India: Financing education

Financing education can be a daunting task. Dearth in finance can put all the efforts to secure admission to one of dreamt school at risk.
Financing can be broadly classified into three different categories
1) Loans
2) Scholarships
3) Personal Sources

Loans:

Getting a loan is a piece of cake if one is admitted in top US universities , typically the university help in getting loan , I guess degree is kept with the bank as a collateral.

If you don’t want to go to US or if you are not the lucky one to get into the top US University than financing your education specially MBA might be challenging.

The very first option that everyone looks for is loans. Now loans can be taken from within India or from outside India.

Loans from Outside India:

You can get a loan from banks outside India by either providing a guarantee by local resident to giving the bank a guarantee from Indian bank. The benefit of getting loan from outside India is that you can get a very low interest rate.
French banks give interests rate as low as 2.35%.

There are firms like prodigy finance that might also help finance the education ie provide a loan, without any collateral.


Loans from Within India

I will just cover getting loans over 15 lacks from India. There are actually two options for getting loans of or over 15 lacks.

a) Provide a third party guarantee
b) Provide collateral

a) SBI provides loan of 15 lacks against third party guarantee. Again the interest rate on which one can get a loan varies from branch to branch that is depends on branch manager. I was able to get a loan at 10.75% though the prevailing rate is 12.25% and I know some of my friends who got at an interest rate of over 13%. Basically your interest rate will depend on your ability to convince the bank that the loan is secured. The more the perception of security that branch manager has the lower interest rate he would be willing to get.
Central bank gives relaxation of 1% for IITians in interest rate.
b) All the major public banks give loan against collateral. This is the least risky loan that bank can provide. Most often people give real estate property in the form of collateral and bank assess the property at 50-75% of the market value. So if you need a loan of 20 lacks then the market value of the property should be anywhere between 27 to 40 lacks.

Now though every bank has procedure of providing loan for education, local branch manager plays an important role in providing the loan. Depending on their perception they might reject your loan application or bring additional requirement that might be difficult to fulfill. Some of the examples that I have come across
1) SBI bank (Indore branch) tells student that it does not provide loan to students who have had employment before.
2) Punjab national bank tells a student that they need to provide document that they will be able to repay the loan (even though collateral in the form of property was provided). Bank is not willing to accept the employment statistic provided by the b-school. Now virtually there is no way a person can provide a document that he will be definitely able to earn more than what the EMI of the loan would be. Even though previous salary of the student is more than the EMI bank is not ready to accept that future salary might also be more than EMI. So perception of local bank manager plays an important role.
3) Centurion bank wants to have equitable liquid collateral against loan. Collateral in the form of cash, mutual funds etc. Again this will not make any sense as what the bank is telling is that we will keep collateral at around 9.25% (FD rate) and give loan at 12.25%. I don’t understand why anyone will do that.
4) There are numerous other examples where bank manager perception plays an important role in bank loans.

If one does not have sufficient collateral to provide against loan then an option is to take multiple loan from different banks against guarantee. Union bank provides loan upto 7.5 lacks without any third party guarantee. So one can take 2-3 different loans of lesser amounts against guarantee and avoid any kind of collateral.

Scholarship:

This can be a very important source of funding for an individual. Often one has to write essays to get scholarship, so the worth of those essays might be a lot if one gets scholarship.

Scholarships are provided by schools. Apart from that there are lot of other scholarship that one can avail. Typically the deadline for these scholarships is in Jan – Feb. So one has to apply in first round of application to get these scholarships.

Personal Savings: I don’t think I need to elaborate on this.

INSEAD funding

Funding for education can be a daunting task, specially if someone is from a developing country like India and going for MBA, shelling out some 45 lacks Indian Rupees. I am still in the process of funding, and once I am done with the funding I will update with an extensive coverage on Funding from India. I hope if it can help solve some of the problems for future MBA admits.

But the goods news is that I have got INSEAD Diversity scholarship, which is a great help. Specially it has enabled me to be more flexible with my future career aspirations.

Some Random Statistics

Some Random Statistics

1) I used to get in hand around 400USD per month, in my first job.
2) I am required to spend around 350USD per day for a period of 1 year for my MBA.
3) Student loan interest rate in France ~ 2.5%, USA ~ 7%, India ~ 12.5%.
4) 80% of MBA students are undecided about their future aspirations.
5) I have flown 160,000 miles so far.
6) I stayed in hotel for 90% of time last year.
7) On average I don't stay in a radius of 500Km for more than 3 weeks.
8) On highways I always speed atleast by 5 mph and at max by 25mph, provided there are no traffic jams.
9) In a week I eat atleast 4 different country cuisines, if I am in US
10) Outside India 95% of the times I eat non-veg food, in India 95% of the times I eat veg food.

INSEAD vs Harvard

INSEAD is a one year course and Harvard is two year course. Average salaries after placements from both the school are pretty much the same. I have not taken joining bonus and other bonus into consideration which might be significant.




So here are the pros and cons of INSEAD and Harvard MBA

Pros of INSEAD MBA

1) At Harvard a person shells out 227200 USD more than what he would at INSEAD.
2) An INSEAD MBA grad gains additional one year experience in comparison to Harvard MBA grad. Typically from both the schools company hires for the same position.
3) Much diverse and bigger network at INSEAD than at Harvard.
4) Global placements at INSEAD compared to Harvard. Person has much more flexibility in terms of the place he wants to work at.

Cons of INSEAD MBA
1) Much more hectic schedule at INSEAD as compared to Harvard.
2) Career switch difficult at INSEAD, when the economy is not doing well.

Statistics above shows average costs and can vary depending to job and function. Specially the opportunity cost will vary widely between people working in different countries.

Story from Japan

Japan is always an enriching experience for me, the culture and people here are so varied that it looks like a world in itself. Yesterday I got to hear an interesting story from my translator (in Japan you cant work without a translator, clients don't speak English).

So the story is about the translator. He is an guy who has traveled more than 50 countries and one of his enriching experience was in India. He was traveling from Patna (Bihar) to somewhere in North when his bus stopped and it was announced that they cannot go further because of the BANDIT fear. In the middle of night he was stranded with no hotels or motels to stay in the village nor there were any restaurants. Being a foreigner he was all the more scared, but then villagers start gathering and village sarpanch offered him to stay along with him and was treated with great food.

Incidentally that night coincided with some festival and the Japanese guy had an unique experience of experiencing traditional festival in its purest form. After 20 years he still remembers the minute details and the least expected help, in the form of life or probably night saver.

And this has been one of the unique experience the guy had, I guess primarily because of a unique Indian tradition.

McKinsey shopping

Just a comparison of where McKinsey goes for shopping amongst the top business schools (year 2007)

INSEAD : 75 (out of 881) = 8.51%

Wharton : 53 (out of 710) = 7.46%

MIT Sloan : 27 (out of 375) = 7.2%

Columbia : 31 (out of 726) = 4.27%

London Business School : 9 (out of 321) = 2.81%

Harvard / Stanford : No data available.


INSEAD statistics looks impressive. Definitely this statistic does not give a complete picture but it tells where does McKinsey shop and that might also to an extent reflect which school is good for consulting jobs.

Theory of Life

I believe in two possible theories of life, I don't know which one holds true

1) Matrix theory

Everything is pre-destined. What makes me believe in this theory is that at times I encounter least expected things and at times I don't encounter most expected things. This theory very similar to what is shown in the movie MATRIX

2) Action Theory

Every action has a reaction and life is nothing but reaction of all possible actions. What makes me believe in this theory is that at times I encounter things counter to my expectations and that leads me to think that I haven't considered all possible outcomes. Since no one can virtually consider all possible outcome, therefore things that don't happen according to expectations can be termed as LUCK, which is actually not luck but a reaction of some actions not considered.

One way or the other life goes on.