be unethical. Just sayin'.

It obviously varies by state, but here's what the Great State of New York has to say on this:

You will obviously have to make the case that going to business school will "enhance one’s ability to obtain more long-term employment in the state or local labor market."

Do most states pay up to 12 months of unemployment benefits? Even with emergency benefits, New York State will only pay 33 weeks' worth.

Even if there is a [questionable] legal basis to what is being proposed by laymeoff, bear in mind one will be unnecessarily exhausting a government benefit that might be the only economic lifeline for many in this market. Do the right thing.

Let's be honest here. Do you really want to commit unemployment fraud over $400 a week for 33 weeks? I just don't think it's worth it. Just remember that you might have to explain your story to a judge one day and they'll probablly see right through your story.

We live in the era of post-Bernie Madoff, Enron, Tyco and other unethical episodes. We are all headed to top bschools where honor codes and ethics are emphasized.

I am sure when all of us applied to bschool, we all painted ourselves as perfect citizens with integrity.

Let's drop this "Quit Your Job and Collect Unemployment Benefits" idea and avoid this thread from becoming the web's Info-Central for devising the perfect fraud for the activity described above.

There are far more unfortunate individuals who NEED to collect unemployment benefits just to live from day-to-day.

We are all lucky to get admits to top bschools and I am sure our future is brighter than those unfortunate individuals. So let's just move on from this dreadful topic. It's not even worthy of further debate.

Hey, I didn't write that. It was "laymeoff". I don't know how you quoted and changed the author name.
I am not looking to get laid off nor to commit any unemployment crime. I was just curious if the law is really bullet proof when it comes to that.

Ha - sorry about that. I was just deleting all the quote headers at the top of the message. My mistake.

No problem. Just wanted to make it clear I am not looking to get laid off

Great information solaris!

Quick grapevine intel for those considering private loans:

Discover appears to be offering variable rate private student loans at Prime minus 50bps (so currently ~2.75%) for domestic borrowers with solid credit AND a co-signer. I hear if you want to go without a cosigner and have excellent credit, you can score Prime plus 200bps (~4.25%).

Discover also offers a 2% reduction in principal as a "graduation reward" when you finish and has zero fees for qualified borrowers.

Not a bad deal.

If anyone sees a better deal elsewhere, please post here for kudos!

That sounds like an awesome deal, if true. Maybe I should've answered one of those Discover telemarketing calls
What are the predictions for this variable rate i.e. how high could Prime usually go?

The Prime rate was around 8.25% as recently as August 2007. Where it will be say in three years, no one knows for sure really. If you will need more than a year or two to pay off your private loans, the GradPLUS loans are probably a safer bet.

Obviously this is all very credit-dependent, and to some extent also on the school you will be attending.

Prime could easily be 13%+ if the Fed screws up the recovery and doesn't tighten monetary policy quickly enough. Or if they hit a home run, it could stay below 10%. However, with quantitative easing and the expansion of the Fed's balance sheet, I wouldn't go anywhere near a variable interest rate loan that I wouldn't be able to refi. You could get seriously burned if rates take off like many economists are predicting.

I agree that right now would be one of the worse times to bet on continuing low interest rates. Once money starts flowing through the economy again, all that cash the Fed pumped into the market is going to produce some intense inflationary pressure.

However! If one could structure their loans to minimize the risk, it might be doable. One option would be to keep the amount you borrow through a variable rate loan low and try and take those loans out near the end of your 2 years. Basically, use them for short-term borrowing, knowing that you'll be able to pay them off quickly if rates start to rise.

Then again, if you minimize your exposure to variable rate loans, how much do you stand a save? A couple thousand? Is it really worth the headache?

RF

I was just going to ask this. Between Grad PLUS at 8.5% and the Discover loan at say, 3.5%, I could be saving a few thousand dollars in interest during the MBA. If the rate goes up drastically, I can pay off the higher interest rate first (from savings) while making minimum payments on the Stafford loan.

Assumes you have savings and a job. Not to be debbie downer, but there are plenty of MBAs who, not having the latter, are quickly running short on the former.

Risk and reward, right?

Oh yes, I don't assume that everything will work out perfectly. But I think we should be researching other options before blindly taking an 8.5% (or higher on some private loans) right now. Risk and reward for sure....doesn't that apply to the whole 2-year full time MBA?

I wanted to add another data point here for those still considering private student loans.

PNC quoted me an APR of around 5.6% (current 3mLIBOR+450) when I put my financial information on my state's loan guarantee agency's "marketplace." For reference, I have a FICO in the high 700s and my application was not endorsed by a co-signer (I am unwilling to use a co-signer).

I'm going to submit one more application to a private lender (Graduate Student Leverage) but if I am unable to secure a rate of <5% without a co-signer, I think I am just going to go ahead with the GradPlus loan and minimize interest rate risk.