Loan Crisis Hits the MBA World

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Other End-Arounds

In the meantime, schools that haven't yet found replacements for CitiAssist are trying to come up with creative solutions. At the University of California-Berkeley's Haas School of Business—which until recently had the CitiAssist program—the financial aid office is ramping up the institutional financial aid they are giving to students. The school has doled out an additional $600,000 to students this year, and plans to give another $600,000 next year, "in part in response to the no-co-signer-loan situation," says Peter Johnson, director of admissions at Haas.

Other schools are encouraging students to look for alternative funding sources. For example, Columbia Business School has compiled a list of different loan programs that exist around the world, and has put students in touch with alumni at banks in their home countries who may be able to help students find loans.

"Little by little, we are piecing things together," says Marilena Botoulas, head of financial aid at Columbia Business School. "This has at least given students some information so that they know that there are other resources out there."

One thing nearly all the schools are doing is recommending that students try their best to find a domestic co-signer, a person who would be responsible for the balance of the loan if the borrower defaults.

Pavel Konin, a Russian business school student from Moscow who started at Columbia Business School this January, managed to do just that. After finding out that the no-co-signer loan program had been canceled at Columbia this fall, he immediately started calling senior colleages of his who were U.S. citizens, asking if they would back his loan application. After three days, he managed to find a co-signer and was able to get a private loan application approved. "I was very surprised of how supportive they were about the idea of going to Columbia in the current market situation, and how little doubt they had in my future ability to repay," he said in an e-mail.

But that's a path most MBA applicants would like to avoid, if at all possible. With the economy in a recession and unemployment on the rise, applicants like Stephane So, a research scientist from Mauritius, an island in the Indian Ocean off the coast of Madagascar, say they feel uncomfortable asking acquaintances or work colleagues to take on any additional financial burdens.

"It is a real dilemma to find a U.S. co-signer," says So, who is working in New York and awaiting admissions decisions from MIT, Haas, Duke, and the University of Virginia's Darden School of Business. "I don't know anybody who would want to risk their assets to co-sign for me. At least nobody has offered so far."

Damast is a reporter for BusinessWeek.com.