Hi All, for those of you that have gone through business school and have had to finance your MBA using student loans and stuff like that, how did you do it? My familiarity with student loans is pretty minimal, as the only time I needed to take out loans was for college, and mostly I was just working off the advice of my family as well as the financial aid office. I have some time to critically think about things, so I’d love to find the best rates possible and also come up with resourceful ways to invest that money for the next two years with a relatively low risk tolerance. Any suggestions, either based on personal experiences or useful literature/websites, would be greatly appreciated.
this link below is related - - it references financing law school - - pretty good resource http://www.top-law-schools.com/forums/viewforum.php?f=15
In all probability, the best loan rates you can get will come from the university that you will attend. I’d be surprised if they did not offer you some sort of loan that accrues interest only after you graduate, or some other deal with favorable terms like that.
I just went with FAFSA for most of my tuition. I also spent a lot of my own money I had saved.
The school does offer some loans and aid, but the problem is that it will only be about $20K at most, which is just a small fraction of my business school expenses
On another note, thanks for the link, philip.platt - looks like a good one! Those law studnets are a lot more on top of their stuff than us finance guys.
The ‘Stafford’ Subsidized Loans come out to 20.5k. The ‘GradPlus’ Loans extend to $30ishk. Once you complete your FAFSA (do it right after you do your income taxes), you’ll learn more about this. The GradPlus is not as interest rate friendly as the Stafford, but the money is there if you need to live on it like most people in a full time MBA program. The aforementioned was the case for my school. Depending your schools location, the standard of living may be higher, thus, you’d get more money from the GradPlus loan servicer.
Fake ADD, deal adderal to undergrads. Come on, use that entrepreneurial spirit.
To further assist with FAFSA, you should try and manage your income for the year of 2009. 1. Take some stock losses (Net of your gains, up to $(3k) against your AGI). 2. Open a traditional IRA or contribute as much as you can to the 401k to have a lower AGI for 2009. 3. Make some big purchases now if you need them (car, computer, etc). You will have to submit your bank statements to FAFSA upon request (though I’ve been told this is rare). More information is in the How To Get Into Top Business Schools book by Montauk.
You’ll undoubtedly get Stafford Loans for up to 20.5k (you might qualify for up to $8,500 of subsidized loans, but it’s not a huge difference and you’ll only be able to get the 20.5k max of Stafford regardless of the mix of sub vs unsub.) These are the best loans out there, so are your first borrowing source. Then you have to make a choice between grad plus loans vs private loans. You will be able to borrow through either of these sources up to the amount your school calculates as its total cost of attendance (usually listed on their fin aid site), e.g. at Chicago it’s 81k this year, less what you borrowed through Stafford. You can’t borrow more in total than the calculated cost of attendance. There are pros and cons of grad plus vs. private: - rate: fixed (grad plus) vs. variable (private) - term: 10 year (grad plus) vs. 10-20 year (private) - fees: compare from each lender, but they are fairly standardized for grad plus - forbearance: if you are unemployed, or attend other grad school, then grad plus payments can be deferred (not sure for how long, in the case of UE) I get the sense that more students prefer grad plus, and usually use the same lender for Stafford and Grad Plus to minimize administration headache. however, if you have extremely good credit and/or use a cosigner for private, it’s possible to get a great rate…but I’d want to figure out a floating to fixed hedge/swap on the rate. You’ll get your loan proceeds disbursed pro-rata throughout the academic year depending on when tuition is due, e.g. I get 1/3 at the beginning of each quarter.
Hey VOBA, thanks for the feedback. I’m sure there is more information about financial aid provided by the schools in the acceptance packages, but I won’t have access to those for another week or so because I’m away from home right now. So, in the meantime, can you provide more info on these: (1) How do people choose their GradPlus or Stafford providers? Does it matter what bank you go to in order to get those, or do you sign up through your school? (2) When you say “calculated cost of attendance,” that includes tuition as well as estimated apartment costs and money needed for other stuff like student trips, correct? (3) I’d be curious to learn about private loans too since my credit is very good. Any suggestions as to whom I should speak? Lastly, you talked about hedges and swaps - can you elaborate on what type of strategy you were contemplating? I don’t mind administrative headache especially if it saves me money. Thanks!
I did the Stafford loans…first year was subsidized, second year was unsubsidized because my wife got a really good job. I also used savings including a 529 account I had set up for myself a few years back. I have $30k outstanding now with a ~$300/month pmt, which seems pretty manageable. One thing I did not know when I started: your interest rate for your Stafford loans is locked in at the point of your first loan. I took a loan each semester over the course of 2 years, and the rate for each of the 4 chunks is the same, much to my detriment. And complaining about it to the Direct Loans rep does not work, I already tried that 
Another tidbit: at a certain income point you can no longer deduct the interest on your student loans.
Thanks for the feedback, naturallight. Just a few additional comments: (1) I plan to get all my Stafford loans and then max out the rest using GradPlus. My rationale for choosing GradPlus (fixed rate of 8.5%) versus private loans (variable rate) is because I don’t think interest rates will get any lower than they are today. If any of the more experienced lenders or fixed income folks on this board have advice about hedges or swaps, that would be great, but otherwise I feel like it’s easier for me just to go with the fixed rate. What do you guys think? (2) Even though I don’t need all the coverage from GradPlus (i.e. I have some savings), I don’t mind taking on the leverage with the 8.5% return because I’m pretty sure I can reinvest that money and earn a higher return on the capital. (3) naturallight, please clarify your comment on the interest rate on the Stafford loans being locked in, and why that ended up being a detriment to you – what were the circumstances related to that?
naturallight Wrote: ------------------------------------------------------- > I did the Stafford loans…first year was > subsidized, second year was unsubsidized because > my wife got a really good job. I also used savings > including a 529 account I had set up for myself a > few years back. I have $30k outstanding now with a > ~$300/month pmt, which seems pretty manageable. > > One thing I did not know when I started: your > interest rate for your Stafford loans is locked in > at the point of your first loan. I took a loan > each semester over the course of 2 years, and the > rate for each of the 4 chunks is the same, much to > my detriment. And complaining about it to the > Direct Loans rep does not work, I already tried > that > > Another tidbit: at a certain income point you can > no longer deduct the interest on your student > loans. I have a question about the 529, since I just read the following on a website: “You won’t receive a Form 1099 to report taxable or nontaxable earnings until the year you make withdrawals.” I plan on withdrawing from the plan once I enroll to cover living expenses, books, etc. Were you taxed on your capital gains while in school? Something doesn’t add up here.
naturallight Wrote: ------------------------------------------------------- > Another tidbit: at a certain income point you can > no longer deduct the interest on your student > loans. Lastly - and perhaps you can shed some light on this - if I quit my job in early 2010 and only have capital gains from investments and freelance consulting work for 2010, will that ensure that I fall below that income threshold and thereby allow me to deduct student loan interest expense for tax purposes? Or, are they just going to look at my W-2 for 2008 or 2009 to determine my income threshold?
numi Wrote: ------------------------------------------------------- > naturallight Wrote: > -------------------------------------------------- > ----- > > > Another tidbit: at a certain income point you > can > > no longer deduct the interest on your student > > loans. > > Lastly - and perhaps you can shed some light on > this - if I quit my job in early 2010 and only > have capital gains from investments and freelance > consulting work for 2010, will that ensure that I > fall below that income threshold and thereby allow > me to deduct student loan interest expense for tax > purposes? Or, are they just going to look at my > W-2 for 2008 or 2009 to determine my income > threshold? They look at Line 39 (the agi line) on the 1040 page 1 for income. So W2, Capital Gains, 1099 stuff, etc will all fall on page 1. Student loan interest deduction will fall on page 2 of the 1040. Turbo Tax or the like would handle this easily. As far as the threshold. I think it is somewhere in the $50s that allow student loan deduction, it is not very high. If you’re curious, look at the IRS Publication 17. http://www.irs.gov/pub/irs-pdf/p17.pdf Loans are loans. Student loan is not the good debt it is made out to be. If you can find a private lender to go below the interest rate that FAFSA offers, give it a shot. The tax deduction is not that much at all, and it is eliminated quickly.
numi Wrote: ------------------------------------------------------- > Hi All, for those of you that have gone through > business school and have had to finance your MBA > using student loans and stuff like that, how did > you do it? > > My familiarity with student loans is pretty > minimal, as the only time I needed to take out > loans was for college, and mostly I was just > working off the advice of my family as well as the > financial aid office. I have some time to > critically think about things, so I’d love to find > the best rates possible and also come up with > resourceful ways to invest that money for the next > two years with a relatively low risk tolerance. > > Any suggestions, either based on personal > experiences or useful literature/websites, would > be greatly appreciated. I was self sponsored. And I think numi should stop crying poor - all along you knew you will be going to business school, and a top one for that matter. Walk your talk this time dude. Anyways, best wishes for the festive season, and I still like your posts.
^apparently we became numi’s personalized human-answered Google.com I’m anticipating numi’s following topics: - Dudes, best places to live near my business school? - Dudes, what MBA clubs would you join? - Dudes, do you think a mix of three Strategy courses and two Marketing courses is a good choice? - Dudes, I have these options for my 1st year Internship, thoughts? - Dudes …
I have no problem with Numis posts. I’ve gained alot from him and others when posting questions. For once the guy would like some guidance, why all the hate? Business school is a big decision, and like myself, Numi simply wants to engage in the best decision he can. Rest assured, not everyone is like this and I’m sure numi will meet some ignorant undergrad to MBA students whom feel entitled to an ibank, mgmt consulting, or exec level role simply for obtaining the MBA.
Nah is not hate at all. The guy is nice, maybe a little bit recurrent on the same topics. I just think that anyone –even nocareer—in this forum should be able to accurately assess and determine the best way to borrow money, right?