Business School Financial Aid FAQ

• How do I pay for business school?
• Which MBA loan programs are best?
• How to choose an alternative loan program?
• How come the amount of my student disbursements was less than I was awarded by the school?
• How is my EFC Calculated?
• How do I manage the difference between the business school's cost and the amount of financial aid I was awarded?
• What should I do if my family circumstances changed since submitting my financial aid applications?

How do I pay for business school?

There are a variety of options for paying for graduate school, and a few differences from undergraduate programs, such as the non-availability of the PLUS Loan Program. In order of lowest cost to highest cost, here are the most well known options:

• Scholarships - essentially free money.
• The MBA Stafford Loan - up to $20,500 per year, $8,500 in subsidized, $12,000 in unsubsidized
• The Private MBA Loan - Annual maximum of the lesser of $70,000 or cost of attendance minus other aid.
• Home equity/refinancing - leveraging your mortgage equity
• Private consumer loans - Student credit cards and personal lines of credit

Which MBA loan programs are best?

While there are no absolute ways to determine which loan programs are best, there are some general guidelines and areas that will help to help you choose the most affordable loan option.

Interest Subsidy – Subsidized loans (in which the government or other agency) are far better than unsubsidized loans (in which interest must be paid by the borrower from the loan's disbursement).

Lowest Cost – The loan's interest rates and fee structure determine the amount of a loan's finance charges. Some loans (like mortgages) allow you to pay up-front fees in exchange for a lower interest rate. You should consider this feature in relation to how long you plan to repay the loan. The loans with a longer repayment period are often less expensive with lower interest charges and a slightly higher up-front fee.

Interest rate options – Programs offer different interest rate options. Some are fixed and stay the same over the life of the loan. Some are variable and tied to the Prime interest rate (or other index). When the interest rate changes also varies among programs. Some change annually, some quarterly and some as often as monthly.

Flexibility – Consider the repayment options offered. Are payments required during repayment? Can the principal be deferred? Are alternative repayment programs (graduate repayment or income sensitive, for example) offered?

How to choose an alternative loan program?

There are many ways to compare alternative loan programs. And oftentimes, a student's and family's unique circumstances will determine what loan program makes the most sense.

Alternative loan programs differ in who the borrower is (the student, parent or other co-applicant). You should refer to the Private MBA Loan page for more information.

How come the amount of my student disbursements was less than I was awarded by the school?

Lenders are allowed to retain a percentage of the amount you borrow in "guarantee fees" and/or "origination fees". Guarantee fees are used by the lender in creating a reserve to protect the loan program in instances when borrowers default on their loans. Origination fees are a processing fee retained by lenders.

Regarding origination fees, there is a large mandate in effect to continuously reduce and eventually eliminate the origination fees that lenders are currently authorized to charge. This applies to only Stafford Loan borrowers at this time. The maximum fee a lender will charge is 1.5% on any Stafford loans disbursed from July 1, 2007 until June 30, 2008. On July 1, 2008 it will drop to 1%, then to .5% on July 1, 2009 and, therefore, be eliminated as of July 1, 2010.

For alternative loans programs, there is generally no maximum fee rate. Fees for alternative loans can range from 0% to 10% or more depending on the credit worthiness of the borrower and risk associated with the loan.

How is my EFC Calculated?

The federal government proscribes an official federal EFC calculation. This calculation determines family resources available from a family's income (less allowances for taxes and living expenses) and assets (less allowances for retirement). A percentage of these available amounts are earmarked as EFC. The EFC is published yearly and is approximately 35 pages long. If you have experience in accounting and would like to learn more about it, visit www.EFCCalculator.com, or you can obtain a copy from the Department of Education. Call 1-800-4-FED-AID to request a copy by mail.

How do I manage the difference between the school's cost and the amount of financial aid I was awarded?

There are three main options available to students and families:

• Contributions from Savings – a family might consider using savings or investments to meet educational costs. Families with assets that can be liquidated for educational expenses generally have less reliance on financial aid and pay less in fees and interest expenses
• Contributions from Income – some families might be able to meet educational expenses by allocating funds from their current budget. This options requires a family to closely analyze their income and expenses and determine an amount that they can pay on an ongoing basis. Adjustments may have to be made to existing household expenses to afford an amount to allocate from Income.
• Contributions from alternative student loans – some families must consider alternative loans as a means to meet educational costs. While these options typically require the lowest monthly payments, but also require the student and family to pay interest and/or finance charges in addition to the amount borrowed.

What should I do if my family circumstances changed since submitting my financial aid applications?

Financial aid officers have some latitude in determining what data is used to calculate a family's EFC. You should contact your school's financial aid office with any circumstance that affect your family's income or expenses.

If you are able to document such circumstances (for example the unemployment of a family member or medical expenses that the family has incurred), the financial aid officer might be able to incorporate these circumstances and recalculate your EFC.