Chapter Twelve
Financial Realities
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Tuition Cost Estimates of Complete Programs as of
2008/09 Academic Year
We
have come to that familiar and dreaded place where the financial
realities of getting an education bear down upon our bank accounts. We
come to the stark realization that we must get creative and figure out
how to meet those tuition payment deadlines. And then those familiar
words stare us in the face: financial aid. But we haven’t got a clue
where to start. Plus, as an adult learner, your options are somewhat
limited, especially when compared to the younger traditional-aged
students who have many more opportunities for a wider variety of
financial-aid packages than adult learners.
Before we start to look at what kind of financial aid may or may not be
available to you, we need to take a look at what this online MBA pursuit
is going to actually cost.
Chapter One briefly explained how tuition costs can vary greatly, and
showed some example costs at several institutions. The table in the
right column features 11 examples of tuition costs of online MBA
programs. It does not include any additional incidental fees that may
come into play, such as application fees, technology fees, course
materials and transportation and accommodation expenses for possible
residencies.
It
is provided only to give you a very general sense about the cost of
earning an online MBA. For more specific information, check out each
program’s costs by visiting the website of each program. If you cannot
ascertain the actual costs from the program’s website, call the program
and ask for an enrollment counselor who can provide that information.
Tuition Cost Estimates of Complete Programs as of 2008/09 Academic Year
School
Cost
Arizona State University
$42,000
Baker University
$16,170
Capella University
$30,000
Portland State University
$35,000
Regis University
$20,520
Syracuse University
$57,000
UMass Amherst
$24,790
University of Colorado
at Colorado Springs
$24,660
University of Maryland
University College
$29,140
University of Nebraska,
Lincoln
$17,280
University of Florida
$41,000
Most online programs charge the same tuition for both state residents
and nonresidents. Some schools have in-state and out-of-state resident
tuition rates for their online students. Also be aware that these prices
are subject to change. Check with an institution’s registration and/or
financial-aid offices before coming to any solid conclusions about cost.
To
cut right to the chase, as a graduate student, if you can’t pay for your
education out of your own pocket, you are pretty much confined to the
following four financial-aid options (unless you are in the military):
• A federal Stafford
Loan, which can be either subsidized or unsubsidized
• A private
loan, usually referred to as an alternative loan
• A scholarship
(typically very limited availability, but they do exist)
• Employer
reimbursement (getting more difficult as employers, in general, seem to
be cutting back)
If
you do attempt to obtain any sort of financial aid, make sure to time
your application for such to correspond appropriately with your
admissions application. For example, the Stafford Loan acceptance
process typically takes about 30 days. However, it can take as long as
90 days (depending on the efficiency of your intended school’s
admissions process and whether all forms are completed correctly). In
contrast, private loans are generally processed more quickly (often in
five or fewer days). The bottom line is to make sure that all of your
financial-aid paperwork is processed well enough in advance of when
classes begin.
If
you need to take out a loan to pay for your online MBA, consider
applying for a subsidized or unsubsidized federal Stafford Loan. A
subsidized federal Stafford Loan is awarded to a student based on
financial need, and it includes the provision of not being charged any
interest while you are attending school and you continue to meet the
basic eligibility requirements of the loan. An unsubsidized federal
Stafford Loan is one that is not awarded to a student on the basis of
financial need, and it includes being charged interest from the time the
loan is granted. Stafford Loans are low-interest loans on which you can
defer repayment until six months after you graduate. These loans are the
biggest source of financial aid for all graduate students.
To
qualify for a Stafford Loan, you must complete the federal government’s
Free Application for Federal Student Aid (FAFSA), form, along with any
other forms the institution you are applying to may require.
The
Free Application for Federal Student Aid (FAFSA) is a form in which
students provide their income, asset, and tax information to be
considered for federally funded financial aid, including
government-backed subsidized and unsubsidized Stafford Loans for
graduate-level students.
Online MBA students can accumulate up to $138,500 in Stafford Loan debt
over the duration of their higher education, which includes any Stafford
Loans one may have received as an undergraduate. Only $65,000 of this
amount may be in subsidized loans.
According to Ellen Blackmun, director of technology initiatives and
distance learning at the Washington, D.C.-based National Association of
Student Financial Aid Administrators, many adult students think that
they can’t qualify for Stafford Loans when, in fact, anyone can qualify
for an unsubsidized Stafford Loan as long as they meet some relatively
minimum eligibility requirements.
With unsubsidized loans, you are responsible for interest as soon as the
loan is granted. You can pay that interest as it accrues, or you can
defer that interest until after graduation. Deferred interest is
capitalized, which means that it’s added to the full balance of the loan
you will ultimately be responsible for after you graduate.
You
may qualify for a subsidized Stafford Loan if you demonstrate financial
need, which is determined based on the information you submit on your
FAFSA form.
The
one requirement that prevents some students from applying for these
loans is that you have to be at least a half-time student, which is
basically determined according to the way a school offers its courses.
Generally, a half-time graduate student is someone who takes at least
three graduate-level credits per term. For example, if you were enrolled
in the University of Phoenix online MBA program, you could take one
3-credit, 6-week course at a time in succession, but they have to be no
more than 29 days apart from each other in order for you to be
considered half-time. If you were in the Regis University online MBA
program, you would have to take at least one 3-credit, 8-week course
over the duration of a semester, which at Regis lasts about 16 weeks.
Each school determines half-time status differently. The bottom line is
that to qualify for a Stafford Loan, you must be committed to staying
the course at least part-time without skipping semesters. Otherwise, you
may have to immediately start paying back your loan. If you can’t devote
the time to earn your MBA under the half-time guidelines, you can always
investigate private loan possibilities, which typically have no
mandatory continuous attendance criteria.
For
more information about Stafford Loans, visit
www.staffordloan.com/
Plain and simple, if you want to qualify for a Stafford Loan, you must
fill out the FAFSA. Doing so is not as onerous a process as many adult
learners, who have not gone to school in years, may believe it to be. If
you are like me, you may have visions from your days-gone-past
undergraduate years of physically visiting a financial-aid office and
waiting in a long line for some hapless bureaucrat to provide you with
the right paperwork and a list of mundane instructions. Today that’s no
longer the case. “The financial-aid process is not so much a people
process anymore,” said Blackmum. “It is a processing of applications
online; and if you are planning to go to school online, I think it can
be assumed that you have some capabilities on the computer.”
So,
dear reader, your job, if you so choose to take it on, will be to
eventually visit the
FAFSA website and begin the
application process for getting a Stafford Loan.
Filling out the FAFSA online is the quickest way to submit this
all-important document to the U.S. Department of Education’s Central
Processing System (CPS). The online process is also sophisticated enough
to immediately identify potential errors and thus allow you to make the
necessary corrections as you are filling out the form.
Before you actually begin filling out this form, however, you need to
get a Personal Identification Number (PIN) that becomes your electronic
signature. You can acquire your PIN by visiting
www.pin.ed.gov/PINWebApp/pinindex.jsp
and filling out an online form in which you supply your name, Social
Security number, date of birth, mailing address, and e-mail address.
After you submit this form, it takes approximately three business days
to receive an e-mail notification with instructions on how to retrieve
it electronically, or 7 to 10 days to receive it in the mail via the
U.S. Postal Service. Your PIN will also give you access to return to the
FAFSA website to check on the status of your application.
If
you want to practice filling out the FAFSA form, or have a guide to
filling it out before or during the real deal online, you can download a
pre-application worksheet in PDF format at
www.fafsa.ed.gov/before012.htm.
The worksheet is made up of all the application questions in the same
order as you would see them on the web.
According to the U.S. Department of Education, the most common errors on
the FAFSA happen in the sections related to income, and they strongly
advise that you have your past year’s income tax return on hand when
applying. Also remember to save all the records you use to fill out the
form. You might need them if you are selected for a process called
verification; this process requires you to submit copies of your tax
returns and/or wage-earning statements to the school.
First of all, if four weeks pass without hearing anything after you
submit your FAFSA, contact the Federal Student Aid Information Center at
1-800-433-3243. Within four weeks, you should have received a Student
Aid Report (SAR), which lists all the information your reported on the
FAFSA. You are required to review this information to ensure it is
correct. Your school will use your SAR as the basis for determining your
eligibility and will process your Stafford Loan for the total loan
amount that you are offered and notify you with a financial-aid award
notice.
In
the final stage of your loan, the school will generate a Master
Promissory Note (MPN) for you to sign, either electronically with your
PIN or by hand via snail mail. The funds will be disbursed through the
school or the lender and will first go toward your tuition payments,
with any possible funds remaining being sent directly to you by check
or, if you so desire and have completed the necessary paperwork, by an
electronic funds transfer.
Be
aware that every institution handles the basic processing of Stafford
Loans differently through their various administrative systems. So your
safest modus operandi is to contact the school’s financial-aid office
and have them walk you through the financial-aid process to ensure that
you take the appropriate steps.
You
should consider taking out a private loan only if you do not plan on
being an official half-time online MBA student and/or you need to
supplement a Stafford Loan. Private loans have higher interest rates and
come in a wide variety of packages. They are available through the
competitive lender marketplace, with many lenders offering benefits to
students, such as low up-front fees and a variety of repayment
incentives. So you’ll have to shop around. Generally, the financial-aid
office at your school will offer a list of lenders that you can
consider, but they will not recommend any one lender over another.
Scholarships
Generally speaking, online MBA programs do not offer a whole lot of
scholarships, and if they do, they usually award relatively small
amounts. This does not mean, however, that you should disregard this
possibility.
Bottom line with scholarships is that you have to ask the financial-aid
office what might be available, because, typically, they don’t promote
these things unless asked. In short, you have to take it upon yourself
to find whatever kind of financial assistance might be available to you.
“Adult students have to be more proactive,” said Blackmum. “They don’t
get the handholding (like traditional-aged students). They don’t get the
financial-aid nights that are held at high schools. They don’t get any
of this because it is assumed that if they are adults going back to
school, they can do this on their own, which isn’t always the case.”
“Being more proactive” also applies to the online MBA student who wants
to seek reimbursement from his or her employer. Employer reimbursement
packages are starting to come of age in the world of online MBA programs
as more employers learn that the online learning environment does,
indeed, have its benefits. For one, online students don’t have to take
days off or leave early from their jobs to physically attend classes.
Even in the flexible Executive MBA environment, spending Saturdays
and/or early evenings on campus can often conflict with a busy
professional’s job responsibilities.
Nonetheless, prospective online MBA students seeking employer
reimbursement must often (even today) prove to their bosses and human
resources managers that the online environment is, indeed, a valid way
to earn an MBA. A lot of employers are still in the dark ages about
online degree programs, especially older executives who may not be so
Internet savvy or cognizant of how education technology is changing the
way people teach and learn.
In
contrast, much of corporate America has adopted and created very
sophisticated online learning environments for training employees and
providing numerous professional-development experiences. In the
corporate world, this is commonly referred to as e-learning. These
Internet-based training and professional-development environments are
not only effective from a teaching and learning point of view, they are
also saving companies millions of dollars in (now unnecessary) travel
costs. For example, because of e-learning, employees working for the
same company, but located in different regions, no longer have to
convene as frequently in the same physical space to learn and
collaborate with each other.
Remember, therefore, employer reimbursement for an online MBA program
will depend on where you work and what kind of perceptions of online MBA
education executives within your company have.
Convincing Your Boss to Fork
Up
If
you find yourself having to explain what online education is all about
to convince your boss or human resources executive to help pay your
tuition costs, address the specifics of the program’s curriculum. The
delivery model is not as important as the content of the courses. Most
online curriculums have everything, if not more than, any traditional
MBA program.
If
your own initiative fails to convince your boss to provide
reimbursement, you can always ask the school to go to bat for you. For
example, Paula O’Callaghan, Syracuse University’s former iMBA program
director, explained that for students seeking employer reimbursement she
would prepare a “briefing packet,” which typically addressed issues
about program quality, residency requirements, financial considerations,
and how long the program will take to complete. “In most cases, the
briefing packets have been successful.”
Tax Credits and Tax Deductions
As
a card-carrying online MBA student you can take advantage of both tax
credits and/or tax deductions, depending on your situation. A tax credit
allows you to reduce the dollar amount directly off the tax you may owe.
A tax credit is more valuable than a tax deduction, which is an amount
that you can deduct from your taxable income.
Like all IRS rules and regulations, deciphering what does and does not
qualify for a credit or deduction can be an awfully confusing
undertaking. Following is a brief overview that may help put things in
perspective, but you should consult with a tax counselor or the IRS
itself for more information because some of this information may have
changed or gone out of date, depending on when you are reading this.
You
can qualify for an Internal Revenue Service Lifetime Learning Credit,
which is determined by tabulating what you pay for “qualified tuition
and related expenses” and the amount of your modified adjusted gross
income (AGI).
Expenses that qualify for a Lifetime Learning Credit are tuition and
fees paid directly to the school, including expenses for books,
supplies, and equipment. You are allowed a Lifetime Learning Credit of
20 percent of the first $10,000 you paid for qualified tuition and
related expenses. Thus, the maximum credit a taxpayer may claim for a
taxable year is $2,000.
The
IRS has three categories concerning tax deductions for education
expenses:
• Tuition and
fee deduction. You can only claim this if you do not claim an education
tax credit. Qualifying expenses must not have been paid with any other
tax-free benefit. A maximum deduction of $4,000 if taxpayer’s income
does not exceed $65,000 ($130,000 on a joint return); $2,000 maximum if
income is between $65,000 and $80,000 (between $130,000 and $160,000,
joint return). You cannot claim this deduction if your filing status is
married filing separately or if another person can claim an exemption
for you as a dependent on his or her tax return.
• Deduction for
work-related education. You can claim costs of education required to
keep your job or to maintain or improve skills needed in your present
work, but not if the education is needed to meet the minimum
requirements of your position or is part of a program to qualify you for
a new trade or business. If you are self-employed, you can deduct your
expenses for qualifying work-related education directly from your
self-employment income. This reduces the amount of your income subject
to both income tax and self-employment tax.
• Student-loan
interest deduction. You can claim a maximum deduction of $2,500 for
interest paid on qualified student loans. Phases out as income rises
from $50,000 to $65,000 ($100,000 to $130,000, joint return).
About
Employer-Provided Educational Assistance
It’s also important to note that you cannot use education benefits under
$5,250 paid for by your employer as the basis for any other deduction or
credit, including the Lifetime Learning Credit.
Employer-paid education benefits that fall under the category of tax
deductions include tuition, fees and the cost of books, supplies and
equipment necessary for your education. However, meals; lodging;
transportation; tools or supplies (other than textbooks) that you keep
after you complete a course; and courses involving sports, games, or
hobbies that are related to your work or are not course requirements, do
not fall under the category of employer-paid benefits and are not tax
deductible.
As
noted by the IRS, if you receive educational benefits from your employer
under an educational assistance program, you can exclude up to $5,250 of
those benefits each year. This means your employer should not include
the benefits with your wages, tips, and other compensation shown in box
1 of your Form W-2. This also means that you do not have to include the
benefits on your income tax return. Any amount over $5,250 must be
included on your Form W-2.
For
additional information on both education tax credits and tax deductions,
refer to the Internal Revenue Service’s Publication 970, Tax Benefits
for Higher Education, located online at
www.irs.gov/publications/p970/index.html.
If
you happen to have multiple federal student loans that you have
accumulated over the years, you can be eligible for a consolidation
loan. Consolidation loans combine these federal student loans into a
single loan with a lower monthly payment. Consolidation loans also offer
flexible payment plans to meet the different needs of borrowers and can
extend repayment deferment options.
Keep in mind, however, that consolidation loans increase the total cost
of repaying loans, because you’ll agree to a longer repayment period and
consequently more interest.
For
more information about consolidation loans, visit
http://loanconsolidation.ed.gov.
Other Financial Considerations
Finally, rather than go into all kinds of budgeting strategies to pay
for your MBA, I will say that the flexibility of an online education has
some financial benefits that can perhaps justify your expenses.
First, if you are self-directed, disciplined, and organized, you should
be able to accomplish all your coursework at times that are outside of
your mainstream job and thus remain highly productive. Upon completion,
if you work at a fair and just place, you may obtain a higher-paying
position.
Second, many traditional MBA students take off a year or two from their
jobs, without salary. You don’t have to. While earning your MBA online,
you can immediately apply what you learn to your work. This, in turn,
could obviously turn into a quicker financial gain.
Third, if you are in a fully online program with no residency requirements, you have no transportation costs (including those pesky parking fees and fines).
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