Funding your MBA 2017-19: Estimate, examine before leaping into education loan

Instead of directly getting into the complexities of education loan for payment of your MBA high tuition fee, the 1st step is to estimate your 2 years total expected expenses at the MBA college instead of calculating only on tuition and related fee.

Top rated MBA colleges like IIMs, SPJIMR, IMT, MDI, IMI among others have either finalized their merit lists or are on the verge of finalizing the same for MBA admission 2017-19. The admission offer will come to you with the instructions to deposit the fee by a stipulated date.

You will need to deposit a fee of Rs. 1 lakh to Rs.5 lakhs by the end of April/May to secure your MBA seat in the MBA college. Now the students who are in search of resources, may find it difficult to suddenly arrange lakhs of Rupees to fulfill their desire of pursuing MBA.

Estimate your total expenses for next 2 years

You should split the expenses on the basis of following 4 parameters-
- 2 years tuition fee, lodging & Boarding charges, other deposits needed by the MBA college
- Expenses on your study material, digital aids, computer/laptop requirement
-Expenses to be incurred in next 2 years to live a non luxurious life during the course 
-If opt for high loan amount, the payment of EMI with interest and period of repayment
This situation further worsens when you are already working and drawing handsome salary. You suffer on both counts- loss of job as well as incurring the expenses till you get the job again after MBA.

Calculate all the components  
Usually we think about the tuition fee when it comes to funding the MBA fee. In fact, tuition fee is only one part of the total fee payment. If you calculate the total fee of your MBA programme, it would have many other components in addition to tuition fee only. Understand with simple example-

Going by the above, it can be understood that while total tuition fee for all the 6 terms in 2 years is Rs. 10.50 lakhs, the other fee components go beyond Rs. 2 to 3.5 lakhs and that too is without your study material, laptop, clothing etc. In fact, for a tuition fee of Rs. 10.50 lakhs at an MBA college, you need around Rs.15 lakhs to sustain yourself during 2 years.

Now you have to arrange to fund your MBA with Rs. 15 lakhs which is a bare minimum requirement. There is no need to reel under the tremendous pressure of  high loan amount and you should explore other possibilities to fund your MBA before approaching a Bank for loan.  Here you have to search your options-

Check for Scholarship
Most of the MBA colleges offer scholarships to high percentilers and to the candidates with outstanding academic record. A part of your expenses can be funded with such scholarship amount. But the Scholarship is neither offered to all nor it is a very large amount. Hence, it may prove to be a drop in the ocean.

If the course fee is about Rs.10 lakhs, scholarship will be somewhere around Rs. 2 to 3 lakhs. You will still need a major chunk for the remaining fee and other expenses.

For example, SPJIMR, Mumbai gives 100% tuition fee waiver in the form of scholarship to a selected few;  BIMTECH Greater Noida and FORE New Delhi offer 38 and 42 scholarships respectively to 80 to 100 percentilers with a fee waiver of  23% to 50%; MDI awards 5 scholarships of Rs. 10 thousand each to the toppers. These scholarships, if awarded can definitely reduce the financial burden to some extent but still more funds to pursue the MBA will be required.

Explore with your family, relatives and friends
If you are from a very rich family, you can definitely foot the MBA expenses bill. But if you belong to a middle class family or your self- respect comes in between, there is a problem then.

You may ask for financial assistance from your friends and relatives and promise to repay the same later. It can be an option the sanctity of which is always doubtful. It can be resolved by

-- Make a written agreement to repay at some later date in the manner suitable to both of you
-- Try to insert some interest component to be paid alongwith the principal amount, it will  make your relative happier and softer
-- It will relieve you of any irritating incidents for example - sometimes it so happens that your relatives may begin enquiring about your personal habits like living style, dressing style, dining out, enjoying the life out as you have borrowed from them and they are not sure whether you are utilizing the money judiciously. Writing an agreement may restore your peace of mind.

Gather your savings to reduce Loan burden
MBA is pursued both by freshers and working professionals. While freshers do not have any source of income, working professional with 3-4 years of work experience might have saved something. So this option may be available to those who are working and are getting hefty pay packet. If you have saved that much, it’s possible that high fee bill can be borne by you.

But, if you have any dependants, you will need to look after them. If you are married and your spouse is not working, you need some money for that.

Negotiate with Banks
This in fact is the best option with the assistance of which you will complete your MBA without imposing a burden on your family or on your savings although a nominal part of the fee and other expenses might have to be borne by you.

Different funding schemes: Premier and Non premier B schools
Banks have 2 types of education funding schemes. Some of the banks have categorized premium MBA colleges which include IIMs, XLRI, SPJIMR, JBIMS, MDI, IMT, IMI and other top rated institutions for example there is “SBI scholar loan scheme” which caters to the financial need of the students who get admission in these top rated MBA institutes. Similarly Central Bank of India, Dena Bank, Punjab National Bank and many more have attractive funding schemes especially designed for the students of these premier B schools.

Banks have their parameters to decide such premier B schools and their branches are provided with the lists of these top rated institutes.

Major USPs of Premium MBA study loan scheme-

-- Nil or Low rate of interest in the range of 5 to 11% per annum in comparison to regular education loan schemes. SBI is charging 9.5%; Central Bank 5 to 15% depending upon the quantum of loan.
-- Maximum loan amount can go upto Rs.30 lakhs without any guarantee or collateral security. Higher amount can also be taken by offering the required guarantee and/or security. State Bank of India Rs. 30 lakhs for top rated IIMs without collateral.
-- Loan upto 100% of course fee can be availed without margin from SBI, Canara Bank; Central Bank of India.
-- Simple interest will be charged during course duration
-- Additional Interest benefit, if parent becomes co borrower
-- Repayment begins after one year from the completion of the course and to be made in 7 years

Second type comprises all other MBA/PGDM institutes which are not covered in the premier B school list. Banks provide less financial assistance to pursue education in these institutes and charge higher rate of interest.

Required Documents
Following documents can be asked by the Bank before processing the study loan for MBA education in a premier B school

1. Admission letter of the Institute.
2. Letter from institute indicating full fee structure of the course.
3. Passport size photograph of the student (2-3) and parent (If he/she is the co borrower)
4. Copy of PAN CARD of the student and parent (If he/she is the co borrower)
5. Copy of Passport/Driving License/ Voter ID/ Electricity bill (to determine the address proof).
6. Copy of Class 10th, 12th, and Graduation mark sheet and certificate.
7. Original copy of the receipts of any fee paid to the institute, so far, pertaining to course fee.

When to approach

Should you approach the Bank immediately on knowing that your name figures in the merit list or wait a little? Following are the key tips to follow before proceeding with your study loan plans

-Wait for the admission offer
-study and understand the key features of  loan schemes of different banks. Now a days it has become easier as the information is available on banks’ site
- Find out the fee structure and the best suitable bank for you that can finance maximum at the cheapest rate and with lowest margin
- Watch out for any hidden charges, processing fee on loan. Although Banks have waived processing charges on Study loan for premier B schools, you have to verify the fact before entering the agreement.
- You must be having a bank account, approach that bank and try to get maximum information. This is no longer a bank dominated world, you have all the right to know the details before availing the loan.
- Every good B school has a Bank branch. Usually these banks get the list of new admissions from the institute with all the details and send in principle loan sanction letter to the eligible candidates.  You should contact the loan sanctioning branch of the bank and thereafter as per the guidance from this branch, should approach the concerned branch of this bank.

Most of the time completion of the loan formalities and disbursement are done by the branch which is nearer to your permanent residence.

Check for the Benefits
You may not avail entire loan at one go, better to borrow the amount as and when the institute demands it. It will further reduce the interest burden.

The amount that you had may be utilized fruitfully at your home or for further income generation.

You have ample repayment period after completion of the course, hence do not have to worry much about the repayment.

In most of the Banks simple interest is charged during course period. If you wish, you can repay the interest part to reduce loan burden in future.  

Stay tuned to MBA Universe.com for more updates on funding MBA 2017-19