Chat Transcript January 29, 2009, 6:53PM EST

Chat Transcript: MBA Loan Crisis

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Dan Thibeault

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What about domestic students? Are they having more difficulty securing loans, too?

Yes, they have experienced reduced loan availability and also much higher rates and origination fees. We've heard anecdotes from students who [had the size of their loans] scaled back by their lender and [were] forced to find the remaining balance from an alternate source.

What can domestic students do to help their situation?

If they are having difficulty obtaining a loan or believe that they are paying excessively high rates and fees, they should attempt to improve their credit application. This can be done in the short-term by obtaining a co-signer with a high credit score. If they do not have access to a co-signer, [they should] attempt to improve their credit score directly. This will take some time, but it could make all the difference. Students can pull their credit score online for free and pay the credit unions a small fee for feedback on what is causing them to have poor credit. For some borrowers, the fix could be as easy as closing revolving lines [of credit, such as credit cards] or establishing a working credit line.

What advice do you offer for keeping on budget when you're in business school?

Budgeting is never easy but it's necessary in today's market. We've found the best areas for cost-cutting for MBA students are with housing, transportation, and food. If you can simply cut back on one aspect of each, you will incur significantly less costs. In terms of budgeting tools, we had utilized Quicken and MS Money in the past. There are now some great online tools that are being offered free as well. Mint.com is one and it takes advantage of automated expense categorization, which saves a great deal of time.

Which schools are responding best to the loan crisis and why?

In terms of school response, I would say MIT Sloan School of Management is leading the charge here, with their School/Credit Union solution. I think it's too soon to judge, however, as I believe most of the programs will come out with some type of support for students.

We're writing a five-part series about getting ready for the MBA application process in the five years after completing an undergraduate degree. How much money should aspiring MBAs save in that span of time? How can they best save it?

We have never focused on this in an attempt to come up with a specific number. This is, of course, based on the fact that financing had never been an issue. For U.S. citizens, the total cost of attendance can be covered by federal loans if need be, so savings is less of an issue. If one did want to come up with a good rule of thumb, however, a good number would be the total cost of attendance minus Stafford loan availability. Students today can borrow about $20,000 [annually] in Stafford loans, so if the attendance cost was $30,000 each year, then saving at total of $20,000 would be a good start ($10,000 for each year). For international students, the number would be higher and could approach the total cost of attendance if their school did not offer loan or grant support.