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Our guest on February 14, 2001, was Patricia McWade, dean of student financial services at Georgetown University's McDonough School of Business. (No. 26 on BusinessWeek's 2000 Top 30 B-School list). McWade currently serves as vice-chairman of the board of directors of American Student Assistance, a student loan guarantee agency in Boston, and is a member of the Consortium on the Financing of Higher Education (COFHE) Financing Options Committee. She is the author of Financing Graduate School, and has 29 years of experience in the financial-aid arena. McWade was interviewed by Lucia Quartararo for BusinessWeek Online. Here's an edited transcript of their conversation:
Q: Pat, tuition for the 2000-01 school year was $26,720 and is on the rise. Do you have an estimated total cost of attending McDonough next year?
A: The total budget figure [for this year] is $42,650. That includes tuition, fees, loan fees, health insurance, books, travel, room and board, and other personal expenses. For next year, the increase will be in the 4% to 5% range. [The total budget for next year will be] about $45,000.
Q: Is the continually rising cost of tuition something that concerns you, and do you think tuition costs will become a deterrent for prospective MBAs?
A: Our tuition increases have been very modest over the last five years. [The price of the MBA] is comparable to other highly regarded MBA programs, and there is some cache to traveling with that pack. We have done all we can to keep the annual tuition increases down. The 1980s were a different story -- they are why we got to where we are today. In the 1980s, when inflation was at 15% to 18%, we were not increasing the tuition at the same rate. Now that inflation is so low, we are increasing [tuition at a rate] higher than inflation, [but we are] still not making up for the days when we didn't increase [tuition] as much as inflation.
Q: The average loan indebtedness at graduation for the class of 2000 was $51,200. How do McDonough grads handle being that far in the red?
A: The weighted average [of indebtedness] for first-year students was $29,000 among the students who borrow. Students who borrow for an MBA are usually borrowing [a large percentage of the] full cost. Many are thinking that they are going to concentrate on their studies, get the best credentials they can, and get a job in the stock market that will allow them to pay [loans] off. The average starting salary without bonuses is between $80,000 and $83,000. We do a lot of debt counseling in how to manage your debt and how to borrow as little as possible, but our MBA students say, "Yep, yep, we know." So we take note of the indebtedness, but it is not alarming to us.
Q: What merit-based awards does McDonough offer its MBAs to help students defray the cost of tuition and living expenses?
A: The MBA Program administers its own fellowships and stipends and they base their offers on academic merit, work experience, and demonstrated leadership potential, with diversity and other factors taken into consideration. They offer some partial- and some full-tuition merit-based awards. In addition, some students get paid graduate assistantships. Candidates should apply by Feb. 1 to receive the strongest consideration for these merit-based awards. [Students hear about merit-based aid] when they are offered admission. Our Web site helps students figure out the processes.
Q: What's a typical merit-award amount, and how many students can expect to reap the benefits of such sought-after financing?
A: The total amount in MBA fellowships and stipends is close to $1.6 million. About 25% of a given class would get some kind of funding. Awards range up to full tuition, and some have a stipend of $6,600 a year for those who would do a graduate assistantship. [The smallest awards are] about $4,000 toward tuition.
Q: You mentioned that graduate assistantships are sometimes part of a merit award. Do first-year students find the extra work overbearing?
A: The students we offer graduate assistantships to [are usually able] to handle the workload. They work with faculty on their research projects, which are related to their course of study. The selection committee decides whom they want to offer assistantships to, and then if a particular student turns it down, they can offer it to someone else.
Q: What are the options open to prospective MBAs looking to fund their McDonough degree with need-based assistance?
A: We administer need-based aid through the financial-aid office. [Applicants] should file the Free Application for Federal Student Aid [FAFSA] after Jan. 1. We encourage [applicants] to file sometime in February or March. We will notify them in April or May [about] their eligibility for federal aid. Over the summer, they can process the papers for their student loans.
There are several loan programs available to our MBA students. The biggest one of course, is the Federal Entitlement Program, or the Stafford loan. U.S. citizens or permanent residents can get up to $18,500 a year -- $8,500 of that is subsidized, so that the student pays no interest while in school. They can borrow the other $10,000 if they qualify, but they would have to pay the interest that accrues.
Q: Financing a graduate education can be tricky for non-U.S. students since they don't qualify for federal funding. Does McDonough have a loan program geared toward its international student constituency?
A: [International students] can apply for merit-based aid just like everyone else. If they want to apply for a loan, we do have an arrangement with a private lender to allow international students to borrow without a co-signer. We have a partnership program with a company called First Marblehead, which provides us with Opportunity Loans for international students.
Q: You recommend that foreign students check first with their government for sponsorship opportunities. Can you recommend any resources as jumping-off points?
A: We know for a fact that at the graduate level, there is just not that much [funding] out there, but we recommend our Web site as a resource, and we also recommend Peterson's Grants for Graduate Students which lists over 700 grants and fellowships exclusively for graduate students. Sometimes international students find fellowship opportunities through these guides, but at times it can be [like looking for] a needle in a haystack.
Q: Does your financial aid office focus solely on McDonough, or is it university-wide?
A: It is university-wide. We do have an MBA liaison with the business school, and students get to see financial-aid counselors. But for overall programmatic issues related to the business school, we have one liaison.
Q: If an incoming MBA were to have a question and require some hands-on help with a financial issue, what should he or she do?
A: We have a client-services department that includes any correspondence that comes in either on the phone, in a letter, or via e-mail, so students can get answers to their general questions. Often, the same question comes up time and again, so we have a Frequently Asked Questions sheet.
As [prospective students] are thinking about applying for an MBA and applying for financial aid, they may bring some of their undergraduate experience with them about how daunting the process is. Usually, if they didn't have a good experience with an undergraduate aid office, they assume that they are going to have to do battle with us. We work hard to disarm them of that notion. We are basically here for the students. We understand that they are grad students, and we don't ask for their parent's information, because the Georgetown aid is merit-based and the federal aid is need-based and the [government doesn't] require graduate students' parents' information.
Q: Is there university housing available to MBA students?
A: [There's] not much for the grad students. We are building a new dorm, and once that is built, we may have some space that we can offer to grad students. But [grad students] may not want to live there. It's hard to know how many people will actually opt for [university housing].
Q: What kind of benefits can spouses of partners of McDonough students look for when they arrive on campus?
A: If the spouse is looking for employment, Georgetown has all kinds of jobs. Spouses can pretty readily find a job on campus. If there are children, Georgetown has a day-care center available for students and their families.
Q: What kind of effort is McDonough making in order to grow the coffers of fellowship aid?
A: The university is in a capital campaign right now, and we are trying very hard to raise money for financial aid. Graduate financial aid is especially challenging, but we do have some very generous donors who have expressed interest in the MBA program. And that will help add to that $1.6 million fellowship budget in the future.
Q: Could you wrap up by giving some final words of financial advice for aspiring B-school students?
A: Prepare yourself. Make sure that when you come to campus you have at least one month's rent. It is amazing to us how many people show up with empty pockets.... [They] aren't even financially prepared to pay a security deposit and are looking for their student loan immediately. If incoming students apply for aid during the summer, and they use the online application processes, we can pretty much get their money to them a few days after they show up.