You want to pursue an MBA but don’t know how you will pay such a high fee. Don’t worry! When I had to take admission to IIM Ahmedabad, even I used to get very stressed, and I had no idea how to manage it. In fact, I wanted to study at Harvard. But when I searched and found that the fee for studying there is 1 crore, my dream was shattered. So I won’t let that happen to you.
Contents
Introduction
In this article, I will explain five things to you:
- What is an education loan for an MBA?
- How do you avail it?
- Repayment
- Scholarships
- Some other ways of financing your fee
Education Loan
What is an Education Loan?
Let us start with an education loan first. My mother used to work at SBI when I got admitted. I had no idea about education loans, how much you can get, or what the rate of interest is. There are many good MBA colleges in India where, after getting admitted, you can get a loan of 40-50 lakhs. Generally, its rate of interest remains around 8-9%, and its tenure, meaning how long you can take to repay this loan, is around 15 years. Some banks offer longer or shorter tenures.
For top institutes, this loan is collateral-free, meaning you don’t have to pledge anything. You definitely need a co-borrower, meaning your parents can become co-borrowers just for security purposes. Otherwise, you don’t need to provide any guarantee. When I found this out, I was like, “How can a bank give money like this? Aren’t they afraid that I won’t repay?”
Well, you get this education loan based on your admission offer letter. Banks know that once you graduate, your chances of repaying the loan will be very high. So for banks, this is a very secure type of loan. That’s why an admission offer letter is the only requirement.
How to Avail an Education Loan
The best thing is that as soon as you get admitted, you don’t have to put in any effort. You will start receiving calls from banks that will offer you this education loan. Generally, your name and contact details are provided in the list by the institutes themselves after admission so that you can easily take a loan. Most loans will be sanctioned online. You will only need to visit the bank once when you finally go to that campus.
Generally, whichever institute you will study at, it has a campus branch nearby. Most people take a loan from there itself. But if you want, you can take a loan from your hometown or any other branch as well. Both options are available. Every college has many tie-ups with different banks. Similarly, you can check bank-wise which banks provide loans for admissions to which institutes.
For example, the education loan from SBI for an MBA is called a scholar loan. I will show you a list that is available on SBI’s website. These are the 263 institutes for which SBI offers a loan of 40-50 lakhs. Similarly, the Central Bank of India also has a proper list. The Union Bank of India has a tier-wise list, with separate lists for tier 1 colleges and tier 2 colleges. I will link all of this in the description. You should check them easily.
Direct Payment to the Institute
While availing of this loan, keep one more thing in mind. When you take an education loan, it doesn’t mean that the amount is transferred to your bank account. The fee is directly paid to your institute. For example, the fee was transferred directly from my education loan account to IIM Ahmedabad. I don’t have access to that account as such, so I can’t withdraw money from it.
Repayment
The most important point in this is that when you are doing an MBA for those two years, during that time you don’t need to repay the loan. Its repayment starts from the time when you graduate or when you start working, meaning when you enter a full-time job, whichever comes first. During those two years, your interest will keep accumulating. You can choose to pay it if you want. Otherwise, the terms for the payment of your principal amount will start after you graduate.
Time and EMI for Repayment
In general, it takes every person 5 to 8 years to repay an education loan after an MBA, no more than that. In fact, those who are in good colleges, in the top 50 colleges, can even repay it in 2-3 years. But people pay off that loan gradually instead of paying a high EMI. In general, the EMI observed is around 20,000 to 30,000 per month. People who have very good salaries or who receive a lump sum amount, like when we join a company and there is a joining bonus in some companies, can pay a higher EMI or even deposit a significant amount of the principal at once.
Tax Benefits
You get tax benefits on education loan interest for up to 8 years, so many people use the full 8 years to repay the amount. Now I will show you some proofs. I was reading a lot about this topic. There are many answers given on Quora, even tier 2 or tier 3 students have written about their experiences. Were they able to repay it or not? There are many links for this. I will attach them in the description as well. You can read them so that you can get some assurance that it is possible to repay. It is very rare that there is ever a default case. In general, everyone is able to repay it.
The Entrepreneurial Trap
You might think that it can’t be such a rosy picture; there must be some catch, right? So I will clarify one more point. There is definitely a trap in taking an education loan, which I personally felt as well. You get stuck in your job in such a way if you want to do something entrepreneurial. For example, when I graduated, I worked for 2 years at Mondelez, which means Cadbury. Now, I wasn’t feeling very good there. I wasn’t feeling very good in my job, so I wanted to quit. And after that, I realized that I wanted to become a full-time content creator on YouTube. But the biggest burden on my mind was the large education loan I had.
That is something you should definitely take care of. If you can work for 2-3 years after your graduation and you are in a position to pay off the education loan, after that you can start your own startup or anything. If you feel that you are doing an MBA with the vision of starting a startup from the very beginning, then it is better that you don’t take an education loan if you have that funding available. If you still want to do an MBA and you don’t have funds, in that case, prefer going to colleges like FMS, TISS, where the fees aren’t that high, and you can finance them yourself.
Scholarships
Don’t just think about the education loan. When you reach an MBA college, you will be offered many scholarships as well. For example, there are some need-based, some merit-based, some sports-based, some gender-based, and even state-wise scholarships. I will show you a list. I generated this list online using a Generative AI Tool. But if you want, you can also verify each one by going through them. These are some scholarships that are offered for MBA in India. Every college’s website has a list of their scholarships.
Scholarships Based on Merit and Need
In our batch, that is at IIM Ahmedabad, there were many scholarships based on need, merit, and many diverse factors, including academic achievements. In fact, let me tell you something. I once asked the topper of my batch how many scholarships he received. He told me the amount, and it was equivalent to the fees at IIM Ahmedabad. This means he was able to repay his entire fee simply with scholarships.
Timing of Scholarships
You might say that you will get scholarships only after you join, right? But you would have to take an education loan beforehand. Let’s say my college fee is 20 lakh. I don’t have to pay it all at once. I have to pay it term-wise. Let’s say I went to IIM Ahmedabad. They asked for the fee for Term 1. I paid it by transferring from my education loan. Now when the second term came around, by that time I either had my own funds or I received a scholarship, so I had funds for that. Then I could use those funds to pay the fee. Then I will not have any more money disbursed from my education loan. I hope this point is clear to you.
Other Methods of Financing
Case Competitions
Many case competitions are organized during the MBA. I also won 3-4 case competitions, and their general prize money is usually 1-2 lakhs. So that was another reason why we found it easy to repay our education loan.
Internships
Secondly, we have internships, i.e., summer internships, in which we receive a 2-month stipend. At top IIMs, the stipend is 1 to 1.5 lakhs per month. You can use that amount to repay your education loan if your living expenses are not that high.
Conclusion
This is broadly how you can finance your fee. Gratefully, I have repaid my education loan, and many in my batch have also repaid their education loans. So please don’t worry if you are going to do an MBA. It is an important investment to make that will only help you in the future.
At this point, I would say if you are concerned or stressed about the fee and whether you can do an MBA or not, please don’t worry; it
is not impossible, it is IIM possible. I would want everyone to comment “IIM possible” so that you remember it. Never let that fee factor come into your mind. I am sure you will live a better life if you invest in an MBA. That education loan will not pinch you much later on.
