Education Loans: Are they worth it for MBA from the US?

The biggest hardship often faced by students who wish to pursue their education from abroad is about financial aid and how to get it. Indian banks figure prominently in the picture, providing help to international applicants by providing them with the required financial aid in form of student loans. Management students are the most favoured league by most of the Indian banks, followed by technology and medical students.

Some students are of the opinion that it's logical to take the risk of education loan only when you get to do the degree from a tier-1 management institute like Harvard, Stanford, Kellogg etc. since this choice would most probably land them an excellent paying job eventually. They support their stand with the fact that the exposure and contacts, which a student gets during US MBA degree are unparalleled and thrust them in the global job market taking into consideration the buoyant state of the US economy in the past few years.

For such students, it is worthwhile taking the risk of a loan worth Rs. 60 lakh for an American MBA especially when the candidate aspires to settle in the US after the degree. Considering the average salary students get after an American MBA, the candidate most likely becomes able to repay the loan within a couple of years.

However, taking an education loan has some risks involved. Consider a hypothetical situation in which you've cleared GMAT and have got a provisional admission letter. Now the next prerequisite is financial aid or in simpler terms, education loan. If you get an overseas education loan worth RS. 60 lakh for, it would be sanctioned against fixed deposits, NSC certificates, property worth the loan amount and a margin amount of 15--25%. All this implies that you will get 15--25% less the amount of the loan. However, this loan would be charged around an interest rate set by the bank.

Some students who have studied abroad are of the point of view that taking a loan is feasible for students who have a strong financial background; the people who can afford to earn in rupees and spend in dollars. In their opinion, the US job market is volatile and it is not easy to get a job in the US owing to multiple factors.  Evident from examples like Bank of America withdrew all its offers made to foreign MBAs in 2009. Going forward, the situation is likely to worsen with TARP funds restrictions. Also if your MBA degree is from a tier 2 B-school, your chance of getting the job is dull compared to tier 1 Indian MBA Institute. Hence, it's not a risk worth Rs. 60 lakh education loan.

Applicants can apply for loan through Shiksha to support their education costs.