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JUNE 21, 1999 B-SCHOOL Q&A: FINANCIAL AID Meet Yale's Financial Aid Director A Conversation with Karen Wellman, Director of Financial Aid at the Yale School of Management
Karen, over the course of your eight years with Yale's financial aid office, you've witnessed a number of trends regarding the need and distribution of aid. Has a graduate business education become more or less affordable for an incoming MBA student? I think that depends on how you define affordable. Certainly we do our best to assist students with our need-based grants from the school. Over the years, I have certainly seen an increase in the number of education loans that are available to assist students in financing their MBA. Despite the fact that the price of an MBA may have gone up, there are also more avenues a student may explore for aid. Yale's tuition for the 1998-99 year is $25,250. On top of that, a student also absorbs two years of foregone income and incurs two years of living expenses. What budget do you suggest people have in mind for their time at Yale SOM? We work with an academic year budget on a yearly basis. The budget for living expenses for the upcoming year (1999-00), including tuition and fees, is $40,660 [valid for both first and second years]. That increases for both first- and second-year students based on any rate of inflation or tuition increase. The budget is not fixed. Is that budget considerably higher than what you forecasted for students five years ago? Yes, it is, based also on the tuition rises over the past years (Editor's note: Yale SOM's tuition has increased by 20% since the 1994-95 academic year). There are a number of avenues, however, that students can explore to help finance their MBA, including fellowship, financial aid, assistantship, and for some, work-study. Which tends to be the most popular route students take? We don't offer fellowships at SOM, which are defined as paying full tuition with a stipend. We do offer need-based grants to our students, however. And basically, in Ivy League schools, financial aid has traditionally been need-based. We do not have work-study available, but students do work as research assistants or as teaching assistants. In both cases, however, they are identified and chosen by the individual professors, and it is not considered part of their financial aid package in any way. Do budgetary constraints prohibit Yale SOM from offering fellowships to its MBA students? I don't think it's because of budget. It's simply not something that we offer students. Anyone across-the-board is eligible to apply for the need-based grants though. They may not receive one, but everyone is eligible to apply. Are need-based grants akin to scholarships? Grants/scholarships -- they're relatively interchangeable.... It's financial aid that does not get paid back. There are about 430 MBA students enrolled at Yale; how many receive a need-based grant? Generally around 50% to 55% of the total population. Awards range from $1,000 up to $10,000, with our average in 1998-99 being $7,766. Can SOM students do anything to increase their chances of receiving need-based aid? Is there a separate form that needs to be completed to be eligible for these need-based grants? Yes, in addition to the admissions application, there is a separate school-specific financial aid application. In addition, all U.S. students have to file the federal form, the Free Application for Federal Student Aid (FAFSA), as well. When should students apply for aid? We have several deadlines for applying for financial aid that are also tied to our admissions deadlines. We have a separate deadline for each of the admissions cycles. Students applying for the first round (Nov. 8, 1999), if admitted, should apply for the Feb. 15 financial aid deadline. The second-round admissions deadline is Jan. 3, 2000, and its corresponding financial aid deadline is Mar. 1, 1999. And our final admissions deadline in Mar. 13, 2000, with a May 1 financial aid deadline. Does it follow, though, that students have a better chance of grabbing grant funds the earlier they apply? No. We set a financial aid application deadline. There are certain schools that have absolute set deadlines, regardless of when a person is going to be admitted. But because of the way our admission cycles work, no one who applies to be admitted in the third round is penalized, as far as financial aid goes, as long as they submit their financial aid application on time. If you don't meet your [corresponding aid] application deadline, you may not receive the same type of grant that you would have had if you'd applied on time, though. Let's say I apply for Yale SOM's first round, but I miss the first round aid deadline and instead hit the second round. Do the chances of me earning aid decrease? Yes, because, technically, you didn't meet the correct deadline for applying for financial aid. We will still accept and review the application, however. What types of factors are judged by the school's internal scholarship board when reviewing an application? We look at a student's current income, as well as any and all assets. There is a different formula used for the expected contribution, whether you are married or if you have children. Are international students also eligible for the grants? International students have been and are eligible for grants. However, we are making some changes in the way we process our international financial aid. Starting this fall, all international students will submit their financial documents with their admission application and become eligible to apply for money from the school that will be based on a combination of merit and need. Prior to this year, our foreign students had submitted their financial aid applications to the Financial Aid Office, and I had awarded funds based solely on need. Unfortunately, the maximum grant had left high-need students very short in meeting their needs. Going forward, by basing aid on both need and merit scholarships, the financial aid packages we award may increase for some. Do students have to reapply for grants each year, or are they fixed for both years of their stay? They have to reapply. I hand out all of the forms to the students currently receiving aid, and they're due back by Apr. 15. Does the amount of grant money tend to increase or decrease going into the second year? It actually can work both ways. Many of our students, over the summer, get very lucrative internships where they're making actually considerably more than they made as incoming students. Therefore, their grant may be less. However, for other students, especially our students who are funded by our Internship Fund, we really don't expect a contribution from income for their second year and, therefore, their aid may increase. Students may also take out a competitive loan to help finance their education. Does Yale have any particular preferred lenders? The majority of Yale SOM's students do take out a loan. We have several lenders that we work with, and I provide students with a comprehensive list of lenders with their interest rates and fees. I feel the loans available for students offer very good rates. And based on the salaries that our students make leaving here, I don't find that [shouldering a loan] becomes a tremendous hardship. (Editor's note: A member of Yale SOM's Class of 1998 took out an average of $43,874 in loans and earned an average total pay package worth $123,008.) Yale does have an agreement with the Access Group where they offer a more competitive loan than their market-rate loan to Yale students. In addition, I administer the Yale School of Management's Public Service Loan Forgiveness Program, which offers financial assistance to graduates who work in the public or nonprofit sector. Although historically more than 90% of Yale SOM grads take jobs in private organizations, the school's Loan Forgiveness Program assists students taking positions in nonprofit- or public-sector positions with their loan indebtedness. We determine eligibility based on students' salaries and loan-debt levels. We average about 20 people in the program, and it can last for up to 10 years [which is equivalent to the standard pay period for loans]. Are these types of loans foreign friendly? Many of them are. However, [internationals] have to have a U.S. citizen or permanent resident as a cosigner. Several B-schools, including Stanford, Wharton, Harvard, UNC Chapel-Hill, and NYU, have recently formed partnerships with lenders to offer programs that make it easier for international students to get a loan without the help of a U.S. cosigner and other restrictive fee structures. Is Yale working on something similar to that? We don't have anything at this time. We are certainly always willing to listen and to look and see what is out there, though. What other resources can international students pursue, given their more limited financial aid options? They should always check to see what's available in their home country. Many times, there are forms available from their own government that they're not necessarily aware of. There is also the Institute for International Education (IIE) that they should contact. And as you probably are aware, there are many international students who do attend school sponsored by their companies. Does Yale target certain student constituencies, such as minorities and women, for certain types of aid? We have what we call a Dean's Scholarship, which is based on both merit and need. And preference has been given historically to underrepresented groups for that scholarship. It's typically awarded to about 10 students annually, based on academic merit and need, and it covers $10,000 per year each year of school. We've had it for about four years. There isn't a separate application to fill out for it. Instead, students are identified by the admissions committee, and then another committee, comprised of a faculty member, the dean of students, the admissions director, and myself, select the recipients. What resources, outside of Yale, would you suggest students look into? Are there any particular books, guides, or Web sites that are particularly useful? There are several Web sites that students would be wise to check out, including The Scholarship Page, The Scholarship Resource Network, fastWEB (Financial Aid Services through the Web), FinAid!, and The National Association of Student Financial Aid Administrators (NASFAA). Basically, if students just go on to the Web looking for financial aid, they should find several useful Web sites. Also, almost any public library, especially in a major city, will have a section on financial aid. There are many books printed that list scholarships there. Generally speaking, though, there just isn't a lot of money out there for students attending MBA programs. What types of services or aid benefits are available to SOM students who have significant others in tow? SOM has many student interest groups. And one of the groups is called the Partners Student Interest Group, which is basically for spouses and significant others to help them get to know each other and to get a little bit integrated into the whole society of the school. In addition, our Student Affairs Office maintains listings and is sometimes able to assist spouses in obtaining employment, either at Yale or in the area. We've had several spouses employed basically for their two years at SOM. Spouses are able to attend our Leaders Forum lecture series, where we've had people such as Martha Stewart and Rupert Murdoch come here to give speeches. Can spouses, for example, audit a class or attend a particular course they find interesting at a discounted price? Spouses are eligible to audit classes at the university. However, the professor teaching the course has to approve anyone who audits his or her class. They're not offered discount tuition, as such. If they audit a class, there is no charge. Does Yale SOM offer any child-care benefits to its students who have families? We don't offer child care. Our Student Affairs Office again maintains a list of day-care agencies, however. There's also an excellent day-care Web site at Yale. MBA wannabes are prone to their fair share of misconceptions and mistakes. What have you noticed to be among the most popular issues that incoming students underestimate? Basically, carrying too much credit-card debt and being locked into a car lease, more so than a car loan. Students may have a loan and sell the car and actually, in a sense, take a loss, even though they may get enough to pay off the loan. But once a student is locked into a lease, that becomes a problem. Our basic budget does not allow for car payments. Surprisingly, you're not the first person that's mentioned the tendency for MBAs to take out sizable car loans and leases. There must be far too many Jags and Corvettes in Yale's parking lot. What advice do you have for the folks who are locked into these car leases? I'd probably suggest that a student reconsider when they want to start their MBA education. Obviously, that's really not up to me, and I don't necessarily offer that advice. But it is a problem when students come in carrying too much debt. Do you find first years falling into any particular financial traps as they transition into their second year of school? Occasionally -- and I don't think it's the majority -- but certainly, some students are prone to use their credit cards as opposed to actually taking out an education loan. The education loan is certainly going to be offered at a lower rate than the average credit card and doesn't require payments while a student is in school. And while, yes, we understand that the interest is accruing while they're in school, basically, based on the salaries our students make, they would be a lot smarter to have a loan that's accruing some interest than to struggle to attempt to make credit-card payments. What overarching piece of financial advice would you bestow upon prospective students who are a couple of years away from applying to Yale SOM? Plan ahead. Realize that you want to apply to go to business school in a couple of years. Get rid of as much debt as you possibly can. In the case of credit cards, pay them off. If you need to keep one for emergencies, understand that that's really what you're keeping it for. And I think all students should keep track of their own credit ratings -- I suggest that in the cover letter that goes out with our financial aid application. Any of the supplemental or private education loans are credit-based. It doesn't happen often, but occasionally when a student comes to me and says, "Well, I can't get that loan because I have bad credit somewhere along the line," there really isn't much I can do. There have been times when students have been able to work with a credit agency and determine that there was a mistake in their credit rating, however. And I'm glad that those students were able to get it straightened out. But if you find all of these things out before you get here, it certainly makes it less stressful. How much in advance should students start preparing financially for their MBA? Prepare two or three years in advance. If you really know that when you graduate from undergraduate school that you are going to go for a graduate degree or you've made up your mind that you're going to go for an MBA degree, you need to step back and look at what you are currently financially committed to. Karen Wellman, thanks much for explaining the ins and outs of financing a Yale MBA education. Prospective Yale SOM students take heed. Thank you. To learn more about Yale SOM's financial aid program, you can visit the school's Web site at: www.yale.edu/som/admissions/apps.html#FINANCIAL+AID  Nadav Enbar  | | [an error occurred while processing this directive] Learn about your online education options |
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