Expert Advice

Financing Your MBA

Choosing to return to school to earn your MBA is a big decision. Most business school students spent several years working after graduating with their bachelor's degree and acquired a certain standard of living during that time. Many purchased homes, some got married, and a few started families. Figuring out how to pay tuition costs upward of $65,000 a year and the idea of returning to life on a student's budget can seem overwhelming. Thankfully, business schools understand your needs, and there are a lot of resources available to help you get the money you need to make your MBA possible.

Business schools all over the country recommend that you start thinking about financing your MBA two years before actually applying to school. Unlike when you earned your undergrad, this time your own personal credit score will have a huge impact on obtaining money for school.

"Nearly 100 percent of students receive enough aid to cover all their attendance costs," explains Bonnie Lack of the Tepper School of Business at Carnegie Mellon University. "Only the ones who have bad credit have difficulty. This is why knowing your credit situation and your credit score should be a vital part of your planning."

It's important to pay down any consumer debt you've racked up and make sure your credit score is as high as it can be before you try to obtain money for your MBA. If you're having trouble getting your credit score up to par, talk to a business school financial aid officer. They have a lot of experience helping students secure loans for school and can give you tips on cleaning up your credit before you apply.

Equally important, you need to start thinking about your monthly expenses. Trying to make a $1,000 mortgage payment, a $300 car payment, and pay all of the other bills you may have right now can be impossible, especially during the first year of b-school. Cutting monthly expenses and living as frugally as possible while earning your MBA can make a big difference in your stress level and the amount of debt you graduate with.

Choosing to return to school to earn your MBA is a big decision. Most business school students spent several years working after graduating with their bachelor's degree and acquired a certain standard of living during that time. Many purchased homes, some got married, and a few started families. Figuring out how to pay tuition costs upward of $65,000 a year and the idea of returning to life on a student's budget can seem overwhelming. Thankfully, business schools understand your needs, and there are a lot of resources available to help you get the money you need to make your MBA possible.

Once you've got your personal finances in order and you've achieved the best score you can on your GMAT®, it's time to start searching for tuition money. There are five sources that can really pay off if you look hard enough.

1. Your Business School
First and foremost, talk to the financial aid counselors at your business school and remember that early application is almost always the key to maximizing the level of aid you receive. Most schools offer both scholarships and fellowships, and all schools have specific lending programs to help students obtain private loans with low interest rates and favorable repayment terms. Some school-specific financial aid awards are need based, but the majority of financial aid is awarded by merit.

Need-based financial aid is always determined by the government's Free Application for Federal Student Aid (FAFSA). Filing the FAFSA also automatically makes you eligible for Perkins Loans and Stafford Loans, but the maximum you can borrow is $18,500 per year. Your prior year's tax return, savings, investments, and assets are used to calculate whether you are eligible for school scholarships or additional government aid. The amount of merit-based financial aid you're awarded is dependent upon your GMAT® score, your undergrad GPA, your admissions application and interview, your résumé, and your letters of recommendation. Many schools also have endowments that are earmarked for minority students and students interested in pursuing specialized courses of study. Funding for your second year of grad school can come from working with a professor as their assistant.

2. Scholarship Search Engines
Financial aid professionals warn against using services that charge you a fee to find scholarship money because, with a little diligence, you can find all the information you need right in the comfort of your own home. Lack recommends searching for aid using reputable sites such as FinAid (www.finaid.org) or FastWeb (www.fastweb.com).

There are many additional scholarship search engines out there, but make sure to do some research before trusting them and be wary of anything that sounds too good to be true; there are plenty of scholarship scams advertised on the Internet.

3. Corporate America
The Kellogg School of Management at Northwestern University recommends that students scour corporate America for scholarships before accepting private loans. Companies such as Coca-Cola, Tylenol, Citigroup, Chase Manhattan, Chevron, Eli Lily, Exxon, Goldman Sachs, Kraft, Marakon, Motorola, Quaker Oats, and Solomon Brothers all offer scholarships for MBA students. Digging deep into corporate Web sites and making a few phone calls can uncover thousands of dollars in free tuition money.

Some students make such an impression during their MBA internship that the company they work for not only offers them a job after graduation but pays for their second year of b-school. Other students negotiate the repayment of a portion of their student debt as part of their benefit package with their first employer after graduation.

4. Government and Private Loans
Every American citizen is eligible for up to $18,500 per year through the Stafford and Perkins loan programs regardless of their credit score. These loans are better than private loans because they offer the lowest interest rates, don't require repayment until after graduation, and spread repayment out over ten years.

If you can't make ends meet through scholarships, grants, and government loans, you'll have to look into private loans. Always work with your school's financial aid office when looking for private lenders. Almost every school has a private lending partner that can offer students preferred terms, saving students thousands of dollars over the life of the loan.

5. Part-Time Classes and MBA Programs
The last alternative to financing your MBA is to get your current employer to pay for it, but earning your MBA while employed requires some significant trade-offs and usually involves a commitment to stay with your employer for a minimum length of time after graduation. When negotiating tuition coverage with your employer, make sure you understand exactly what they expect of you in terms of grades, how long you have to complete the MBA program, and what the consequences are if you either do not graduate or fulfill your employment commitment after graduation.

"Balancing work and school is amazingly difficult, but I wouldn't have been able to achieve my MBA without my employer's support," says Jessica Drebes, a project coordinator for the Harris Corporation who attends Xavier University's part-time MBA program in Cincinnati, Ohio. "In an average week, I spend about 25 hours in class, studying, and doing homework on top of working full time. But every day when I come into work I can apply the principles I learn in school, and I think that really helps me understand and retain what we study in class."

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