Pursuing an MBA degree requires a significant monetary investment, which is sometimes perceived as a hurdle. According to GMAC’s 2017 Prospective Students Survey Report, more than half of MBA aspirants say that a lack of sufficient funds to pay for their education and the prospect of becoming saddled with huge debts could prevent them from pursuing a graduate business degree.
International students have it even harder. They are normally unable to secure loans to fund studies at universities in the United States or Europe because they lack local credit history, which means banks cannot assess their creditworthiness. While more and more students realize the benefits of obtaining an MBA degree abroad, mainstream lenders have so far failed to respond to demand.
Below, PrepAdviser has listed several MBA lending options for international students. However, before you start considering these possibilities, ensure to check if local lenders in your country can offer loans at favorable conditions to students who want to study abroad.
Check out: What Makes MBA Loans Attractive? (Interview)
UK-based online lender Prodigy Finance was founded in 2007 by three INSEAD (France) students who realized that it’s almost impossible for international students to secure loans from traditional banks because they require collateral, co-signers, guarantors or documentation that students simply don’t have. Cameron Stevens, one of the cofounders of the company, told the Financial Times:
You have talented people who have proved their potential in receiving offers to business school. The only barrier for them is funding, because the banks are still incredibly localized, as they were in the 1500s.
Prodigy Finance provides financing to postgraduate international students who are unable to get loans from mainstream financial institutions. It evaluates students’ earnings potential based on the studies they will undertake and also uses credit scores from their countries of origin.
Securing loans in the United States is difficult, all the more so for international students. You need to have a credit score, which means that you have already taken a credit. Stilt is an online lender that can help you establish credit in the United States if you are a legal immigrant.
The company specializes in lending to immigrants, so you don’t need a Social Security number, a credit score, or even a job to apply for a loan. There are many options for international students and students on visas who need a loan. However, you will need to provide proof of income.
Stilt is one of the few companies offering student loans to international students, but the company is known for commanding high interest rates and short repayment periods.
International loans from business schools
Some business schools, especially in the US, offer internal lending options to international students that do not require a US co-signer. The financial aid is available to students who are ineligible for federal loans, which, by law, can only be distributed to US citizens or permanent residents. Make sure to consult with your target schools’ financial aid office and inquire about available loan options.
Bear in mind that US lenders are not allowed to extend loans to students from countries on the United States Treasury Department’s Office of Foreign Assets Control (OFAC) Sanctions list. International prospective students are therefore encouraged to check this list on a regular basis as it is frequently updated.
What factors to consider before taking out a loan
Securing a loan is a serious endeavor and you need to be careful in order to avoid getting burdened with a heavy debt millstone.
Tuition is important, but it is not the only point to consider. The cost of living where your MBA is based is equally important.
Then you need to know how a loan works and be able to determine if a loan offer is good in the context of your specific needs. The loan offer consists of the loan amount, repayment period and interest rate. Consider these three factors carefully. Make sure you know what a fixed and variable interest rates are and the pros and cons associated with them. Also, ensure that you are aware of the total cost of the loan. In addition to the interest rate, there is also the Annual Percentage Rate (APR), which is the annual rate charged for borrowing and includes any fees or additional costs associated with the transaction. Also, research in advance the loan application process, requirements and deadlines, to make sure you can have the response on time when your tuition fee payment is due.
Taking out a student loan is a big step and can even seem intimidating. However, if you have a clear and realistic plan about how to repay it, it may prove to be one of the best decisions you make.