FINANCING A WESTERN BUSINESS
SCHOOL EDUCATION
By Dominic Basulto
While the idea of attending a business school in the
United States, Europe, or Canada may appear to be an attractive option
during the ongoing Russian financial crisis, the harsh reality is that
a world class two-year business education has a current price tag (including
tuition, books, and housing) of $80,000 in the USA and approximately
$65,000 in Europe. Unlike traditional graduate programs in the arts
and sciences, where students often expect to receive stipends and full-tuition
grants, business schools are typically structured as self-contained
profit centers on any campus. It is only those business schools with
the largest endowments and/or greatest corporate sponsorship which can
afford to subsidize student tuition and award merit-based scholarships.
In the US, for instance, students can receive significant loans from
both the US Government and from private sector lenders, so American
business schools have little or no incentive to offer grants. In 1998,
the Economist indicated that 81% of all MBA programs are self-financed,
either through personal savings, bank loans, or parental support. If
given a choice between two similar candidates, one of whom can pay the
full bill, one of whom can not, it is no surprise that a school will
give a higher priority to the candidate with a fatter wallet.
Since the prospect of securing an $80,000 loan from
a Moscow bank is currently as probable as the Russian government receiving
a series of interest-free billion-dollar tranches from the IMF, it makes
sense to start tracking down potential lenders as soon as possible.
Given the current instability in the Russian banking sector and the
perilous state of the Russian government's budgetary resources, Russian
candidates are unique in their need to rely upon Western generosity
to attend business school. There are currently only two key programs
for accessing MBA financing in Russia: the Edmund S. Muskie/FSA Graduate
Fellowship Programs (for US schools only) and the ABN-AMRO Bank/EBRD
Financing Program (for INSEAD, IESE, London Business School and Michigan
only). The Muskie/FSA Fellowship (funded by the United States Information
Agency) is awarded through a merit-based scholarship competition. Since
the Muskie/FSA Fellowship provides a full-tuition scholarship and a
stipend covering living expenses (including transportation to the US),
competition is intense. In the current competition, 900 applications
across Russia were received for one of the 35 Muskie/FSA business awards.
The one drawback to the program, however, is that a third-party selection
committee (in conjunction with admissions representatives from sponsoring
business schools) largely determines at which business school the award
will be used- meaning that the probability of receiving an MBA from
Harvard or Yale is small.
The ABN-AMRO/EBRD program is perhaps the best-known
to young Russian MBA wannabes, despite its brief existence since 1995.
However, the only eligible candidates are those who have already received
acceptance letters from one of the four participating schools. Students
passing this first hurdle stand a high chance of receiving the highly-coveted
loan covering full tuition and jetting off to London, Paris, Barcelona
or Ann Arbor, Michigan. Since 1995, approximately 55 Russian students
have received the ABN-AMRO/EBRD loan. Recipients are expected to repay
the loan within 12 years and work in Russia or Eastern Europe for a
minimum of 3 years within a period of 3 years after graduation from
business school.
Since the number of students who can access these
two primary sources of lending is small, what other alternatives are
available to cash-strapped young professionals hoping to attend business
school?
One obvious solutions is to APPLY TO 1-YEAR PROGRAMS
in Europe or the US. Even 1-year programs, though, are not exactly "bargains."
INSEAD, for instance, advises applicants to be prepared to spend $43,000
for its highly-ranked MBA program. Another solution is to OPT FOR MBA
PROGRAMS WITH LOW TUITION FEES. Historically, Canadian business schools
have priced themselves much lower in relation to their North American
competitors across the border. In addition, lower-ranked or smaller
MBA programs that do not commonly attract Eastern European or Russian
applicants are often more willing to lend money or grant tuition waivers
in the hopes of increasing the diversity of the their incoming class.
Another alternative is to LEVERAGE CORPORATE SPONSORSHIP.
Until recently, Western firms with a significant presence in Moscow
were keen to attract the "best and the brightest" Russian
MBA graduates to staff their offices across Russia, and even Central
Asia. Firms with deep pockets and a long-term strategic vision for Russia
might be persuaded to sponsor the second year of an MBA program in return
for the promise to work in Russia upon graduation. Keep in mind that
summer internship employers (for 2-year MBA programs) often entice future
employees with "loan forgiveness" programs and/or huge up-front
signing bonuses- both of which are included in the "average starting
salary" statistics in the annual business school rankings. Some
corporations choose to sponsor special scholarships at top business
schools.
Since most corporations are loath to invest much more
in Russia, a better option for sourcing funds might be to ACCESS FUNDING
IN DIFFERENT DEPARTMENTS OF THE UNIVERSITY. While business schools themselves
are not necessarily willing to open their coffers for Russian candidates,
other departments of the university may consider them eligible for additional
funding. Someone interested in "international finance" might
consider a joint degree in finance and international relations. A school
such as Columbia University offers a top-rate finance program and a
highly-regarded program in international affairs. For those who are
not willing to accept the additional academic burden required of joint-degree
candidates, there are often opportunities to work as teaching assistants
for the university's Russian/Slavic program or as research assistants
in math or physics departments (for those applicants with a strong scientific/technical
background at a Russian institute). Large, research-intensive universities
boasting well-funded Russian Studies programs may be eager for candidates
from Moscow, St. Petersburg, or Kiev. Indiana University, for instance,
boasts an impressive Russian Studies program and is a Top 30 business
school.
Perhaps the most frequently overlooked way of financing
business school is to QUALIFY FOR SECOND-YEAR TUITION DISCOUNTS. Just
because a candidate lived in Russia before applying to business school
doesn't necessarily mean that this candidate will be classified as "Russian"
by the financial aid office for the full two-year program. For example,
state (non-private) universities in the USA usually offer significant
discounts for in-state residents, with the result sometimes being a
dramatic 50% reduction in tuition. The one important caveat is that
Russian students studying abroad in the US are quite often denied the
requisite documents needed to take advantage of this potential loophole.
The same opportunity may be available in Europe as well. At IESE, Russian
students entering the second year of the MBA program often qualify for
funding from the Spanish government since they are classified as Spanish
residents.
For general information on MBA financing, a number
of web sites (www.mbafinancing.com, www.finaid.org, www.getmba.com)
are available as resources. The best recommendation, though, is to contact
the business school directly for exact details of both merit-based and
need-based scholarships. The leading MBA programs (especially in Europe)
are aware of the difficulties posed to Russian candidates and have started
to arrange special programs for the highest-potential candidates. For
example, London Business School offers the Friends Scholarship; INSEAD
offers the Emerging Country Scholarship; IESE offers the IESE Trust
Scholarship; and Yale offers the Fox and Frank Fellowships.
Dominic Basulto is a 1998 graduate of Yale School
of Management and currently works as a consultant for Pericles ABLE
(American Business and Legal Education) in Moscow. Pericles offers a
full MBA advising program.