Financing Your MBA
As they say, the single most important parameter in the selection of an institute would be the return on investment. We need to consider how much money (in salary terms) we can expect to make post an MBA from a given institute and how much money will be spent in acquiring the degree. And, in this regard the fee charged by the B-schools becomes very important. Also, for most of us the question of "where will the money come from?" is always playing at the back of the mind while thinking about the B-schools to apply to.
The following are a few facts regarding the fee levels at B-schools in India:
- The overall fee charged by Management Institutes would include Tuition, Books, Library, Exam etc. Mostly, the Hostel and Lodging, Exchange Program, Laptop etc would be charged extra.
- The University departments that offer post-graduation in management often charge as little as Rs.10, 000 to Rs.50, 000 for a two year post-graduate programme. For e.g. The Course fee at FMS Delhi, MIB and MHROD programmes of the University of Delhi etc charge fee in this range only.
- If you secure admission into one of the top 50 B-schools, the fee level need not be a major concern for you as the salary after your placement will adequately cover your investment. As we go down in the B-school ranking list, the importance of fee would increase and you would be advised to consider this factor very carefully.
- The fee levels at two B-schools could be a potent tie-breaker for institute selection if you happen to get a final joining offer from two B-schools in the same category.
- In general, the course fee at the Government institutes is lesser than that at the Private B-schools. Even within the Institites of the same category, the fee levels may vary. Not all IIMs charge the same fee. Not all IITs charge the same fee. In fact, the fee at IIT Kanpur's Management Program is substantially lower than the corresponding fee at most of the other IITs.
A. Education Loan
These days, it is relatively easy to get an education loan from banks at concessional rates of interest particularly for those studying at top management institutes, thanks to the Ministry of Human Resource Development's committment to ensuring that no desrving candidate should ever have to forgo his Management Education dream because of lack of money.
- A number of banks, both in the public and the private sector, are willing to provide these loans to those who have gained admission to the reputed management institutes.
- Loans from these banks cover the cost of tuition and may also cover some of the other costs such as computer fee, library fee, hostel fee, and laptop. If the student wants to go for an exchange program, even that cost may be covered in the loan.
- The rate of interest charged by the banks would differ – with the Public Sector Banks being on the lower side (around 9%).
- Mostly a moratorium of 1-2 years may be attached to the loan, meaning in this period you only need to pay the interest component of the loan – the repayment of the principal begins only after this period is over.
- The interest component of the Education Loan is exempt from Income Tax - as per the GoI rules. So, if a loan has been taken at a 10% interest rate and the person is in the 30% Income Tax bracket, the effective rate of interest is only a 7%.
- No security or collatoral is required on loans up to a limit (typically around Rs. 4 Laks). For loans above this limit, the banks may/may not require security. It would primarily depend on how good the B-school is.
B. Merit-cum-means Scholarship
In most cases, the institute itself provides a merit-cum-means scholarship to the deserving students. Typically each institute will have a set of public/private bodies that offer scholarships to the students based on their financial background, qualification, performance in the entrance test, performance at the B-school etc.