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JULY 7, 1999 B-SCHOOL Q&A: FINANCIAL AID Meet Olin's Financial Aid Director A Conversation with Joe Fox, Associate Dean for MBA Programs at Washington University's Olin School of Business
Joe, first off, the price of today's MBA education is significantly higher than just five years ago (Editor's note: For example, the Olin School's 1998-99 tuition is $23,920. Five years ago, it was $18,350). Are increasing fees becoming problematic for incoming students? I think it's pretty clear that the increases of the past 5 to 10 years, in particular -- when we've seen the rate of increases exceeding inflation and other measures of price increase pretty significantly -- has probably come to an end. I don't think that the size and rate of increase is sustainable for the long haul. The price tag on MBA programs is probably nearing more of a steady state. Is that because you think that we are now reaching the limit of what students can afford? Well, I think there's two parts to it: One is what students can afford, and the other is how schools can make it affordable to them. That's the whole question of financial aid. There's a real question about the relative cost of education in the greater marketplace of things that people pay for. People do value education. They look at it as an investment rather than as an expenditure. But the size of it is now clearly consequential enough that you have to look at it as a cost in its own right. So I think more people are looking at it and saying, "Do tuition and fees need to be more than this? Is this realistic?" For the 1998-'99 academic year, tuition at Washington University's Olin School is a hair under $24,000. When determining your total education investment, you also need to factor in two years of foregone income, which for many of the MBA set is $40,000 to $60,000 per year, and living expenses. Overall, that adds up to a small fortune. Indeed it does. Just on direct expenses alone -- tuition and living expenses -- for the 1998-'99 year, we were recommending a student budget of $38,600. That's just for one year. And we're lucky to be in the Midwest, where the cost of living is a bit more moderate. That was for 1998-'99. Now, we're projecting about a 5% increase in estimated costs for next year's incoming class. That, of course, does not factor in foregone income, and that opportunity cost is significant. So I think students need to take a long hard look at their rationale for pursuing MBA degrees. Rather than pursuing the MBA because others have it or others recommended that they should, [prospective students] have got to take a hard look at what their expected outcomes are, both in terms of hard financial outcomes (what's my payback period for this investment, including opportunity costs) and also for the benefits outside of the hard dollars (career success, happiness, etc.). [MBA aspirants] need to make sure both of those pieces fit before making such a consequential decision. Is that 5% increase in estimated costs for the 1999-'00 academic year in line with the annual increases that we've been seeing for the last couple of years? I think it's probably a little softer than the annual increases of the past couple of years. The tuition increase is not as big a hit this year. As I said, I think you're seeing an era where those tuition increases are likely to start slowing a little bit. Of course, inflation has been good to us for the most part, and the consumer price index is not going up at the breathtaking amount that it was in some eras. The 5% is a result of both those factors, and that's more moderate than it has been in past years. It's challenging for incoming students, both domestic and international, to broker the best two-year financing solutions for themselves. Of course, there are a number of opportunities out there waiting to be tapped: Merit and need-based fellowship and scholarship, federal financial aid, assistantship, and work-study.... How does an admitted student to Olin apply for these different types of aid? That's an important question because every school differs, if not significantly, then at least enough that it's important to investigate each school separately. At the Olin School, we have fellowships, scholarships, financial aid, assistantships...pretty much the full array of packages that you've mentioned. With regard to gift aid, or what we call scholarship aid, whether it's through fellowships, dean scholarships, or internal scholarships...all of that is determined by merit only. Dean scholarships are the primary means Olin makes scholarships funds available for its incoming class. They are given in varied amounts, ranging from $4,000 to $12,000. Gift aid is not need based at all, and the evaluations and determinations are made as part of the admission evaluation process. So there is no separate application process that's required for the gift aid that the Olin School puts forward. With regard to the financial aid that comes through the government loan programs, obviously that's a different story. Students need to fill out the FAFSA form and can submit that to the federal government for evaluation starting Jan. 1. Then, we hear back what the approval amounts and parameters are and go ahead and fill the needs using the loan programs. As soon as the student applies, we send out the federal aid information in hard copy if it's available, depending upon when the student applies. Otherwise we'll let them know where they can get their hands on the hard copy. We encourage students to fill the FAFSA form out and submit it as soon as possible so that they don't butt up against deadlines. In most cases, students haven't figured out whether they're going to come to Olin or not. And they haven't found out what total aid package is going to be available to them. So completing and sending in the FAFSA form is important because of the timing of clearance and the number of people who have to review that before the final decision [on aid eligibility amount] is made. There are a total of roughly 740 students graduate business students at Olin, of which about 320 are full-time MBA students. Does the school draw from the same scholarship pot for its entire B-school population, or is there a separate budget earmarked for the full-time program? The full-time program has a separate budget. Most of the folks in the part-time MBA program are fully employed as they go through the program, and many have access to tuition reimbursement programs through the corporation that they're employed by. We also have loan programs available for them. Both Olin-type programs and government-sponsored programs are becoming increasingly available for executive and part-time MBA students. But the financial aid that we're talking about -- the scholarship monies -- are earmarked exclusively for the full-time MBA program. And students who are applying for that money are the 320 students that you mentioned in the full-time program. We're in the neighborhood of 150 to 160 incoming full-time students per year, and those are the students who are vying for the fellowship and scholarship dollars. Has Olin's scholarship kitty increased? Quite significantly. Just this year, there was a major event that caused it to increase significantly. Prior to that, in a normal, ongoing basis, we'll try to keep the financial aid dollars at least tuned into the normal increases in tuition costs. The gift aid budget for the 150 to 160 students in the class of 2001 will be slightly over $1 million. We don't have a set number of fellowships set up with that money. We don't say we're going to give 50 people or 40 people or 100 people fellowships. We don't work at it from that angle. Instead, we work at it from individually evaluating each of the applicants, identifying those who have the strongest merit-based cases, and then trying to come up with a game plan that allows us to use that million dollars in our best interest and in the students' best interest. How many Olin students generally receive gift aid? For the current class, which had a significantly lower gift aid budget, 52% received some form of merit-based aid. That aid went to our domestic and international students. Is any of Olin's gift aid targeted at specific applicants, such as women or underrepresented minorities? No. There's some endowed fellowship money that may have some targets associated with it, but we're generally speaking about scholarship aid. The lion's share of our $1 million budget is comprised of scholarship aid available to anybody regardless of background or origin. Are there any fellowships that pay the full tuition? There's a few of them. One of them is the reason that our gift aid budget went up so significantly this year. This year Howard and Joyce Wood, both alums of the Olin School, gave a tremendous gift specifically to the MBA program to help fund scholarships in a program known as the Wood Fellowships Program. It's going to allow us to pay full-tuition scholarships for up to 15 students per year, covering both years of the program, with an eye towards not only capturing people with tremendous academic and experiential statistics and background but also people who've demonstrated tremendous leadership skills. At the Olin School, because of our size, students play a tremendous role in the development of the program itself, and so bringing in people with those kind of attributes is a natural way to propel the program. This year, we will have 15 full scholarships that we'll be using, and the commitment has been made to do that for the next five years. Do most of Olin's fellowships cover both years of the MBA program? Or do they have to be renegotiated for the second year? When we make an offer of fellowship, scholarship, or whatever form of gift aid that we might make a determination on, it's good for both years. It doesn't have to be renegotiated the second year. There is no possibility of it being decreased at all, as long as recipients are in good academic standing. We also don't have to worry then about renegotiating upwards for the second year. We can make a commitment and be able to work our budgets much more rationally that way. Do need-based aid amounts fluctuate wildly from the first to the second year? They can. They're going to fluctuate depending upon two characteristics: One is the cost base, to the extent that second-year costs, both in terms of the cost of living issues as well as the tuition issues, change; and the second thing will be the students' personal circumstances -- where they are financially and so on. Do the income levels students submit to your office tend to increase moving into their second year, given the lucrative summer internship salaries (upwards of $7,000 to $15,000 a month) an increasing number of MBAs are capturing? We actually don't assess their income and their expenditure. That's done through the government's evaluative process. So that's of little or no consequence to us. The Olin School doesn't have an internal office that oversees private, need-based funds? We can do private need-based funding, but we don't need to assess [a student's finances] to that degree. The Olin School does have a separate loan fund that we can use to supplement, if necessary, the government program. But we generally try to keep it within the realm of the federal government's assessment. We sometimes can work out arrangements when there is a special need. Let's say a student has a need for funding for educationally related travel or for the purchase of equipment that's related to their education, whether it's computers or whatever it might be.... We can usually help supplement that. There's not a ton of those cases though. On an annual basis, I'd say a half dozen or a dozen students come forward that we can help out. Many more MBA students end up taking out loans than earning merit-based fellowship. How many people at Olin go to the bank to negotiate loan terms? (Editor's note: A 1998 Olin grad walked away with an average of $32,878 in loans.) You're right. The vast majority of our students include potential loans as part of what they're looking at to shore up any difference between the gift aid or the finances that they have personally available to them. Right now, the statistics for our most recent class show that of the students who are normally eligible (meaning the domestic students who all qualify under the federal programs), approximately 75% took advantage of one loan program or another. Which lenders do you suggest students contact? We have a couple of programs that we do a fair amount of business with. One is a program called Total Higher Education (THE) Loan Program. Another is CitiAssist, which offers loans to international students with cosigners. And two other worthwhile Web sites are MBA LOANS and The Missouri Higher Education Loan Authority (MOHELA). International students are eligible for fellowships, but are much more restricted when looking for private loan financing. That's due mostly to cosigner issues. There are now, however, a growing number of MBA programs that have partnered with banks to offer more foreign-friendly loans. Is Wash U in that loop? No, we're not for a couple of reasons. One, we've got a size issue. With an incoming class of only 150 students, of whom perhaps 30% or so are going to be international students -- not a big number -- it's hard to attract the attention of institutions to put together those types packages. There's just not enough quantity to warrant them doing so. The second thing is that when you set up such a program, you clearly are going to share some of the risk, or some of the underwriting costs. Again, given the size of our domain, we feel it better to take those dollars, keep them in the gift aid area, and move them directly both to international and domestic students rather than use them to help underwrite the cost of a subsidized loan program. Are there any other resources for Olin's international student body to investigate besides the fellowships that the school offers? In addition to the merit-based aid, our entire foreign student population (which amounts to 28% of the incoming class) qualifies for the merit-based aid review, Wood Fellowships, and some other full scholarships. The other thing that many of them can and do pursue upon their arrival is assistantship opportunities. Again, with a class size of only 150, one of our advantages is that the supply and demand works out in the favor of the students quite readily. Each year, I would say that there are more faculty members looking to hire assistants than there are assistants available to the faculty members. So our students, in general, are in a positive supply-and-demand situation, and those assistantships serve two purposes really. They are a nice way to supplement cash flow and provide a tremendous advantage in involving students directly with faculty members on a number of projects. About how many assistantship are annually available? Usually there is perhaps 20% to 25% more demand than there is supply for the assistantships. So students oftentimes get to choose which professors they want to work with. How does the assistantship hiring process work? It occurs upon arrival. Faculty members have certain finances that are set aside for them to use as they see fit. Many of them use those finances to hire assistantship help, and then there is almost what I would call a clearinghouse process where the market comes together.... The two groups (students and faculty) do some interviewing and get together, make the match-ups, and go from there. These assistantships are available to the entire the class, for both first and second years. So the school doesn't frown upon a first-year student taking on too much work as they adjust to the rigors of the MBA curriculum? We are clearly interested in making sure that students are feeling comfortable and in place before they start spending too much time doing that. It would certainly be our preference that the first semester be well underway and the courses be under control before students pursue this with any kind of rigor. Our faculty understand that too, and they help to manage that process without us having to be heavy handed about it. Do the assistantship awards take a sizable chunk out of tuition? It depends on where the student is in the program and how much time they can commit to working with the faculty members. I wouldn't say that assistantships take a sizable chunk off tuition. I think what they do is give a reasonable level of cash flow to the students who may be using it to help fund their living expenses or pay their tuition expenses or whatever it may be that they are using it for. But the discretion is up to the students. So an assistantship pay scale depends upon the budget within a particular department? Right. But it's not so much departmental -- we're not a highly bureaucratic or structured faculty. Funding is actually done on a per-faculty basis, and it's up to the faculty members' discretion how to use it. An option for Olin's minority students is the Consortium for Graduate Study In Management (CGSM). Do many applicants take advantage of that? Absolutely. The way the Consortium works is that students apply through the Consortium and then identify among the 11 partner schools which ones they're most interested in attending. The applications then go out to those institutions who make their reviews and assessments and determine whether or not admission is realistic, while also taking a look to see if the Consortium fellowships, which each institution is committed to funding, are appropriate for those individuals. Consortium fellowships cover full tuition, and in any given year could vary from institution to institution, both in terms of how many fellowships are offered and how many students accept the offers. This year, for example, I believe, we have eight Consortium fellows who will be joining the Olin School with the full fellowship funding. Are there any other outside sources you suggest students learn more about on the Web or in their local library? I must tell you the first thing I would recommend they do is go look at Business Week's Best B-School's Web site. It gives a good reading of the various kinds and types of programs and the different means and methods of getting there, but it also suggests that students who are serious about applying to these programs investigate more than just an index or a book or a Web site. I also suggest that students go to each individual school's Web site or brochure materials to find out what the differences are between each program, what it is that they might qualify for, and then the process for doing so. Each school is becoming different in a number of ways, especially when you take a look at the differences between funding opportunities and requirements for state universities vs. private ones. Within some state schools, there are laws and regulations that have been enacted to give them more or less latitude to work with. It would be hard for anyone to come up with a guide which could be comprehensive. So I think what's important is that you identify schools of greatest interest and then investigate very carefully each individual school's specific circumstances. Do you have any other suggestions for needy students? Well, this is more Wash U-related, but I think it points to how important it is to look at each individual school. There are a number of other fellowships and other forms of aid that are available at Washington University that are different from what you'll see anywhere else in the world. There's funding, for example, that's available for women -- a fellowship named the Spencer T. Olin Foundation Fellowship for Women. That's not just for the business school, it's university wide. But we support it, our students apply for it, and it's a very competitive process. There's any number of these, and every school has their own endowed fellowships that are specifically directed at targeted groups or individuals. I think that's where it becomes difficult to take a look at a kind of listing or overview index for financial aid and get the full flavor of all those things. Yet when you think about it, if you do your homework -- and most of this stuff can be investigated rather easily these days on the Web -- these are things that you may be surprised you qualify for and may be a perfect fit. But without having done your homework for an individual school rather than in the broader sense, you're less likely to be aware of them. There's a whole world that's willing to help support higher education, and it's a matter of finding where the best match is for you -- and I'm not just talking financially. It's like I teach students in my taxation courses: "Never make a business decision just because of the tax consequences. But on the other hand, never make one without knowing what the tax consequences are." Financial aid is very similar. You would never pick a school just because of the financial aid, but you'd better know what all the financial aid possibilities are as part of picking the school for all the right reasons. Those are words to live by. Thanks much, Joe. You're very welcome! To learn more about Olin's financial aid program, you can visit the school's Web site at:  Nadav Enbar  | | Learn about your online education options |
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