Post #24: Financing for LBS Sloan Masters Programme

When I started blogging one of my colleagues read the title as ‘my lbs (s)loan journey’  (read loan instead of Sloan) :-). I have been researching on the various financing options available in India for some time now and hence the delay in this post. I now realize that loan process is consuming a considerable amount of time and effort in my sloan journey.

I have consolidated inputs from multiples sources for this post. I would like to take this opportunity to thank my fellow admits from India and students in class of 2013 who did a considerable amount of research on the loan options available in India.  I am awaiting information from my fellow admits in other countries on the financing situation. I will keep updating this post as and when I get more information for other countries.

LBS had a tie-up with HSBC to offer loan for Sloan Masters Programme. However, this was discontinued after the 2008 financial crisis. As I mentioned in ‘Comparison of Sloan Fellows Program’ post, the key challenge for LBS Sloan students is to secure loans from banks in their respective countries.

How much do you need to budget for Sloan Program in London?

I arrived at the below figures after talking to current students and alumni. This is some basic data which any student will  begin with.

Please refer to the survival guide put together by LBS Partners club for details on expenses, housing, local transport, medical facilities etc.

Single students:

Total Budget: 70K GBP (INR conversion @90Rs per GBP – 63 lakhs INR)

Breakup:

• 51k course fees
• 19k living expenses. Living expenses are around 1600 GBP per month (1200 for accommodation for 1 bed room apartment, approx 400 for other expenses).

Family Expenses: 80k GBP (INR conversion @90Rs per GBP – 72 lakhs INR

Breakup:

• 51k course fees
• 29k living expenses. Family expenses vary based on the size of family and the amount spent on rent.

Financing in India for LBS Sloan:

I will divide this section into four parts:

1. List of Banks
2. Challenges in securing loans from above banks
3. Other options
4. Path forward

1. List of Banks:

LBS provides a list of banks that students can talk to for loans in various countries, see the documents containing list of banks for various regions below.

• Americas
• Middle East and Asia
• UK and Europe 

Below are a few banks in India with whom we have interacted with in the last couple of months.

a) Credila: LBS financial aid department recommended ‘Credila’ as several students  availed loan from credila in the past.

• Maximum loan offered: No upper limit (meaning you can get full funding for course fees if you have collateral to support)
• Rate of Interest: 13.5% (can negotiate a bit based on co-applicant’s credit history)
• Repayment Tenure: 5 to 7 years.
• No moratorium: Simple Interest to be paid right from first month after disbursement
• Co-applicant accepted: Mother/Father/Spouse. Co-applicant should be earning atleast 15 lakhs INR per annum along with a good credit history to get a loan of 40 lakhs INR.

b) State Bank of India: SBI is the largest public sector bank of India with reasonable interest rates. However we need to provide lot more documentation and do multiple trips to bank as the customer service is not as good as Credila (which offers loans at door steps). Even though this is a lengthy process, this is the best option so far for Indian students.

• Maximum loan offered: 30 lakhs
• Rate of Interest: 12 to 12.5% (can negotiate a bit based on co-applicant’s credit history)
• Repayment Tenure: 12 years
• Moratorium: 1.5 years (you have 6 months after course completion to start repayment)
• Co-applicant accepted: Mother/Father/Spouse/In-laws.

c)  The Paras Education Foundation (TPEF) loan:

If you see the financing section, there is an institution called ‘Paras Education Foundation’ that provides loans to students from across the world if you have co-signor who is a US citizen or has green card. Their interest rates are competitive and provide loans for upto 65000 USD.

I had a detailed discussion with them. The bad news is they stopped providing loans for students in UK from last year. They asked me to check with them again in October which is too late I guess for class of 2014. I want to note that they were not very responsive based on whatever interactions I had with them.

2. Challenges with Credila/SBI:

Both banks require the co-applicant to be from immediate family as mentioned above. However, the average age of Sloan fellow is 38. This implies that most of the parents and in-laws of Sloan fellows are already retired without any income or a small pension income.  Not all spouses work and meet the income requirements.

The harsh reality is these banks do not accept the co-applicant to be a friend or other relatives even if you have collateral that is double the value of loan.

3. Other Options:

There are a couple of other options which we are exploring right now.

1. Loan against Agriculture Property: The interest rates are low on loan against agriculture land. Those who have agriculture properties can explore this option.
2. Top-up on Home Loans: HDFC, SBI and a few other banks offer top-up loans for those with good credit history and already have an existing home loan. Note that you need to be residing in India when you apply for this loan. I am still trying to get more details on this.

4. Path Forward:

LBS currently has tie up with Prodigy Finance to offer loans to MBA/MiF students. We (admitted students for class of 2014) think that Sloan fellows deserve a loan and there is a strong business case to offer loans to Sloan fellows for the following reasons:

• Sloan fellows come with an average of 16 years of experience and are already earning good salaries and have collateral to offer
• Sloan fellows get into good roles with decent salaries post program which is evident from the past career reports. So repayment should not be an issue for Sloan students.

We have approached LBS financial aid department to help convince financial institutions that Sloan fellows deserve a loan. This in turn also helps school to attract the best talent from across the globe while the students can focus on other preparatory work if financing is taken care.

I hope this information helps prospective students to plan well in advance.I will keep updating this post as we gather more details.

Please check the loans section on official website for more details.