[PaGaLGuY Explores] Life in the time of MBA fee hikes

[the_mask]

Along with IIM Ahmedabad, several other top Indian b-schools hiked their fee substantially this year. How are students in top Indian business schools financing their education now and how have student loans adapted to the new fee structures? PaGaLGuY.com explores seven b-schools that increased their fee by 30 percent or more.

Indian Institute of Management, Ahmedabad (IIM A)
Fee amount: Rs 11 lakh

Prof Ajay Pandey, the PGP Chairman explains, “There is a system of income linked fee waiver in place here. Students whose family incomes are less than Rs 6 lakh per year are eligible for this scheme. Those with annual income of less than Rs 1 lakh are granted full fee waiver and others are given graded assistance. This is a mechanical process in the sense that students eligible for this system are automatically given financial aid according to income levels. As of now about 60-70 percent of the students at IIM Ahmedabad have benefited from this scheme. We also have a system of need based scholarships in place in which after considering income linked waiver and education loans, further need for financial assistance is determined and aid is provided. Unlike income linked waiver, aid under this scheme is discretionary in nature,” explains. Banks also have favourable policies as regards loans related to IIM Ahmedabad. Some offer loans without requiring collateral or a co-signor.

IIM Bangalore
Fee: Rs 8 lakh

Prof RV Murthy, Chairperson, Financial Aid explains, “Students with a family income less than Rs 3 lakh per annum can apply for financial aid. Those with a family income exceeding this amount may also apply. In either case, there is an interview in which the need for financial aid is gauged. Depending on that, a fee waiver of one to three terms is given. Banks have also decided to tie up with our institute and have raised the collateral-free loan amount from Rs 4 lakh to Rs 10 lakh”. On being asked whether the total aid provided would also increase with the increase in fees, she says “Last year we provided about a crore in financial aid and we’ll probably be exceeding that amount in the coming year”.

IIM Calcutta

The school did not wish to comment on this issue. The web site claims that all admitted students with income less than Rs 2 lakh would be eligible for financial assistance.

IIM Kozhikode
Fee: Rs 6 lakh

“Students with annual income of less than Rs 2 lakh are eligible for need based scholarships. Depending on the annual income, fee waivers of certain amounts are given. A student loan committee helps to decide which bank (amongst the ones that the institute has tied up with) is offering the best agreement. This year, the offer was to take a loan of up to Rs 10 lakh with no co-signor or margin requirements at a fixed rate of ten and half percent or at a floating rate of two percent below the Prime Lending Rate (PLR). More than 90 percent of the batch here has taken an education loan”, comments a first year student.

Management Development Institute (MDI), Gurgaon
Fee: Rs 7.92 lakh

Dr BA Metri, Dean (Academic programmes) says, “There are no issues as far as loans are considered. Banks are coming forward to help students. In the case of a school with a good brand name the pay back period for loans is not very long. Apart from this, meritorious students can also apply for scholarships such as the OP Jindal Engineering and Management (OPJEM) scholarship and the Bharti Foundation Scholarship. Every year around two students at MDI are awarded these scholarships”.

Mudra Institute of Communications, Ahmedabad (MICA)
Fee: Rs 9 lakh

“MICA has a tie-up with SBI and compared to the current market rates we get to take loans at very reasonable rates. The interest rate is about 10.5 percent and this offer is very good considering the market rate of thirteen percent. Further, proof of collateral or a co-signor is not required. The college has an understanding with the bank and therefore conditions have been relaxed for us. To the best of my knowledge, out of a batch of 120, 70-80 students have taken a loan under this scheme for the course fees which is Rs 9 lakh for the two year programme,” explains Mihir Shah, a first year student at MICA.

TA Pai Management Institute, Manipal
Fee: Rs 6 lakh

“TAPMI has tied up with HDFC so that a loan amount Rs 750,000 can be taken without providing any collateral. This amount would cover the entire fees for the MBA course at TAPMI. One parent is required to be the co-borrower. Earlier 30-35 percent of students at TAPMI would take education loans. Now that number has grown to 60 percent of the student body here,” comments Dr V Rao, Director In Charge at TAPMI.

[the_egonomist]

Hey,

Are you sure that TAPMI fees are 6 lakhs?

What I recall is they hiked their fees to about 7.5 on account of the new campus.

Cheers.

[mufasa]

Originally Posted by the_mask

Apart from this, meritorious students can also apply for scholarships such as the OP Jindal Engineering and Management (OPJEM) scholarship and .......

The context gives a different meaning to the reality altogether... OPJEMS is NOT a need based scholarship. It is meant to promote leadership and excellence... the shortlisting is completely on academic criteria...
for 1st year : top 20 students based on overall CAT score have a written exam, following which 2 people have interviews with Jindal Management..one student is awarded the scholarship...
for 2nd year : same process, except that the initial shortlisting is top 20 by CGPA at the end of the 1st year....
OPJEMS is more in line with the Aditya Birla Scholarship... hope that helps!

[rmbt]

Great article!! Yes, the fees has really gone up last 2 years.

A small cost cutting measure: All the MBA entrance exams should have a similar pattern to GMAT or Jmet i.e. after you get your score, you can choose B-schools to apply.

[cinevalley]

imho, fees is not an issue for tier-1 school students. Their payback period will be short. The real issue is for the students of tier-2 & 3 schools, where the placements dont ensure a good ROI for the students.

Now, that brings us to the qn. why do people go to tier-3 or the lesser known schools? Is it proper to compare their ROI/paybackperiod with that of tier-1??

--Cine Valley
Snip

[chuck_gopal]

This is an issue I feel is slightly misunderstood by the media, who take pains to hype things up.

I'm restricting my discussion to good BSchools that you and I aim to get into, and not that shady one-room 'institute' operated by some local retired prof on the roof of the building opposite your bus stop

- BSchools require to charge a certain amount of fees from its students, who are pretty much their only source of revenue. Apart from the forms, of course. We all know that profs at BSchools are being paid peanuts, and the industry is wooing them with lakhs more than their current compensation.

- In the absence of full-time faculty, BSchools require visiting faculty from the industry. Now these buggers are being paid 10000 Rs an hour for consulting. Why on earth should they come down to a BSchool to teach for anything less than that? Beyond a point, all this 'enlightening-minds-of-the-youth' bull doesn't hold. They need to be compensated too.

- In addition to this, infrastructure needs to develop in BSchools. All these costs put together leads to higher fees. The fact that the best BSchool in the country have increased their fees to 11 lakhs shows the amount of money that even IIM Ahmedabad has to put in. And this is an ostensibly non-profit institute we're talking about.

- For long we've been under the delusion that an MBA can be had for 3 lakhs, because that was the standard IIM fees. Wrong. The government subsidises nearly 2 times that, per student.

- All BSchools worth their placement figures have tie-ups with banks. For example, MICA has a tie-up with SBI Ahmedabad which offers full loan to students at concessional rates. In some instances, like ours, collateral is not required.

- Loan repayment amounts start as low as 10000 per month. Now don't tell me that, after an MBA, you can't pay that off. Even if you have a starting salary of 6 lakhs an annum and like in Mumbai, you will pay it off easily. Yeah, it's a b*tch for the first couple of years, but after that, you'll end up earning pretty well, and the loan can be easily paid off.

- As brought up by cinevalley, Tier III BSchools are really not worth it. They may tell you that you can do an MBA for 2 lakhs, but then that will give you a direct idea of the quality. With 2 lakhs there is no way there can be good infrastructure or good faculty.

Originally Posted by rmbt

A small cost cutting measure: All the MBA entrance exams should have a similar pattern to GMAT or Jmet i.e. after you get your score, you can choose B-schools to apply.

This is a utopian dream as far as aspirants are concerned. On their parts, major private BSchools would like to sell as many forms to paranoid CAT takers before the actual results come up. Let's assume that the speculated cut off for a BSchool is 98 percentile. So if we had a GMAT-like, apply-for-BSchool-after-CAT-results scenario here, that's 5000 people in CAT 2007 numbers.

5000 * 1500 per form = 75 lakhs (who said MICAns can't do math! )

Whereas, suppose they close the deadline before the CAT results are out, so that more number of paranoid people can apply, this number would be atleast double. Think of how many people would apply to an MDI or an SPJain, and I think I would have proved my point here.

I know that's a pain, but hell, that's how business works! You have a BSchool where people are dying to get into, you cash in on it, instead of acting all benovelent. That's business, baby!

Okay, long enough post.

Cheerio,
Chuck

[Apurv]

Originally Posted by cinevalley

Now, that brings us to the qn. why do people go to tier-3 or the lesser known schools? Is it proper to compare their ROI/paybackperiod with that of tier-1??

Originally Posted by chuck_gopal

- As brought up by cinevalley, Tier III BSchools are really not worth it. They may tell you that you can do an MBA for 2 lakhs, but then that will give you a direct idea of the quality. With 2 lakhs there is no way there can be good infrastructure or good faculty.

Whether schools below tier-1 are worth it or not is a flawed question in my opinion. Most b-schools are worth it for the price they charge and the returns they give, so it depends on who you're talking about as a target audience. MBA is equally about upgradation from one's current situation than it is about some absolute standards of quality. For someone with a BA from a small college in small town MP, getting an MBA from RKDF Institute of Management Indore for Rs 2.5 lakhs and then getting that Rs 2 lakh sales job at ICICI is amazing RoI. Which is not the same kind of RoI for someone who's worked in a TCS or Infy in Bangalore and is already earning Rs 3 lakhs.

You should go through the MAT brochure which comes out 4 times a year. It features in total nearly 700 schools across the country in small towns. A small number of them are one-room operations but most are proper campuses with decent facilities for what they charge. They might not have the best profs as the tier-1 guys do, but then quality begets quality and it there is a differential across the board. Nothing personal, but people in IIM-A can argue with equal right that an MBA at MICA is not worth it for the same reasons that MICAns can argue the same for a slightly lower rung school and so on.

Moreover, until last year, most good 2nd rung private schools were charging 2-4 lakh. Now that they increase to Rs 8 lakh+, they turn back and question the ability to deliver good education at 2-4 lakhs. Are they admitting to having delivered inferior education when they were charging Rs 2-4 lakhs?

I don't think that the fee hike in b-schools is only because of the need to offer better faculty/facilities as chuck argues. A large part of this is also a general inflation in price on account of the economy doing well, schools being able to offer better salaries, etc. And the fee hikes will be up for question if the job scene turns out to be bad this winter as is being predicted.

The perspectives put in the two posts did not take the larger picture into consideration in my opinion and spoke of chauvnism. My 2p

[AlpeshChaudhari]

Great article.

I do agree with the article & chuck's argument.

The teachers in schools are paid very less. For better faculty you need more money. They are paid more in b-schools outside India. Many of them also try to opt for a job outside India for monetary reasons.

Secondly, I remember an article in TOI, when fees of IIMs were hiked, students pay only 1/3rd of the total expenses. 1/3 is incurred by Aluminis & remaining 1/3rd by government.

Of course inflation & well doing of economy has it's percentage in the incease. But looking at the percentage of hike of fees, other factors are more dominant, I guess.

[direct2manoj]

why we are seeing only fees ,we also have to see the packages which the students getting after passing from these B-schools.for example,IIM-A provide much greater facilites & international exposure ,so fee hike is justied.These B-schools also provide scholarships & loans so that best talent don'i wasted due to financial problems

[jain4u2004]

Pls note that MDI has increased the fee to 10,55,000 for the next session 2009-2011 and during the current session 2008-10 they have revised the fee from 8 lakh to Rs. 9 lakh