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Loans and life after MBA worry students and b-schools
With b-schools across the country organising convocation ceremonies without recording 100 percent placements, graduating students are faced with loan repayment issues and the prospects of a life that they did not envisage when they stepped into business school.
Amongst Indian b-schools, the Indian School of Business (ISB), Hyderbad is the most noted institute yet to successfully place 100 percent of the graduating class in which students took loans of upto Rs 19 lakhs. Management Development Institute (MDI), Gurgaon and Institute of Management Technology (IMT), Ghaziabad are other prominent b-schools which are yet to complete campus placements and required a total two year investment in excess of Rs 5 lakh from students graduating in 2009. Further, the economic slowdown has resulted in significant reductions in salary levels with all institutes so far to have released final salary data recording a 20 percent minimum drop in average salary.
The drop in average salary has a significant impact on return on investment considerations for b-school students. Two year expenses for students who graduated from IMT Ghaziabad in 2007 and 2008 was approximately Rs 4.3 lakhs. It is worth noting that the average domestic salary secured by IMT graduates in 2007 was Rs 9.5 lakh and in 2008 was Rs 8.67 lakhs while a 2009 graduating student from IMT, Ghaziabad says that the salaries secured by the majority of those placed so far are in the range of Rs 5 – 6 lakhs. The total fee for the two year fulltime program IMT, Ghaziabad for students graduating in 2009 was Rs 5 lakhs approximately.
MBAs who graduated in 2007 and 2008 from Symbiosis Center of Human Resources and Development (SCMHRD), Pune also enjoyed a similar return on investment with students securing an average domestic salary of Rs 8.4 lakhs and Rs 10.32 lakhs respectively and an education loan for the two year course amounting to approximately Rs 4 lakhs. The total expenses for the two year course at SCMHRD, Pune for students graduating in 2009 amounted to Rs 7 lakhs. At the institute, 16 students out of a batch of 192 remain to be placed.
The total fee for graduating students at Mudra Institute of Communications, Ahmedabad (MICA) was Rs 8 lakhs while the average salary recorded in this year’s recruitments is in the range of Rs 6.5 lakhs. 2008 MICA graduates secured an average salary of Rs 8.02 lakhs while the total fee for this batch of students was Rs 6.7 lakhs. Students from MICA who graduated in 2007 paid just over Rs 6 lakh for the 2005-07 program and secured an average annual salary of Rs 7.25 lakh.
Typically, banks allow students to repay loans over a maximum period of five – seven years and a loan amount of Rs 6 lakhs paid over seven years would require a Equated Monthly Installments (EMIs) of Rs 10,000 approximately while repayment of the same sum over four years would involve EMIs of Rs 15,000.
Faculty across b-schools is concerned about issues which the MBA batches of 2009 may face. “Banks are considering restructuring loans and even in that case I feel that MBAs will have to sacrifice some amount of quality of life. Earlier students could buy a house or a car within two-three years of work life. Graduating MBAs this year will have to tighten their belts at some level and cut down on discretionary expenses such as a car and an owned home,” says Subir Verma, Placements Chairperson at Management Development Institute (MDI), Gurgaon.
“Students in these times will find it difficult to pay EMIs and the situation is very difficult for those students who are currently placed. It is of course horrible for those who are still to secure a job. Even if loans are restructured, students will still be required to pay interest. It is possible that non-placed students may have to take another loan in order to repay the educational loan,” predicts a high placed official at SDM Institute for Management Development (SDMIMD), Mysore.
While MBAs of the batch of 2009 enrolled in b-school at a time when fee levels were not as high as they are currently, students at private b-schools such as MICA, Ahmedabad and Alliance Business Academy (Alliance), Bangalore still find themselves faced with the prospects of a loan exceeding Rs 6 lakh. Banks have recently asserted that they sympathise with students in these economic times and will restructure loans on a case by case basis if approached by loan applicants.
However, it is clear that job woes have some MBA students worried and concerned parents are willing to aid their wards. “I’m not placed currently and I think that I will have to take my father’s help in order to repay this loan. My father advised me to first get placed and then think of issues related to loan restructuring. He has assured me that he would help repay the loan if required but that is not an assurance I really want. I am very anxious about how I will pay the loan and will probably have to remain based in Bangalore as it won't be possible for me to secure a job in Delhi which is my hometown and the cost of living here is lower than that in other cities,” says Heena Bajaj, a second year student at Alliance, Bangalore.
Shruti Shankar Misra, a MICA graduate says frankly, “My story is slightly different as I got married recently. EMIs are not an issue for me as I stay in a double income household. However, it would have been a big problem if I was living off my own. I don’t know how such people are managing. Quite a few of my batchmates are struggling as they can’t be based in their hometowns, have to stay in a working people’s hostel or share a room with others. What is the point of higher education if such compromises have to be made?” Another MICA graduate, Aparna Moossaddee explained that her parents paid the interest for the entire loan amount of Rs 10 lakh of their own accord.
Other soon to be MBA graduates who are yet to secure a job displayed a positive outlook. A second year student of a prominent operations management institute who opted for a loan of Rs 3.75 lakh for his MBA studies says, “I cannot think right now about the salary I would be getting. It will definitely not be possible to save in the initial period. My parents are always there to help me but I will not let them help me repay the educational loan. In the first few months, life will be tough. However, I’m confident that I will secure a job within the next three months and will not need to approach the bank to restructure my loan.” Another second year student at TA Pai Management Institute (TAPMI), Manipal said that he would plan his loan repayment only after securing a job which he was hopeful of obtaining in the near future.
MBAs who have secured jobs through campus placement are guardedly optimistic about loan repayment issues. “Students who are placed should not find it too difficult to pay the monthly loan installments. Most graduates would begin repayment of loans in early or mid 2010 and by then the situation would be such that the training period would be over and employment would be confirmed. Companies which came for campus recruitment have promised that salaries would be significantly higher by that time. Of course, they haven’t specified actual figures as far as this is concerned,” comments Mansi Bagga, an MBA graduating from IMT, Ghaziabad.
Amongst Indian b-schools, the Indian School of Business (ISB), Hyderbad is the most noted institute yet to successfully place 100 percent of the graduating class in which students took loans of upto Rs 19 lakhs. Management Development Institute (MDI), Gurgaon and Institute of Management Technology (IMT), Ghaziabad are other prominent b-schools which are yet to complete campus placements and required a total two year investment in excess of Rs 5 lakh from students graduating in 2009. Further, the economic slowdown has resulted in significant reductions in salary levels with all institutes so far to have released final salary data recording a 20 percent minimum drop in average salary.
The drop in average salary has a significant impact on return on investment considerations for b-school students. Two year expenses for students who graduated from IMT Ghaziabad in 2007 and 2008 was approximately Rs 4.3 lakhs. It is worth noting that the average domestic salary secured by IMT graduates in 2007 was Rs 9.5 lakh and in 2008 was Rs 8.67 lakhs while a 2009 graduating student from IMT, Ghaziabad says that the salaries secured by the majority of those placed so far are in the range of Rs 5 – 6 lakhs. The total fee for the two year fulltime program IMT, Ghaziabad for students graduating in 2009 was Rs 5 lakhs approximately.
MBAs who graduated in 2007 and 2008 from Symbiosis Center of Human Resources and Development (SCMHRD), Pune also enjoyed a similar return on investment with students securing an average domestic salary of Rs 8.4 lakhs and Rs 10.32 lakhs respectively and an education loan for the two year course amounting to approximately Rs 4 lakhs. The total expenses for the two year course at SCMHRD, Pune for students graduating in 2009 amounted to Rs 7 lakhs. At the institute, 16 students out of a batch of 192 remain to be placed.
The total fee for graduating students at Mudra Institute of Communications, Ahmedabad (MICA) was Rs 8 lakhs while the average salary recorded in this year’s recruitments is in the range of Rs 6.5 lakhs. 2008 MICA graduates secured an average salary of Rs 8.02 lakhs while the total fee for this batch of students was Rs 6.7 lakhs. Students from MICA who graduated in 2007 paid just over Rs 6 lakh for the 2005-07 program and secured an average annual salary of Rs 7.25 lakh.
Typically, banks allow students to repay loans over a maximum period of five – seven years and a loan amount of Rs 6 lakhs paid over seven years would require a Equated Monthly Installments (EMIs) of Rs 10,000 approximately while repayment of the same sum over four years would involve EMIs of Rs 15,000.
Faculty across b-schools is concerned about issues which the MBA batches of 2009 may face. “Banks are considering restructuring loans and even in that case I feel that MBAs will have to sacrifice some amount of quality of life. Earlier students could buy a house or a car within two-three years of work life. Graduating MBAs this year will have to tighten their belts at some level and cut down on discretionary expenses such as a car and an owned home,” says Subir Verma, Placements Chairperson at Management Development Institute (MDI), Gurgaon.
“Students in these times will find it difficult to pay EMIs and the situation is very difficult for those students who are currently placed. It is of course horrible for those who are still to secure a job. Even if loans are restructured, students will still be required to pay interest. It is possible that non-placed students may have to take another loan in order to repay the educational loan,” predicts a high placed official at SDM Institute for Management Development (SDMIMD), Mysore.
While MBAs of the batch of 2009 enrolled in b-school at a time when fee levels were not as high as they are currently, students at private b-schools such as MICA, Ahmedabad and Alliance Business Academy (Alliance), Bangalore still find themselves faced with the prospects of a loan exceeding Rs 6 lakh. Banks have recently asserted that they sympathise with students in these economic times and will restructure loans on a case by case basis if approached by loan applicants.
However, it is clear that job woes have some MBA students worried and concerned parents are willing to aid their wards. “I’m not placed currently and I think that I will have to take my father’s help in order to repay this loan. My father advised me to first get placed and then think of issues related to loan restructuring. He has assured me that he would help repay the loan if required but that is not an assurance I really want. I am very anxious about how I will pay the loan and will probably have to remain based in Bangalore as it won't be possible for me to secure a job in Delhi which is my hometown and the cost of living here is lower than that in other cities,” says Heena Bajaj, a second year student at Alliance, Bangalore.
Shruti Shankar Misra, a MICA graduate says frankly, “My story is slightly different as I got married recently. EMIs are not an issue for me as I stay in a double income household. However, it would have been a big problem if I was living off my own. I don’t know how such people are managing. Quite a few of my batchmates are struggling as they can’t be based in their hometowns, have to stay in a working people’s hostel or share a room with others. What is the point of higher education if such compromises have to be made?” Another MICA graduate, Aparna Moossaddee explained that her parents paid the interest for the entire loan amount of Rs 10 lakh of their own accord.
Other soon to be MBA graduates who are yet to secure a job displayed a positive outlook. A second year student of a prominent operations management institute who opted for a loan of Rs 3.75 lakh for his MBA studies says, “I cannot think right now about the salary I would be getting. It will definitely not be possible to save in the initial period. My parents are always there to help me but I will not let them help me repay the educational loan. In the first few months, life will be tough. However, I’m confident that I will secure a job within the next three months and will not need to approach the bank to restructure my loan.” Another second year student at TA Pai Management Institute (TAPMI), Manipal said that he would plan his loan repayment only after securing a job which he was hopeful of obtaining in the near future.
MBAs who have secured jobs through campus placement are guardedly optimistic about loan repayment issues. “Students who are placed should not find it too difficult to pay the monthly loan installments. Most graduates would begin repayment of loans in early or mid 2010 and by then the situation would be such that the training period would be over and employment would be confirmed. Companies which came for campus recruitment have promised that salaries would be significantly higher by that time. Of course, they haven’t specified actual figures as far as this is concerned,” comments Mansi Bagga, an MBA graduating from IMT, Ghaziabad.
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