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JUNE 23, 1999 B-SCHOOL Q&A: FINANCIAL AID Meet Stanford's Financial Aid Director A Conversation with Ursula Kaiser, Director of Financial Aid at the Stanford Graduate School of Business
Ursula, you are a Stanford veteran, having worked at the school for over 30 years and as the school's financial aid director for the last 23. Have you seen a greater number of students coming to you asking for financial assistance? Oh, sure. When I first started here, we had substantially fewer students coming to us for a number of reasons, one of which was a lot of the financial aid was processed at the main campus and we were just doing fellowship funds. That has long since changed. We brought everything in-house so that we could provide better customer service for our students, and of course, [student aid requests] increased. We see the majority of our students, whether they actually end up applying for financial aid or not. That's quite an achievement given Stanford GSB's 750 MBA student enrollment. The school's tuition is $25,990 for the 1998-99 year. And according to our records, GSB MBAs walk the graduation carpet roughly $45,000 in the red. What are some of the ways that your office helps students finance their education and avoid racking up those bills? Well, about 50% of our students receive fellowship funds directly from Stanford, and about another 5% to 10% receive scholarship from outside sources that we are involved with. All of our student fellowships are based on financial need. We do not have merit-based aid here at the GSB. And when determining fellowship eligibility, we consider the applicant's entire financial picture, including such nonliquid items as retirement funds and home equity. But we don't use those when we're qualifying students for need-based loans. So about 50% of our students get fellowship funds and that helps drop the amount of the loans that they have to take out pretty dramatically. What's the general size of a fellowship award? Because they're based on need, awards vary based on what the student's financial situation is. We award a percentage of need in fellowship money. So what we will do is determine how much a student can contribute to their education and then take the remaining financial need and offer a percentage of that need with fellowship funding. We do have some other fellowship funds that we give to students, and those are based on diversity, which we define here in its broadest sense -- it's not limited to race or citizenship but includes applicants coming from a variety of backgrounds and perspectives. If we believe that a student can truly offer some diversity to the class then we might give them fellowship status at a slightly higher level than the normal need-fellowship percentage. Some students feel alienated by the aid bestowal process. They're confused as to how a school determines who to give aid. When determining diversity need, how does Stanford's internal board distinguish between someone who should receive more aid than another? Is it arbitrary? Marie Mookini (Stanford's Director of Admissions) and the admissions people see the entire student population, and she knows who someone with a different background is more so than I would because she's reading the admissions applications. She and I will talk about the particular individuals that might fit into a diversity category based on their very different backgrounds. As I mentioned, Stanford's definition of "diversity" isn't just predicated on race or international status. It's also based on perspectives, which may change from year-to-year. For example, one year, there may be a large group of people enrolling into the program from consulting and I-banking. Well, someone coming in with that background may not be put in the diversity category for that year. However, an individual transitioning into GSB from the Peace Corps, an organization that does not employ a large portion of our incoming student population, may be put into the diversity category. Marie Mookini makes a large portion of those diversity decisions. Also, we give additional funds to people who come in with truly high need. For instance, if somebody comes in with a family of three children and a spouse that's not working, that person might go out with a debt that's so much higher than we're comfortable with. And that might prompt us to put that person in a high-need category and offer a little higher fellowship. Does Stanford also extend that need-based aid to the 30% of its student body who hail from outside the U.S.? We extend that to everyone. Our international students, except for federal funds which, obviously, they are not eligible for, are treated exactly the same as our U.S. students. They receive fellowship money, and actually, starting this year, we've also made available international student loans from a new source that has made foreigners eligible without a cosigner. We're very happy with that. Is fellowship folded into the admissions application? No. Admissions is completely need-blind here. We keep our admissions and our financial aid processes completely separate. We have admissions deadlines in January, March, May, and we set our financial aid deadline for incoming students approximately three weeks after a student has been admitted. A student who applies for financial aid in May is just as eligible for fellowship funds as someone who applied in January. That's a question we always get asked: "Am I going to jeopardize anything if I apply late?" And the answer is unequivocally no. We treat everyone the same, and we do our best here to help students avoid jumping through unnecessary hoops. Because we have more than 7,000 applicants for our 360 spots, we only want to ask those who are admitted to file a financial aid application. That's why our deadline is three weeks after the admissions deadline. So to be considered for financial aid, as an admitted applicant, I essentially have to submit two forms -- one to the school and the other to the federal government? Correct, and obviously the international students would not file the Free Applications for Student Financial Aid (FAFSA) because they don't get financial aid from federal sources. Does Stanford renegotiate the terms in a fellowship package during the two-year MBA program? Our returning students do need to apply at the end of their first year for second-year financial aid, and we always tell them that as long as their financial situation remains constant between the first and second year, the students can pretty much expect the same package. The differences would be if somebody had a higher or lower income in the summer before they come or in the summer between the two years. That might affect their aid one way or the other, but in general, if things stay the same, they can expect the same amount of aid, adjusted for the increase in the student budget. Federal aid is another source students can exploit to foot their MBA bill. In fact, given the average $45,000 in debt Stanford MBAs graduate with, I'd imagine that more than a few submit their FAFSA forms. Yes, they do. As a matter of fact, approximately 50% to 60% of our students borrow from federal funds. But federal aid is only a portion of the amount that our students borrow. Approximately 65% to 70% borrow from all sources, including federal loans. Some students actually receive forgivable loans from their employers where, if they go back to their employer, [the loans] are forgiven over an agreed upon number of years that the student works at the company. But it the student doesn't go back to the employer after graduation, then those revert to loans that they would have to repay. You touch upon an interesting point. MBAs are grabbing out-of-this-world pay packages, replete with tuition reimbursement perks. Do you see an increasing number of companies using that perk to lure MBA students? I actually see them more from the front end and the Career Development Center would obviously see them from the back end. But I have seen an increasing number of students receiving these forgivable loans from their employers or down-right support from their employers. I think that the employers are selecting people that they want to come back to their jobs so that they can get the best out of them that way. They know who's in their employ right now whom they would want to get the MBA experience and then get the value of that back. So yes, it's increasing dramatically. How many students are sponsored at GSB? I'd say that, on the front end, 10% to 15% of our students are getting some help from their employers. That has continually increased, but this year, actually, is the first year that I've seen it increase so dramatically. Historically, we've had one or two students each year more than the previous year [receive forgivable loans], but this year there've been quite a few additional students, probably in the 20 to 25 range more than in previous years. Forgivable loans are becoming increasingly common in the MBA arena. They obviously go a long way in helping to pay off an MBA education. But are there drawbacks? When we see a forgivable loan on a financial aid application, the first thing we do is call the student and ask him or her whether they are sure they're planning to go back to their employer. We talk with them a great deal about accepting the money because if they don't go back after graduation -- which happens -- they get themselves into a lot of trouble. Some of these employers fortunately have set up opportunities for the student to pay them back over two or three years, but others say they want it all back immediately, in one lump sum. So we have that conversation with our students up front to make sure they know what they are getting themselves into. Also we've been having conversations with a number of lenders about possibly being able to help these students if, indeed, they do not end up going back to their employers. We're hoping that the lenders would provide a different kind of loan, maybe a 10-year term, instead of a three-year term or immediate repayment. Does Stanford receive preferred-lender status from any banks? We're very fortunate because we have such a low default rate that several private lenders give us preferred rates. We list all those lenders -- including MBA LOANS and CitiAssist -- in our financial aid handbook that we send out to each of our financial aid recipients.Included are phone numbers for students to call to see what the particular rates are because the Web sites don't list them. Our primary loan, however, comes from a recently formed partnership [during the school's 1999 spring quarter] with First Marblehead and Bank of America named the Gate Loan. Essentially, as I mentioned earlier, it allows our international students to borrow without cosigners. We're very excited about that because that effectively makes all of our international students eligible for a loan. Even though they have to get a credit check -- the credit check has very minimal restrictions -- to date, not one of our international students has been denied a loan. The rates are low, there are no fees associated with the program, and the students have up to 13 years to repay. In fact, we've been so pleased with this program that we now offer the Gate Loan to both our international and our U.S. students on the financial aid packet. We think this is the best loan on the market, but in our handbook we say that students have the opportunity to go to any of the other lenders if they so choose. Moreover, the first Marblehead and Bank of America people have not asked us for any kind of exclusive arrangement whatsoever. A number of business schools, including Harvard, Wharton, UNC Chapel-Hill, and NYU, have been brokering similar partnerships to provide foreign-friendly loan programs. Is this the latest push by B-schools to make a U.S. business education more affordable to everyone, especially internationals? I think it is, and I think it's very important. We have a global economy now. We are bringing in students from international areas, and we need to help them if we don't want to have just rich students attending our school. So yes, I think it is the next step. Meanwhile, we want students to do whatever it is that they want to do when they graduate. If that means graduating into a good job with high pay, great. But if it means graduating into a good job with low pay, that's great too. And we actually have the GSB Loan Forgiveness Program here for our students who go into low-paying public-sector jobs where we will help them pay back their loans while they're employed in that arena. Between the loan program designed for students going into low-paying jobs and increasing tuition reimbursement perks and sponsorships, it seems like Stanford's financial aid office has its hands in many different pots. Do you find your office working more closely with the admissions and career services offices to get a better handle on a student's total financial picture? We certainly work very closely with admissions because admissions knows the historical background of the students. We know the financial background of the students, and in fact, we don't do any financial aid until we are very clear on what the unique circumstances are for each of our students. At the back end, we work closely with Career Management when it comes to options for graduating students. For example, we will work together to inform employers and students about how the MBA LOANS Program may create some benefits for hiring strategies. Also, when students are going to find jobs, if they are getting signing bonuses or tuition reimbursements, we gently nudge them into using that money to pay back their loans if at all possible. We also work very closely now with our development office. As the need for fellowship money increases, I work much closer with our donors and with our development office to establish the types of aid that we might need for the future. What is the annual budget you recommend for incoming students? The budget varies depending on whether students live on campus or off campus. The majority of our first-year students live on campus in our Schwab Housing Center. Next year's entering class should budget about $42,000 if they live on campus, and $45,000 if they live off campus. Does the budget move upward as one transitions into their second year? It probably goes up. It wouldn't fluctuate during the academic year, but certainly for the next academic year, it would go up. The budget includes not only tuition, but also room and board, personal expenses, books and supplies, transportation, and medical insurance. Meanwhile, we're in very much of a housing crunch here, and housing is expensive. So we have to adjust the budgets based on what the actual costs would be to our students. Has the university bought any off-campus housing to provide lower-than-market rates for its students? Actually, we've been building on-campus housing nonstop. This year, there was a very major housing shortage, so the university contracted with outside apartments to provide lower housing costs to our students. I'm not sure, however, that they've purchased anything off campus. All of Stanford's fellowship aid is need-based. Are there any particular resources -- books, guides, or Web sites -- that you suggest students look into for merit scholarship or other aid opportunities not offered by Stanford? I think the best one out there is the Financial Aid Information Page. It contains a wealth of information about financial aid, including a search engine for outside fellowships. It also includes information on types of loans and calculators so that you can compare one private loan to another because there are so many different fees involved -- it's hard to compare apples to apples. Sallie Mae also has an excellent Web site. In addition to that, I always encourage my students to look at the lender sites. Lenders are doing fabulous jobs with their Web sites, and many of them now provide repayment incentives at graduation. So we encourage students to take a look and see which lenders are cheaper for them in the long-run and do some comparative shopping. Some have up-front fees that they reduce and some have 2% off if you pay back on a regular basis...those kinds of things. Are there other outside sources available that target a specific student constituency, such as minorities, women, or internationals? The search engine on the Financial Aid Information Page allows you to put in your background, and it provides information based on that. Once we saw how well that worked, we actually went away from recommending other sources. There are some other books that students can find in their local public library. One notable publication is called the Annual Register of Grant Support that's a fellowship guide for all students, including international minority students. Stanford tiers the aid amounts given to students based on their marital or family status. How are you able to determine how to tier aid for students with families? It depends on whether they are U.S. or international, because there are some federal restrictions based on the federal-loan eligibility for U.S. students. If a student is a U.S. citizen, we would use a higher budget to determine their fellowship eligibility because obviously, it's more expensive for two people than it is for one. But we are restricted to the single-student budget for federal loan eligibility, and in that circumstance, and under what the federal government allows us to do, we make adjustments on the amount we expect the student to contribute, or the student and their spouse to contribute from their income. That way they are required to contribute less. We do make adjustment for families. If a couple has children, then we can add different items to the budget such as child care, again, depending on their circumstances. What types of resources and benefits does the school have for spouses? Spouses receive a variety of benefits here. They have access to our Career Development Center at the university level, and they can receive help in finding a job. They can actually audit classes at Stanford, although not at a discounted rate. We provide competitive health-insurance rates for students and spouses and children, and we also have a wonderful graduate student housing complex, dedicated to married students with children. The houses look onto a yard setting where children can play safely and in that environment, parents often set up cooperative child care. In addition, the business school has something called the Biz Partners, an organization for spouses. It includes both working and nonworking men and women that provides social events, opportunities, job networking, and informal child-care arrangements. In general, the GSB embraces spouses as an integral part of the school community. Does Stanford offer assistantship or work-study positions? Actually we do have assistantships, although we encourage our students not to work. We think that the nature of the MBA curriculum is very rigorous, and we want them to be completely immersed in the MBA experience and all that encompasses. Working sometimes detracts from that. About 3% of our students do get research assistantship funding, and it's usually in their second year. Depending on the type of research assistantship, compensation comes either in the form of income or a little bit of tuition credit. Most of the research assistantships go to our doctoral students. What do you tell an individual who asks you how in the world he or she is going to be able to afford an MBA? It depends on when they've asked the question. If they ask a year or two out from when they're actually thinking about coming here, we can give them a different answer than if they're here at our doorstep with a lot of debt. I think students tend to not prepare as much as they should before coming here. They believe that they can live in the same manner in school as they did when they were employed full-time and earning a good salary. But if they don't budget and if they don't adjust their lifestyle, they can find themselves in financial straits, especially towards the end of the academic year when the funds run out. We always tell them to prepare early. Start saving as soon as you know that you're interested in going to an MBA program. Some students believe falsely that if they save, they'll be penalized. While savings may reduce fellowships somewhat at the schools that base fellowships on need, it also substantially reduces the amounts that students need to borrow. And lower payments at graduation can help in career choices so that students can take lower-paying jobs if that's what interests them. Bottom line: Save early, pay off your consumer debt before you come to school, and keep your credit clean. Do most incoming students follow your advice? Most people do. But we do see students with credit-card debt. That happens certainly in the second year when they've run out of money at the end of the first year. They use their credit card to survive the remainder of the year. But most students really pay attention because costs are going up and because they do want career choices when they get out of here. So most students are conscientious about their finances, but there's still that fraction that needs your help... Thank goodness! That's job security, right? One caveat: Schools differ in their policies, and often students will talk to one financial aid office and assume that whatever information they've received is true of all the other schools. Well, that's not necessarily the case. If students are interested in what's happening here at Stanford, we encourage them to talk to us directly. We are here to help. Ursula, thank you very much for delivering such a clear picture of what's involved in Stanford's financial aid process. Thank you, Nadav. To learn more about Stanford GSBs financial aid program, you can visit the school's Web site at:www.gsb.stanford.edu/finaid/Default.asp  Nadav Enbar  | | Learn about your online education options |
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