A Financial Lifeline for Foreign MBA Students

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The new loan program isn't for everybody. Several schools, including Harvard Business School (Harvard Full-Time MBA Profile), the University of Pennsylvania's Wharton School (Wharton Full-Time MBA Profile), the Stanford University Graduate School of Business (Stanford Full-Time MBA Profile), and the MIT Sloan School of Management (Sloan Full-Time MBA Profile), announced deals with credit unions to provide no-co-signer loans for international students last spring.

Simon School's Experience

But for many others, the new program is a lifeline. One institution participating in the ALPS program is Rochester's Simon School, which signed up in July. About half the school's student body is international, so demand for a loan program of this sort was huge, especially after the credit crunch, says Greg MacDonald, Simon's admission director. So far, about one-third of the school's international students have signed up for it, and the school expects even more students to sign up in 2010, MacDonald says.

"Our options for international students before this were fairly limited, and we didn't have any no-co-signer options available for students before we signed this," MacDonald says. "It was clearly necessary, and I'm afraid to think where we would be if we didn't have this product to offer students."

Other participating schools are reporting similar successes. At Northwestern, Deutsche Bank has purchased $67 million in student loans through the program. At Chicago Booth, more than 100 international students are now taking advantage of ALPS, Martinelli says. Meanwhile, the UCLA Anderson School was able to issue $3 million of loans to students through the ALPS program this year. As a result, 20 first-year and 20 second-year MBAs were able to fund their education, says Kevin McCardle, the senior associate dean of Anderson's MBA program.

"Providing loans for international students is key. We would be in serious trouble and we would not have the international students we have now if we did not have some method of providing credit to the students," McCardle says.

Not Much Paperwork

Roger Ivan Cordero-Mueses is one of the MBA students taking advantage of the ALPS program this year. He came here with his wife from the Dominican Republic in 2008 for business school and paid for his first year at Rochester's Simon School by asking his wife's sister, who lives in the U.S., to co-sign a loan for him. He was reluctant to ask her to do this again for his second year, so he was eager to sign up for Simon's new loan program for international students, which didn't require a co-signer.

"It was very easy to apply, and I didn't have to do much paperwork," he says. "I think without it, I would have had problems financing my second year of school here in the U.S. It has really helped me."

Dave Wilson, president and CEO of GMAC, has been keeping a careful eye on the program since he helped develop it last year. So far, the feedback from schools using the program has been positive, and he expects it will help them attract more international applicants this year. Meanwhile, he is working to promote the ALPS program among his member schools, he says.

"I'm hoping the loan program will continue to tempt schools and will continue to grow," Wilson says. "The program certainly has the financial strength in the lender to take the program up to a quarter of a billion dollars, and that starts to make a real difference. Once it becomes more broadly adapted, word will get out very quickly."

Damast is a reporter for BusinessWeek.com.

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