Tuesday, March 24, 2009

Funding your MBA

One of the biggest headache most prospective students will need to go through is to come up with a financial plan that will put you through school.

Before I dive into how one can secure funding to pursue one of the most expensive post graduate qualification, I'd like to highlight that one must try not to bring funding into the mix when selecting and applying for schools. It's tough enough working on the GMAT, essays and investigating schools, so get in first, worry about the money later. If not, all you'll see is a mountain of obstacle and you'll never get off your arse to write those essays :)


Everybody loves free money! And all schools offer free money! The problem is... you'll need to standout from everyone else. Unfortunately (shouldn't it be fortunately?) while Malaysia is a developing nation, we are far less deserving than the girl from Chad that dreams of heading World Aid.

External scholarships? I only know of one Malaysia based organization that offers financial scholarships to deserving Malaysians and that's Maxis. If you hold a H/S/W offer. You should stand a good chance.

Otherwise, read the school's financial assistance material word for word, cover to cover. Have a knack for innovatively persuading people to pursue material opulence? LVMH sponsors many students in leading schools. Want to end up in McKinsey? Try the bursaries set up by consulting firms. There is always funding somewhere that fits your career goals or your unique profile and schools are more than willing to match you up with potential donors.

Be realistic though. Most will not obtain a 50% scholarship let alone a full scholarship. Most likely, you'll be going to school with a combination of scholarship, loans and savings. So be sure to have plan B, C, D and E.

Like it or not, you'll need to smash that piggy bank and scrape every dime you've saved since your first paycheck. Those who are toying with the idea of obtaining an MBA in the distant future, start saving now. Even if you don't end up in a business school a few years from now, the money saved is still yours to fling on that RX-8...
However, unless you are working in private equity now or if you've been converting every ringgit you've earned into gold since 5 years back, you'll need help to raise the US$80,000 you need.
Loans and borrowings

Got a rich dad? Easy then, just tell him you've grown up, realised the folly of your bi-weekly club crawl along Heritage Row and you now want a Wharton MBA so you can take over his automobile empire. You may stop reading now.

For the rest of us, raising money from family is a popular option. Unlike the West, it's acceptable to ask relatives to help out a daughter, nephew, grandson, godson or whatever. Just remember to not only pay back but also perform your filial duties.

If you've exhausted the options above, it's time to look at paying for credit. Make no mistake about it, immediate credit is just pain imported from the future. Loans are almost always a necessity. Unfortunately for us Malaysians, credit facilities for matriculating overseas isn't normally offerred. Start by contacting the school. They may be able to help source loans that are suitable for international students. Expect to be asked for a resident co-signer in the loan originating country though.

Malaysian banking institutions continue to exhibit its ignorance to international programs. However, two local banks do offer loans tailored for overseas education. Both CIMB and RHB offers loans on pretty reasonable terms (BLR + x, long repayments and 40-50% collateral). At the time of writting, you can borrow up to RM100,000. I've also heard that Citibank offers education loans but I think they need more assistance than us now... *snigger*

Less appealing options include personal loans from banks. These loans are way more expensive and will usually require you to start repayment upon loan disbursement. There's also no way to stagger the disbursements so you don't end up servicing the interest of the unutilised portion of the loan. You'll also need to secure this loan before you quit your job. While this is a valid option especially when you take into account of your anticipated higher income post MBA, becareful and always read the T&Cs. Depending on your current income, expect the credit line to be extended to a maximum of RM100,000.
Getting your boss to pay
Do you belong to this category? It all depends on your career goals. Career switchers can throw this idea out of the window immediately as no employer will invest in an employee that's leaving. However, if you are currently a loyal mid level manager and you've done enough to prove your leadership potential and is willing to return to the company, this is a valid and almost painless option. Admittedly it's a tough time now to secure corporate funding but business is all about making deals. Good luck to the lucky few!

For the desperados

What if you've tried all the options above and you still come up short? You could try any one of these methods...
Ask for more free money from the school. Once an offer is made, schools try to maximize acceptance rate. Most of the time, if you are sincere and you really need just that little bit more, financial aid officers can work out something for you.

Show them your other offer. Got free money from another school? You can potentially ask nicely and leverage your other offer. This may be frowned on by some schools but as long as you are honest, and you are not breaking non disclosure terms, you can still use this tactic.

Renegotiate your mortgage. If you are currently servicing a mortgage, why not contact your bank and see if you are able to extend the mortgage line?

Burn up your retirement fund. EPF withdrawals from account II (30% of total EPF funds) is possible on the pretext of reducing home loans. I will not comment more.

Apply for credit cards before quitting. Some desperados have been known to use credit cards to fund living expenses while servicing only minimum payments. Only for the very brave.

Well, I hope this post illustrates the various options one can exercise to fulfill that MBA dream. While it is highly likely that you will be racking up a whole lot of debt, MBA graduates are able to demand the highest salaries of any post graduate qualification.

Just make damn well sure you really do want to be a banker/consultant/PE. You can buy an MBA but you can't buy happiness.

1 comment:

Anonymous said...

Hey, nice post about financing options for Malaysians.

Just a couple comments to add for those considering MBAs in the US or UK.

Most schools will typically arrange for loans for international students without requiring a domestic co-signer, in order to enable access for internationals from diverse backgrounds. This has been the traditional way for internationals to finance their studies, with loans up to the full cost of study (say, about USD150k).

While the loan situation seems more stable in the UK (caveat: I'm only aware of LBS, which has an arrangement with HSBC), the American schools had problems because they were all tied up with Citibank (which is now up sh*t creek without a paddle).

So the US schools are all scrambling to come up with alternative packages, while current and prospective international students are in limbo. MIT has led the way by coming up with a new programme using its credit union, and others are following suit. But it looks like all these packages will have higher interest rates.

Nevertheless, this is a real option to consider, in case your scholarships, private funds and local banks cannot provide sufficient funding to cover the cost of study at the top overseas institutions.

Disclaimer: Round 2 admit to Wharton, Chicago and LBS.