One of the simultaneously best and worst aspects of business school is that you can pay for it with loans. The upside for the many of us who don’t have $200,000 stashed away is that loans make it possible for us to attend business school. The downside is that the loans are big and expensive.
This post has a lot of links of websites that explain things. One of the best websites to get an overview of it all is the GSB Financial Aid website. You can use the links on the left to get the official GSB perspective on Fellowships, scholarships, government loans, and private loans.
I’m going to start my discussion of loans with the lucky people– those who don’t need loans. Sometimes large companies, especially top consulting firms and banks, will sponsor employees who choose to attend business school. This means that the company pays a percentage of the tuition (often 100%) and sometimes also living expenses. In return, the employee/student agrees to return to the company for an agreed-upon X years after graduation. This type of deal gives the student two stress-free years but also greatly constrains future employment options. It would definitely be a great position to be in–choosing whether or not to accept sponsorship from your company.
Then there are Fellowships, which is the bschool name for free money. Fellowships can be based on need or merit. I’m not sure how the merit ones work- they might be based off of GPA/GMAT or it could be another holistic thing based on how much a particular school wants a particular student. The need-based ones are a bit more simple- they figure out how much you can afford to pay (in my case more than I actually have in my bank account, so that’s another mysterious equation) and then give you a percentage of the remaining cost in a Fellowship. It’s a lot more generous than other grad programs, like education or law, where Fellowships don’t seem to exist.
If you need more money, I would recommend looking for other sources of free money before moving on to loans. For minorities, the Consortium can be a great option (you apply to bschool for a reduced fee and can get huge scholarships). For women, there’s the Forte Foundation. There are also loads of specialized scholarships that target almost every nationality, race, religion, interest, etc. Pretty much the only type of individual not eligible for at least one outside scholarship would be a non-religious, middle class, white, male American. For everyone else, google long and hard. There’s an unbelievable amount of free money out there.
Once you’ve gotten all your Fellowships sorted out, it’s time to look at loans. I’m going to give the American perspective–I’m not sure if foreign nationals are eligible for some of these, especially the government ones. To start with, most Americans in need of loans are eligible for a Stafford loan and a Perkins loan. These are government loans with decent rates and no origination fee, although interest can accumulate while you are in school. You can pay them off early with no penalty. Sort of confusingly, if these loans are offered to you in your financial aid package it doesn’t mean you have to take them. Should you manage to find a private loan that’s a better deal you can turn down these loans. In that case, the Stafford and Perkins loans remain available to you in case you later realize that you need more money. I’m pretty sure these two loans are as good as it gets.
For all of my fellow nonprofit/government/military folks out there, odds are you will have a nice Fellowship, some outside scholarships, a Stafford loan and a Perkins loan and that it still won’t be enough. This is when it gets tricky. You can borrow the remainder from the government in the form of a Grad PLUS loan or you can get it by way of a private loan from a bank or other institution. I’ve already done the research on this and I would recommend against the Grad PLUS loan if you know someone with a good credit score (like a parent) who would be willing to co-sign and help you get a good interest rate on a private loan. If you don’t have a co-signer you might want to look at organizations like SoFi. I’m not sure of the details, but SoFi allows GSB grads to loan to GSB students at fantastic interest rates (for the students).
Once you’ve figured out your loans, it’s time to figure out how to pay them back. Here I need to thank one of my blog readers, Ankur, for calling out a rather flippant remark I made a few weeks ago. In a reply to a comment, I wrote that the way to pay is simply to “pick a post-GSB job with a high salary”. I do believe that if you know going into it that bschool will leave you with significant loans to pay off you can plan accordingly. At top business schools there are lots of opportunities to get into finance, consulting, or another sector with high starting salaries. From my conversations with alums and current students, I believe that if you set your mind to it getting one of these jobs is an achievable goal. Luckily for me, the path I really want to follow immediately post bschool happens to be in a high-paying sector. So, for me, I believe that my plan to take on all the loans and assume I will get a job with a high salary is reasonable.
Unfortunately, as Ankur pointed out, this plan isn’t for everyone. For those like Ankur who are interested in entrepreneurship, figuring out the ROI is a bit trickier. Gaining the network and experiences provided at bschool probably couldn’t hurt. But the loan bills could easily crush your dreams. There are many top schools that help pay off loans for recent grads who choose low-paying nonprofit jobs (every school has a different policy on this; this is an overview of the GSB’s with some more info if you click the links on the left). A smaller number of schools provide financial support to aspiring entrepreneurs in the form of additional fellowships or loan forgiveness after graduation (I know the GSB does a bit of this; I’d recommend checking the website for details). But it’s still a tough choice. Is it worth it to go to bschool if it means you have to get a job you don’t enjoy (or possibly hate) for five years before you can even begin to pursue your entrepreneurial passions? It’s probably a different answer for each person.
In addition to certain sectors (like entrepreneurship and the social sector), there are also certain geographical locations where it could be difficult or even impossible to pay off loan bills. For example, consultants in Asia make way less then consultants in the US, even if they’re working at the same company. If your loan bills are big enough, you could be limited to jobs in North America, Europe, and a few other locations.
So that’s the money post. Once you get into bschool it’s not too hard to find the money to pay for it. But once you graduate you might be forced to pick a specific job or location based on the size of your loan payments. If that job/location isn’t part of your dreams, is bschool worth it?