The Ultimate Guide on How to Finance your MBA

MBA is one of the most expensive degrees in India, and the cost of the program itself becomes a major deterrent for most MBA aspirants, and their concern is valid as the course fee ranges from anywhere between 15 L to 40 L, and for 99% of Indians affording this amount is simply impossible.

If an MBA is this expensive, then why do it?

Talking totally in Financial terms, most of the MBA colleges have their average package either more or somewhere near their program fees. The return on Investment (ROI) calculated on the average package to program fees is positive for most of the MBA colleges. This means your investment in an MBA will come back to you in the first year of your job itself, and even more amounts will follow every consecutive year as a result of pay raise. To see ROI of top B-Schools in India Check: Top MBA Colleges with high ROI

So instead of looking at this as an expense, one must view this as an investment. An investment into a high-paying and managerial-level job. In my opinion, doing an MBA from a good institute is the best financial investment with the highest returns.

Now, coming to how someone can arrange the money for this investment, it could be done in two ways: Self-Financing and education loan. I will tell you about both of them in detail along with the advantages and disadvantages of each in this article.

Self-Financing

You can self-finance your MBA by doing savings while working, asking your parents and relatives for the money, or doing planned financial planning in advance. 

By doing a mix of the mentioned ways, you might be able to self-finance your MBA. Self-financing has its own advantages and disadvantages.

Advantages:

• Flexibility in paying back money. Compared to taking a loan in which monthly EMIs would directly get deducted from your account, you have much flexibility as to when to pay back the money. This ensures that you would have some amount of cash with you in any crisis or emergency or even to cover your day-to-day expenses easily, given that you spend your money wisely.
• Minimal or no debt: Avoiding taking an education loan means graduating without any debt, which gives you much more financial freedom in the long run. At the same time you will be able to save a substantial portion of your salary and might invest in assets like mutual funds, bonds, fixed deposits. This will grow your wealth and provide security.

Disadvantages:

• Immediate Financial Burden: Self-financing could pose a financial burden on an individual and his family as the course fee is very high, and paying money out of your own pocket would cost your family’s entire savings, and other assets like gold jewelleries, and would lead to an immediate financially tense situation.

Education Loan

If you get admission into top B-Schools like IIMs, the education loan is totally different from traditional ones. Many banks provide you with various schemes to easily finance your MBA. SBI has SBI Scholar Loan, which gives up to a 40L loan without collateral and at a very nominal interest rate. Other Banks also have similar schemes. Moreover, applying for a loan is also super easy. Banks come to the institute itself for the loan process. The education loan not only covers your fees, but you can also disburse money to buy a laptop and even for monthly allowances out of the sanctioned amount.

Advantages: 

• Tax Benefits: Applying for an education loan helps you avail exemption of some amount of taxable income under Section 80E of the income tax act, 1961. E.g., if you have to pay a tax of 2 Lakh rupees as income tax, and you have paid interest of 1.5 lakh on your education loan, after tax deduction you only are liable to pay 50 thousands as tax. 
• Full Financing: Even if someone comes from a very poor family. His MBA gets financed by taking the loan, this ensures that anyone can do an expensive degree like MBA, regardless of his financial situation.  

Disadvantages:

• Financial Burden due to very high EMI: Post MBA the EMI for the loan will start getting deducted from your monthly salary and that amount is between 30k to 50k. Which can become very cumbersome and may impose financial burden
• Effects Risk taking ability for a Startup: Most of us have a dream of starting our own company post MBA, But this dream might be hampered by the compulsory obligation of paying the EMI’s. As the first priority after MBA is to repay the loan, the individual has to insure a good paying secure job at least for 2-3 years rather than taking risks for starting something on their own.

A student may also partly self-finance his MBA and take loan for the rest of the amount. To avoid immediate tax burden and avail some tax benefits without taking a hard blow on his monthly income. 

Scholarships

Many B-Schools also offer various scholarships that can provide some financial relief to eligible candidates. Some of the scholarships provided are:

• Scholarship for Category Students: Almost all the institutes provide scholarships to category students. The criteria and scholarship percentage of fee may vary from institute to institute and category to category. If you belong to any category check if you are eligible for a Scholarship.
• Need-Based Scholarship: Many top B-Schools, including IIMs, provide need-based scholarships for students from weaker financial backgrounds based on the student’s family’s annual financial Income. Criteria vary from institute to institute. IIM Ahmedabad provides scholarships to students whose family income is less than 15 LPA, similarly for IIM Bangalore, it’s 8 LPA. 

Also, the scholarship amount also varies as per the requirement of a child. It may happen that 1 student only gets a scholarship for 5% of the total fee and another 20% under the same scheme.

• Merit-Based Scholarship: Scholarship based on merit is granted based on various criterias. Some tier-2 and tier-3 MBA colleges may give you scholarships on the basis of your CAT percentile. In some institutes you may get scholarship on the basis of your academic performance prior to joining the college, others may provide you scholarships based on your academic performance while in college by securing rank 1, 2 and 3 on CGPA basis. 
• Scholarships provided by other Organisations: Many organisations like HUL, Aditya Birla Group and Jindal Group also provide students with scholarships in top IIMs under the names of T.Thomas Scholarship, Aditya Birla Group Scholarships and OP Jindal Engineering and Management Scholarships (OPJEMS). 

Students can avail of multiple scholarships if they are eligible for them. The process of availing scholarships may require proof of the condition under which you are doing so. To check the scholarship schemes, the college may directly inform you through email. Otherwise, you can contact them to check if there are any scholarships that you can benefit from. 

Top MBA Colleges With High ROI