Education Loans – Why MBA Loans Are Not As Intimidating As They Are Made Out To Be

MBA and loans have become synonymous in conversations. At the demand end of the pipe, B-schools regularly hike their fee and show no signs of slowing down. On the supply end, banks welcome students on a red carpet at the mention of admission at a reputed B School. Not without good reason. Take a look at the numbers. The average salary in these institutions has grown steadily in the past few years. It’s the reassurance of a guaranteed high paying job that keeps this ecosystem alive.

Securing a loan is never a problem. Banks offer loans without collateral that cover expenses for the entire duration of the study. The question that pops up next is, “Will I be able to repay the loan?”. The Indian mindset is to repay the loan at the earliest possible moment. Loans are akin to the sword of Damocles in the eyes of a quintessential Indian. It’s not necessarily so, especially education loans.

Here are some opinions about education loans:

An Investment – The loan you take is an investment – an investment in you. Your education and career benefit immensely out of this investment. You would acquire skills, create your network and boost your career in a short period. You reap the benefits of this one-time investment for the rest of your life.

Not a baggage – The thought of large student loans seems frightful. The following article perfectly captures how long it takes to recover your investment. Take a look at it here.

The time to recovery pales in comparison to the earnings in the long term. Even by looking at the numbers you can observe that the recovery period for your 2-year investment is lesser than two years. Do not be bogged down by the weight of a loan. The long-term benefits largely outweigh your apprehensions. The article above sheds light on the starting salary of an average MBA graduate. In the long term, the number is going to grow in size.

How long to repay – The time of repayment is just another number. If you are still concerned, look at how much earnings you will have left for yourself after paying EMI. Be mindful of the tax benefits that cover your education loan while doing so. Numerous banks provide calculators which you can explore. To make your calculations easier here is a calculator.

An Enabler – While the reasons for resorting to loans might vary, the underlying theme is the lack of funds. A large number of us would not be in B-schools had it not been for education loans. It facilitates your study and reduces the financial burden on the family. The repayment period starts well after the end of the course. And to those who look forward to relieving their families from expenses, this is a gateway since the onus of repayment is mostly taken up by the student.

What matters – Education loan is just one part of joining an institution. Never make a call based on the loan figures. The real things that matter are the institution’s domain of expertise, faculty, subjects offered, campus life and student committees to name a few.

Student fee is a concern for anyone who is taking up a loan. As long as the quality of education and healthy ROI is maintained, it is prudent not to read too much into the loan figures. There are better metrics to weigh your options before making a choice. Students have their reasons for choosing their b schools. It’s a personal call to see if your goals and aspirations are fulfilled by joining a particular b school. What might work for one candidate in an institution might not work for another. So, choose wisely, but not based on the loan incurred for its just a number.

Find out everything you need to know about education loans to fund your MBA here.

Raghunathan S

XLRI (2018 - 2020), Comfortable with awkward silences


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