Late last month, Clear Admit teamed up with community-funded loan provider Prodigy Finance to share information and answer questions as part of a free webinar for prospective MBA students looking to study outside of their home country.
We were pleased to draw 70 registrants for the February 24th webinar, and participants took part in a lively Q&A session at the conclusion of the presentation. Today we’re going to recap some of the key points for anyone who may have missed out.
Financing Your MBA Abroad Poses Specific Hurdles
The costs associated with pursuing an MBA program at a leading business school today routinely reach six figures, which means that financing the degree can pose a significant challenge to almost any prospective applicant. But students looking to study outside the country of their nationality or residence face unique issues that can make financing business school even more difficult.
That’s because traditional banks are reluctant to lend across borders, since doing so can make it harder to track and enforce loan repayment. Many U.S. banks, for example, won’t lend to foreign students without a U.S. co-signer—someone local the banks can go after to recoup their debt if the borrower fails to repay. And the same is true for U.S. students looking to study in, say, Spain.
Enter Prodigy Finance
A decade ago, a few MBA students at INSEAD found themselves facing precisely this predicament. Realizing that they were probably not alone, the students came up with a solution, launching Prodigy Finance in 2007. Their answer: a community-funded model in which international students attending MBA programs abroad receive loans made possible by investments from alumni of the school they attend.
For instance, alumni who attended INSEAD will invest in a bond to fund current INSEAD students. Additional investors often include the business schools themselves, the school community and other investors or institutions interested in higher education or social impact. By investing in these current international students, they are also investing in the value of the given school’s MBA program.
Today Prodigy has grown to have offices in New York City, Cape Town and London, funded more than 3,000 MBA students worldwide and given out more than $130 million in loans. More than 150 countries are covered as part of Prodigy Finance loans.
So What Does It Mean for Borrowers?
This was at the heart of the February webinar. After an intro by Clear Admit Co-Founder Eliot Ingram, Prodigy Finance Student Relations Manager Zach Hirschfeld outlined some of the key benefits for MBA students who receive loans through Prodigy Finance.
For starters, no cosigner, collateral or guarantor is required for any Prodigy loan. Loan recipients have a six-month grace period after graduation before loan repayment starts. While the loans do carry an administrative fee (equal to 2.5 percent of the total loan amount), it is amortized over the lifetime of the loan, with nothing due up front. Loans for students attending business school in the United States are disbursed in U.S. dollars. Finally, there is no fee or penalty if you decide to pay off your loan early—instead, you’ll simply benefit from a lower overall repayment expense thanks to savings on interest.
Hirschfeld also drilled down into some of the things prospective applicants need to think through as they begin to contemplate financing their MBA. First, says Hirschfeld, consider your budget. Most schools’ financial aid offices provide an official cost of attendance figure, which is a great starting point. But also consider how you’ll travel to and from the campus, where you plan to live during school and how many social events or trips you hope to take part in while a student, he suggests. “Try to talk to a student who is already at the school—they will give you the best first-hand perspective of how much it actually costs to attend so you can make a really informed decision about, in total, how many funds you need to properly afford the duration of the program,” suggests Hirschfeld.
The next step in the process is to take stock of your available funding sources—from savings to scholarships, company sponsorship to help from friends and family. “Once you have taken this into consideration, sometimes you will need to fill the gap that remains through a loan,” Hirschfeld says. “If you come to the conclusion that you will need to borrow either a little or a lot of that amount, Prodigy can be a really great resource for you.”
