Paying for B-School: Debt Matters (cont’d)

As Petersam points out, foregoing a Park fellowship is an expensive decision, in both dollars and in missed opportunities.

He cites the case of Angie, a young woman who did go to Cornell as a Park fellow. She was able to start her own business right after graduation – a move she never would have been able to make if she had school loans to pay off. The Park fellowship gave her both a solid MBA education and the financial freedom to put her knowledge and skills to work for herself at a remarkably early age.

Read the Small Print

The University of Chicago’s Machen agrees that even the best informed students often choose their dream school over a more practical choice. So the question of how to pay for it arises.

The University of Chicago, like other schools across the nation, offers debt and financial aid counseling that goes well beyond help with filling out forms. The school offers financial planners, debt counseling, repayment information, and general support.

Machen offers some simple advice that students can act on before they ever set foot in their first class.

“Read what you are sent,” he said, explaining that some of the most common money problems could be avoided if prospective students read their financial aid packages carefully. “I know there is a sense of information overload, but it’s relatively straightforward.”

Once you are engaged in the financial aid cycle, both Harrill and Machen agree on one basic point.

“Be polite,” Machen said. “Word does get around.”

In dealing with financial aid officers, prospective students need to remember that they are only one of thousands of applicants that school employees deal with every term. Flaring tempers and angry words will only come back to hurt you.

“They feel entitled to the money,” Harrill said of people who cause commotions in financial aid offices or over the phone. “That doesn’t get you anywhere.”

“If You Live Like a Banker When You’re a Student…”

However, once your loan money is deposited in your account, then what? Common sense and thrift can make a big difference in a student’s long-term financial health.

“We counsel students to create a budget and live as leanly as possible,” Machen explained.

Students should consider the example of a simple pizza. If they buy pizza every night using their student loan disbursement, they wind up paying not just the $20 for the food, but also the interest on that $20, spread out for years after they graduate. By the time their loans are paid off, each pizza can wind up costing over $50.

Suggestions for stretching your aid dollars include careful budgeting. Calculate your cost of living, which should include not only the total cost of school attendance but also extras, including travel, social activities and the like. Don’t forget to include “luxuries” like food and utilities, which are often overlooked by budgeting students.

In order to stretch every dollar, Harrill suggests turning to other, “non-financial” sources of support. If your family can provide you with a car or a place to stay, it could help to greatly defray the cost of school. Consider taking in a roommate to cut down on housing costs, or, as Machen suggests, consider a lower rent apartment during your school years.

Think of it this way, Harrill says: “If you live like a banker when you’re a student, then you’ll live like a student when you’re a banker.”

Machen cautioned that students doing internships need to be especially careful not to be lured into a professional’s lifestyle before they actually graduate.

“I think sometimes they are somewhat seduced by it all and forget they are a student for another year,” Machen said, referring to students’ summer internship experiences. He explained that very often he would see students start to spend money like they were already executives, even though they had a year of student level living left.

Negotiating Financial Aid Packages

A final option for securing more financial aid is to try to bargain with your school. Some schools will allow students to present their financial aid packet from another institution and see if it can be matched or beaten. However, Harrill and Machen both advise caution if students take this road.

Students can research what schools are offering by talking with other applicants, either directly or through Web discussion boards. Machen explained that this helps to keep law schools honest, and the playing field level.

“More transparency is definitely a good thing,” Machen said. However, he cautioned that not all schools will bargain with students, and that students must initiate aid negotiations with both courtesy and tact.

Be Responsible to Yourself

MBA graduates can expect to go on to business careers in which they will be trusted to manage capital and other assets wisely. A sensible first step on that career path is to treat your own assets – which include your credit rating and your future earnings – with as much care as would those of an investor.

If you honestly need to take out loans to complete your education, do so. But make sure you use that debt effectively. Cut unnecessary expenses in order to minimize the amount you need to borrow, look for the best loan terms you can get, and – above all – excel at your studies and internships, to ensure that your investment pays off the way it should.

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