How to Finance high expenses of MBA with ease

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Doing MBA is an expensive affair and when it comes to pursue your flagship Management programme from IIM Ahmedabad, Bangalore, Calcutta, MDI Gurgaon, XLRI Jamshedpur or any other top B-school, you need to shell out between Rs.19 lakhs to Rs. 21 lakhs to pay only for your tuition fee and other key charges included into it, as almost all the top B-schools have increased their fee structure.

Despite expecting high placement packages that you should get after completing your course, the biggest hurdle in opting for a good MBA/PGDM programme from a top rated B-school is its high fee structure. In general, you need INR 10 to 25 lakhs to complete your 2 year MBA/PGDM course whether from IIMs or non-IIMs. Apart from tuition and other fee, you need to meet other expenses on lodging & boarding and petty expenses to maintain yourself during your stay. It is not easy to get an offer of admission in MBA programme from a top rated B school like an IIM, SPJIMR, IIFT, MDI, IMT, IMI, XLRI or any other top rated preferred B-school. It is heartening if you lose the chance of doing MBA from a coveted B school because of its high fee structure due to paucity of funds.

But, if we go with a planned and well thought of process, we may not only get the required money to pursue our dream MBA but will also save a lot of money during the course of study.

 

Fee Structure in top B-schools: Rs.15 lakhs and above

IIM Ahmedabad: Current Fee-Rs.21 lakhs
Rise in fee structure at IIM Ahmedabad has been manifold. The fee has been increased for consecutive for second year for PGP in Management and PGP in Food & Agribusiness Management.

Year Fee (Rs. in lakhs) Percentage rise over last year
2015 18.5 -
2016 19.5 5.4
2017 21.00 7.7

 

IIM Bangalore: Current Fee-Rs. 19.50 lakhs
Close on the heels of IIM Ahmedabad, IIM Bangalore has also revised its fee by Rs. 80,000/-  for 2017-19 batch.

Year Fee (Rs. in lakhs) Percentage rise over last year
2016 18.70 --
2017 19.50 4.28

 

IIM Calcutta: Current Fee-Rs.19 lakhs
IIM Calcutta is close 3rd as one of the most expensive B-schools in India. Last year it increased its fee by 17% . Now the fee stands at Rs. 19 lakhs for 2017-19 batch.

 

MDI Gurgaon: Current Fee-Rs.18.86 lakhs
Management Development Institute (MDI) Gurgaon has emerged as one of the most expensive B-schools. The fee for 2017-19 has been increased by Rs. 1.71 lakhs.

Year Fee (Rs. in lakhs) Percentage rise over last year
2016 17.15 --
2017 18.86 9.97

 

SIBM, Pune: Current fee Rs.18.25 lakhs
Symbiosis Institute of Business Management (SIBM), Pune will charge Rs.18.25 lakhs for 2 years flagship MBA 2017-19. 

 

XLRI Jamshedpur: Fee Rs. 17.95 lakhs
XLRI Jamshedpur is likely to revise the fee for the PGDM programme from Rs.17.95 lakhs. If it happens the revision could go in the range of 7 to 10%.

 

IMT Ghaziabad: Current Fee Rs.16.50 lakhs
The Institute of Management Technology (IMT) Ghaziabad till last year maintained its fee structure at Rs.15 lakhs. The fee has now been increased by Rs.1.5 lakhs

Year Fee (Rs. in lakhs) Percentage rise over last year
2016 15 --
2017 16.50 10

 

IIM Lucknow: Current Fee-Rs. 16 lakhs
During past 5 years IIM Lucknow has increased and reduced its fee also. However, IIM luck now has increased the fee for the second consecutive year.

Year Fee (Rs. in lakhs) Percentage rise over last year
2012 12 --
2013 10.8 Reduced by 10%
2014 10.8 No change
2015 10.8 No change
2016 14 Up by 29.63%
2017 16 15% increase

 

IIM Kozhikode: Current Fee-Rs.16 lakhs
IIM Kozhikode has recently revised its fee to match the other IIMs and has increased it to Rs.16 lakhs.

 

SPJIMR, Mumbai: Current Fee-Rs.16 lakhs
One of the top PGDM B-schools, SPJIMR Mumbai has recently increased its fee from Rs.14.6 lakhs to Rs. Rs.16 lakhs for PGDM 2017-19.

 

IMI New Delhi: Current Fee-Rs.15.41 lakhs
International Management Institute (IMI) New Delhi has increased its fee structure by Rs. 45000 taking it to rs. 15.41 lakhs

 

IIFT Delhi: Current fee Rs.15.5 lakhs
Indian Institute of Foreign Trade (IIFT) with its 2 campuses at Delhi and Kolkata offers MBA (International Business). The fee during the last years has seen negligible increase for the flagship MBA programme.

 

XIM Bhubaneshwar: Current fee Rs.15.40 lakhs
One of the highly ranked MBA college of Xavier University Bhubaneswar, Xavier Institute of Management (XIM) will charge Rs.15.40 lakhs for its flagship 2 years MBA 2017-19.

 

Top B-schools with Fee structure below Rs.15 lakhs

IIM Indore: Current fee Rs.14 lakhs
IIM Indore has increased its 2 year fee for PGP 2017-19 to Rs.14 lakhs from Rs. 13 lakhs. Still among the highly ranked IIMs, its fee structure is the lowest as compared to other top older IIMs.

 

IIM Kashipur, Raipur, Ranchi, Rohtak, Tiruchirappalli, Udaipur: Fee range Rs.12 lakhs to Rs.14 lakhs
The 6 IIMs are comparatively charge a lower fee than the other older IIMs and other top PGDM B-schools although the placements in  these IIMs are also high enough to offer you good RoI.

 

IIM Amritsar, Bodhgaya, Jammu, Nagpur, Sambalpur, Sirmaur, Visakhapatnam: Fee range Rs.9.5 lakhs to Rs.11.5 lakhs
These newest IIMs that started operation in 2015, have a moderate fee structure. Many of them have achieved high placement packages for their first batch with an average salary of more than Rs.10 lakhs. 

 

K J Somaiya, Mumbai: Current fee Rs. 9.68 lakhs
The 2 years PGDM fee at K J Somaiya Institute of Management & Research (SIMSR), Mumbai is Rs.9.68 lakhs for the 2017-19 batch.

 

TAPMI Manipal: Current fee Rs.14 lakhs
TAPMI's two-year Post Graduate Diploma in Management  (PGDP) will cost you Rs.14 lakhs including accommodation but excluding food charges.

 

Top B-schools with subsidized fee: No or little finance needed

FMS Delhi: Current fee Rs. 25000/- for 2 years
You may not need to arrange finance for your MBA fee at FMS Delhi. The fee for MBA programme is regulated by Delhi University. During the last many years MBA full time fee structure at FMS Delhi has remained around Rs.10000/- per annum. The total programme cost to the student including lodging and fooding does not exceed Rs.1 lakh for 2 years.

 

JBIMS, Mumbai: Current fee Rs.3 lakhs per annum
Jamna Lal Bajaj Institute of Management Studies (JBIMS) Mumbai used to charge around 1.02 lakhs for the flagship MMS programme. From the year 2017-18 onwards, the revised fees will be Rs. 3 lakhs per annum  for General Students from the existing fee of Rs. 102,290/-.

 

PUMBA, Pune: Current fee Rs. 2.42 lakhs
Pune University Department of Management Sciences (PUMBA) has different fee structure of Maharashtra State and All India candidates. While the fee for All India candidates for flagship 2 years MBA is Rs.2,42,500/-, for Maharashtra State candidates the fee is much lower and stands at only Rs.1,32,528/-.

 

Calculate & Identify the required amount
Calculation is must to know the actual need of funds to pursue MBA. If you borrow more you repay more. There are Banks and other financial institutions which offer 100% study loan and ask for interest rates in the range of 9 to 12%. Almost all the good B schools have banks in their campus. They have tailor made study loan schemes at affordable rates to pursue MBA from your dream B school. You should cross check with it before exercising other options to cater to your need.

 

How to decide
We may calculate the MBA funds requirement on the basis of following 4 factors-

  • 2 years funds requirement
  • Prospective job market after 2 years
  • EMI on repayment based on interest rate and period of repayment
  • Amount needed to live a non luxurious life during the course

 

Other Expenses:
Apart from seeking funding for tuition Fee you have to think of Lodging & Boarding expenses, Computer, stationery, books, clothing among others. Taken together all these expenses may be very high. But you would incur them it is for sure.

 

Cheapest Funding options for MBA
MBAUniverse.com Research team has worked out the economics on how you can save at least Rs.2 lakhs on your admission fee, if you opt for study loan from the right financial institution after negotiating a little.

All the banks have their own study loan schemes to fund the MBA study in India and abroad. These study-loan schemes are divided in two segments – one is the regular study loan for the students of normal professional colleges and the other is meant for premium institutes like IITs, IIMs, XLRI, MDI, SPJIMR, IMI, IMT, IIFT.

The difference in both types of schemes is that the study loan schemes for premium institutes offer you higher amount with less interest rate. Corporate/Head offices of these banks publish updated list of such premium B schools.

If your institute falls under the category of premium B-schools, you will get MBA study loan at low interest rate and during the repayment tenure of 7 years or so, you will be able to save a huge amount as in the initial years even a 0.25% hike rate in interest rate can make a cumulative effect coming in lakhs at the end.

 

Compare MBA funding schemes of different banks
Education loan for MBA is available from almost all the banks and other specialized financial institutions in private and public sector including Avanse, Central Bank of  India, Credila, Dena Bank, IDBI Bank, HDFC, Punjab National Bank, State bank of India, Punjab & Sind Bank 

These loan schemes are known by different names to ascertain the various terms and conditions, maximum amount, concessionary rate of interest, clubbing of co borrower, need of margin and security.

SBI has named its education loan scheme for premier B-schools as ‘Scholar loan scheme’ and SBI student loan; PNB has named it as PNB Pratibha and PNB Saraswati. But our prime objective is not to go for the name but to know where we can get maximum at minimum interest rate.

Let us compare among the prominent loan providers:

 

Private sector NBFCs

Avanse Financial Services
Avanse is a non-banking financial company and is the finance arm of DHFL. It is a private company offering education loans to the students studying in India or abroad.  

Maximum loan amount: No limit depending upon the B-school fee and expenses
Rate of interest: 11.5% + Spread ( Between 0.5 to 1.5%)
Margin amount: Nil (one time processing charges between 1-2% of the loan amount + taxes will be recovered)
Collateral security:  Required as per the quantum of loan account
B schools covered: All the IIMs, XLRI and other top B schools

 

Credila’s Education Loan
CREDILA is a private non-banking finance company (NBFC). It is a subsidiary of HDFC Ltd Company and primarily focuses on education loan. It offers customized education loan packages to pursue higher studies in India or abroad.

Maximum loan amount: Rs. 25 lakhs or may be above as per offer letter from the B school
Rate of interest: 12.10% (Credila’s base lending rate) + spread as applicable for education loan
Collatoral security: Not required for low amount loan, required for high amount loans
Margin amount: Nil (Origination fee will be charged)
B schools covered: IIMs, XLRI, and all the other top B-schools

 

IDBI Education Loans
IDBI Bank Ltd. is a young, new generation, public sector universal bank. IDBI offers personalized banking and financial solutions to its clients. Education loans are provided by IDBI for higher education in India as well as abroad.

Maximum loan amount: Rs. 15 lakhs
Rate of interest: MCLR 8.30 + Spread between 0.15 to 2.15%
Margin amount from borrower: Upto 4 lakhs- Nil; Above Rs.4 lakhs-5%
Collateral security: Required for loan above Rs.4 lakhs
B schools covered: IIMs, XLRI, XIMB, SPJIMR, MDI and other B-schools offering AICTE/UFC recognized programme
Public Sector Banks offering specialized Education loans

 

Central Bank of India
It is a public sector bank and will cater to the needs of all types of loans.

Maximum loan amount: Rs. 20 lakhs
Rate of interest: MCLR 8.40+0.5% for top B schools and 2% for other B-schools (Would come to 8.90 for top IIMs, XLRI and 10.4% for others)
Collateral security: Required for loan amount above Rs.7.5 lakhs
Margin amount from borrower: Nil for top IIMs, XLRI but required for other institutes.
B schools covered: All IIMs, XLRI, XIMB, SPJIMR, MDI and other B-schools

 

State Bank of India
The largest bank of India offers education loan under its different schemes for study in India and abroad. The Scholar scheme loans are offered to study in IIMs and other top B-schools while for other B-schools regular study loans are offered. The tailor made education loan schemes are offered for different B-schools like IIM Ahmedabad, MDI Gurgaon in accordance with their fee structure.

Maximum Loan amount: Rs.30 Lakhs (for students of IIM Ahmedabad, for others as per their fee structure)
Rate of interest: 9.35% for IIMA; for others like MDI 10.70%
Margin amount: Nil for IIM A; 5% for others
B schools covered for Rs.30 lakhs cap: IIM A,B,C
B schools covered for Rs.15 lakhs cap: All other IIMs, MDI, XLRI, XIMB,IMT 
Collateral security: No collateral needed for top B-schools, co-borrower required. For other B-schools collateral required

 

Punjab National Bank
Two different education loan schemes are available with Punjab National Bank for students. The schemes are named as Pratibha and saraswati. Different institutes are covered in these 2 loan schemes.

Maximum Loan amount: No limit depending upon the repayment capacity. However, loan is sanctioned as per the fee requirement of the B-school
Rate of interest: 8.35% to 10.95%
Margin amount:  Nil upto Rs. 4 lakhs; 5% above it.
Collateral security: Required above the loan amount of Rs.7.5 lakhs
B schools covered: IIM A,B,C,L, Kozhikode, Indore, Shillong,  XLRI,  New IIMs, MDI, IMT, SPJIMR, IIFT, FMS, JBIMS, NMIMS, NIRMA, Symbiosis

 

Dena Bank
Maximum loan amount: Rs.15 lakhs for IIMs; Rs.10 lakhs for other A rated B-schools
Rate of interest: 10 to 11.8%
Margin Amount: 5%
Collateral security: Required for loan above Rs.7.5 lakhs
B schools covered: MDI, IIMs, IMT, SPJIMR, XLRI and other top rated B schools

 

Canara Bank
Canara Bank offers education loan to study in top B-schools like IIMs, ISB at a concessional rate under ‘Vidya Turant’

Maximum loan amount: As per requirement of IIMs upto Rs.25 lakhs; for ISB upto Rs.36 lakhs; for others Rs.20 lakhs
Rate of Interest: MCLR-8.45% + 0.20% (For others interest rate will be higher)
Margin amount: 5%
Collateral security: Not required for top B-schools
B schools covered: IIM A, B, C, ISB and other A & B rated MBA colleges

 

Union Bank of India
Special education loan scheme has been prepared to study at IIMs, XLRI and other top B-schools with various concessions.

Maximum loan amount: Rs.30 lakhs for IIMs and other top B-schools
Rate of Interest: 8.65%
Margin amount: Nil under this scheme else 5% above Rs.4 lakhs
Collateral security: Not required under this scheme else needed above Rs.7.5 lakhs
B schools covered: All the IIMs, XLRI, SPJIMR, MDI and other A graded B-schools 

 

Punjab & Sind Bank
Maximum loan amount: Rs.10 lakhs (Higher amount considered for study in IIMs & other B-schools)
Rate of Interest: 9.75% for IIMs and other top B-schools; 10.75% for others
Margin amount: 5% for loan above Rs.4 lakhs
Collateral Security: Required above the loan of Rs.7.5 lakhs
B schools covered: All the IIMs and other B schools

 

Other key points to save on your MBA funds expenditure

Save on International tour
Many B-schools have started foreign study tour to various foreign institutes or have engaged in international exchange programme. The fee for foreign tour or international exchange programme runs in lakhs. If you are able to convince the B-school that you wouldn’t like to go for it, it is very much likely that you are exempted from it. Moreover, the value of the international tour may not be so much as it is claimed by the B-school.

 

Fee negotiation
There are highly ranked B-schools who can offer you discount, scholarships, fee concessions and waivers. Cross check how much of it you can get. This will further reduce your financial burden while pursuing MBA.

 

Calculate well the repayment
The options to avail the study loan are plenty and can be exercised with private or public sector banks depending upon their prevailing schemes. Taking a loan is probably less difficult than repaying it regularly for a long time. In fact longer the repayment period, more will be the amount you would be paying to the bank.

On the top of it, when the loan amount is more, higher EMI is to be paid and when the income is low it becomes very difficult to find out the ways and means how to make regular repayment without causing financial crunch. In case you choose not to pay the amount regularly, the tiny concession of 0.5 to 1 % that could have otherwise been available to you on regular repayment no longer exists.

 

Work out the economics
Assuming that the fee structure of the MBA programme requires an amount of Rs.10 lacs to complete the 2 years’ programme, let us discuss what amount would be feasible in different prospective income scenarios.

 

Example-1- Expected Annual Gross Salary: Rs.7.20 lacs.

Net (in hand) salary: Rs.5.76 lacs
(After allowing 20% for various components like Medical Insurance, HRA, PF,)

 

Maximum recommended education loan amount: Rs 10 lacs @ 11% pa Maximum recommended EMI: 30% of net in hand salary -Net per month salary: Rs 48,000/- -EMI of Rs.10 lacs for 10 years: Rs 13700/- -Total repayment in 10 years: Rs. 16,44,000/- -Total interest paid on loan: Rs.6,44,000/- Example-2- Expected Annual Gross Salary: 4.8 lacs.
Net (in hand) salary: Rs.3.84 lacs
(After allowing 20% for various components like Medical Insurance, HRA, PF,)

 

Maximum recommended education loan amount: Rs 7 lacs @ 11% pa
Maximum recommended EMI: 30% of net in hand salary

  • Net per month salary: Rs 32,000/-
  • EMI of Rs.7 lacs for 10 years: Rs 9600/-
  • Total repayment in 10 years: Rs. 11,52,000/-
  • Proportion of repayment to net salary: 30%
  • Total interest paid on loan: Rs.4,52,000/-

 

Example 3- Expected annual Gross salary: Rs. 3.6 lacs.
Net (In hand) salary: Rs.3 lacs
(After allowing 20% for various components like Medical Insurance, HRA, PF,)

 

Maximum recommended education loan amount: Rs 5 lacs @ 11% pa
Maximum recommended EMI: 30% of net in hand salary

  • Net per month salary: Rs 25,000/-
  • EMI of 5 lacs for 10 years: Rs 6900/-
  • Total repayment in 10 years: Rs. 828,000/-
  • Proportion of repayment to net salary: 28%
  • Total interest paid on loan: Rs.328,000

If you wish to pursue your MBA with Bank loan and expect this much of salary after 2 years. You are advised not to go beyond this amount of education loan. It will be better to arrange from other sources, instead of going to borrow from Banks. Understand the repayment schedule and avoid financial crunch.

 

Opt for shorter repayment period
Think on reducing the repayment period. Banks have tactfully revised and extended the same. The burden of interest in a longer period will be more. For example on the above cited loan amount at the given interest rate if you repay in 10 years, you will end up paying the interest amount of more than Rs.6.4 lacs. On the other hand if you repay in 7 years, the amount of total interest would be around Rs.4.35 lacs.

 

Pay interest during course period
Try to repay the amount of simple interest applied on your study loan amount. It would reduce the interest burden when compounding of interest begins after 1 year of completion of course.

 

Top B schools with different fee structure: Choose the best
Fee structure of top rated B-schools can vary not marginally but there could be a huge gap in the fee structure of 2 top rated B-schools.

Now there are 20 IIMs and other top rated B schools like IIFT, SPJIMR, MDI, NITIE, IMT, IMI and all have different fee structures. Even the new IIMs have different fee structure in a range of Rs. 12 lakhs to Rs.14 lakhs while the USPs are more or less remain the same. The fee structure of older IIMs and top B schools go upto Rs.21 lakhs.

If you can get a learning experience and RoI more or less at the B-school offering MBA/PGDM at lower fee structure, there may not be any need to pursue your MBA from an institute asking for high fee and other expenses.

Since the fee structure alongwith other parameters like faculty, infrastructure, programme structure and placement could be stated as the base to choose the B school, take the decision as per the past USPs of the institute instead of paying more.

MBA colleges including many top B-schools have kept their admission process flexible with number of fee concessions available to compete and grow in MBA education market. Once you try and understand the process, you may get pleasant surprises in your favour than you expected to arrange the funds for your MBA education.