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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