Financing an MBA is a serious concern that every MBA aspirant faces during the GMAT preparation and application phase. We have computed all the costs involved and listed down options available for financing your MBA. This blog focuses on the costs involved and financing options for the 1-year MBA programs in India – the executive MBA programs at the IIMs or the PGP program at the ISB.
The three parts of B School Expenses
- The academic fees
- Personal expenses
- Pre-MBA expenses
The Academic Fees
This is what you pay for the academic component of the MBA, which in most cases, includes your lodging. Though this takes the lion’s share of what you spend for an MBA, the effort required to take care of this part is relatively low. Based on the data available about the fees for academic year 2019-2020, let us take the fee component to be Rs.28 lakh.
|B-School||Program & Duration||Fees (INR)*|
|IIM A||PGPX / 1 Yr||28L|
|IIM B||EPGP / 1 Yr||21L|
|IIM C||MBAEx / 1 Yr||27L|
|ISB (Hyderabad)||PGP / 1 Yr||35L|
Student expenses during an MBA
This part comprises two components – the expenses you will incur as a student at the school and the expenses for upkeep of your family (if you are a key contributor toward your family finances).
Boarding and Food
For the sake of clarity, we consider boarding as what you pay for food expenses to the hostel mess.
Expenses counted under the heading food is what you pay outside of what you spend at the hostel mess. Quite often you work late nights and end up visiting night canteens. Also included in this component is expenses toward networking and campus events.
The total expense depends on the individual and eating habit. However, one can estimate the number to be Rs.2.25 lakh for the 1 year period.
Includes travel expenses. An average MBA student visits home about 3 times during the course of the 1-year MBA.
Expenses incurred for completing project works such as expenses toward conducting surveys. The activities might require you to travel to a different location. Provide for such expenses as well.
Factor in the cost of dressing up for placements.
And not to forget that you will require a powerful laptop and a tablet and a few more computing, presentation, and communication gadgets thrown in for good measure.
A safe estimate for personal expenses will be Rs.5 lakhs.
Plan for 15 months
You might quit your job a month before you join your b-school and your new job might not begin 2 months after you finish your MBA. You do not want to be scrambling for money just before joining your new job after the course.
If you are the primary breadwinner or if the finances of your family depend on you, you might have to set aside adequate amount to take care of your family’s financial requirements for the next 15 months. If you have any existing EMIs, try to clear them or try to negotiate a moratorium on them.
Medical expenses / Life Insurance. When it comes to life insurance, go for term insurance. It gives you very high risk cover at a nominal cost. The flip side as many may argue is that there is no survivor benefit. We are not taking an insurance for investment purpose. Your objective now is to mitigate risk. Get adequate medical cover for you and your family. Should a need arise, these insurance will come in handy. You will spend not more than Rs.40,000 for both insurance. Remember, you are paying for your peace of mind.
Set up an emergency fund that might have your back if something goes wrong. Set up a buddy system with friends and family that you can dip into, should a need arise.
Financing your MBA – Educational loans
Major national banks provide loans at an interest rate of 8% to 10%. Major banks will reach out to you through the school to provide you with loan to cover the academic fees. Unless your credit score is low, you are pre-qualified to get loans from these banks when you get into a good b-school. Even private sector banks provide loans – the rates of interest could be a tad higher than nationalized bank rates.
NBFCs like HDFC Credila and private financial services like Prodigy Finance, Future Finance also provide loans. Their paperwork might be easier and they might even pitch in to fund your personal expenses of Rs.5 lakhs.
Financing your MBA – Other sources
Provident Fund (PF): If your employer subscribed to PF, you can draw down the amount in the PF 60 days after you quit your job. This might come in handy after a month or two into a b-school. PF doesn’t sound so bad now, does it? Whatever PF that you withdraw to help finance your MBA will be more than adequately compensated through your post-MBA rise.
Existing Investments: If you have any Fixed deposits, cash, stocks, real estate investments, find the most sensible way to draw down on those to help you fund your MBA program.
Though nowhere in the same order of magnitude of what you will spend at a B-school, pre MBA expenses could work out to be a tidy sum. Do not overlook these expenses.
GMAT Exam Fees: It does not hurt to be extra cautious. Budget to take the GMAT twice. Set aside USD 500 toward GMAT exam fees.
Application Fees for different schools range from 2000 INR to 7000 INR. You will most likely apply to all the IIMs that offer an executive MBA and the ISB.
Application Assistance is something that helps present your story in a polished way. We advise you, out of experience, even if your writing skills are top-notch, to take up application assistance. A good application essay is a deal clincher. It is unlikely to be more than 1% of the total cost of doing an MBA; now isn’t that a compelling argument?
GMAT Preparation Course: A necessary component to get a good score. We, at Wizako, have tried to make it easy on the pocket of MBA aspirants. We have the most comprehensive online courses for the GMAT starting from around Rs.3500. Our live online course is structured to mimic all the benefits you will expect from a physical classroom without the hassle of having to travel to a class. The classes are two-way interactive sessions conducted via Zoom.
Pre-MBA expenses will work out to about Rs.1.5 lakhs. It makes sense to take this number into account when you arrive at your means of financing your MBA.
1-year MBA – Cost Estimate
|Opportunity Cost (Pre MBA Salary foregone)||10L|
Now that you have a ball park of what a 1-year MBA in India will cost and means to fund the same, put this information on cold storage and get started with your GMAT prep. A good GMAT score is the starting point for an MBA. Without a GMAT score, much of what is discussed about will not amount to anything meaningful.
A new year is a good time to start a new journey. Make yours the MBA journey.
Stay safe, best wishes.
Written by Manigandan N