Paying the cost to be the boss: A range of loans can help students to pay high course fees

In a recent book about his experiences studying for an MBA at Harvard, journalist Philip Delves Broughton describes his surprise at the number of expensive cars in the student car park. He found out later that this was no mere extravagance. By buying the cars, the students had emptied their bank accounts enough to qualify for financial aid.

MBA students have often used ingenuity to pay their ?15,000 to ?30,000 fees. Now, in a rocky financial climate, they need it more than ever. Finding it particularly hard are students from the United States, where a number of student lenders have gone bust. Those lenders that remain have become pickier over who they allow to borrow money, and are demanding higher interest rates.

International students, who make up more than half the MBA student body, can also struggle to secure loans because banks are usually unwilling to lend to someone going overseas.

It was Cameron Stevens' difficulty in finding a loan for his MBA at Insead three years ago that inspired him to set up Prodigy, which made its first loans to students last year.

Stevens, a South African who had been working in Malaysia, found he was not eligible for loans from either country. He realised most of his class faced similar challenges.

Even when his fellow students had managed to secure loans, the sums they could raise were often inadequate because the loans were made on the basis of their current salary, which was especially tough for students from developing countries.

His idea was to assess risk on the basis of future earnings, based on profiles of past students, and to raise the money for the loans from alumni. Investors would gain a better return on their money than they could in a bank and a stake in their old institution, and borrowers would have an incentive to pay back the loans or risk falling out with the valuable alumni community. The scheme, which lent out around €1m last year, has so far been limited to Insead students and alumni but is to include other top business schools next year.

"It's a very human way of lending," says Stevens. "You get a community benefit and the ability to interact directly with students." In a similar vein, the Swiss business school IMD has an Alumni Loans Committee, which manages a fund guaranteeing loans financed by Credit Suisse and UBS, and takes responsibility for collecting bad debts. The fund receives money each year from bonuses received by MBA students for consulting projects and also awards five annual scholarships.

The idea of a more personal form of lending similarly inspired Scott Patterson, who set up Student Choice while studying for an executive MBA at Oxford University's Said Business School last year. The company puts students in touch with suitable credit unions, similar to UK building societies, and provides administrative support in arranging loans.

So far it has helped secure loans totalling around 60 million dollars for around 1,500 undergraduates and is expanding to cover graduates, including MBA students, next year.

"Credit unions haven't got mixed up in sub prime," says Patterson. "It's old style banking which works by taking deposits and lending the money out to people in need."

For UK residents, the Association of MBAs runs a loan scheme with Natwest for students with a place on an Amba-accredited programme and at least five years of practical work experience (two for graduates). There are also Career Development Loans, which can help cover course fees and expenses.

Then, for those prepared to spend hours filling out application forms, there are scholarships. Most business schools offer these, often as part of a general strategy to attract underrepresented students, or position themselves in the market.

Lancaster University Management School this year introduced a scholarship that will refund half the ?18,500 tuition fee of the student who performs best on the course. "We wanted to send a message that Lancaster was really interested in high performers," says Oliver Westall, director of Lancaster's full time MBA.

ESCP-EAP European School of Management has launched a scholarship scheme targeted at employees of small and medium-sized companies, offering to fund two thirds of their fees on an executive MBA if their company funds the rest. Meanwhile, Nottingham University Business School is keen to reinforce its credentials in corporate responsibility, offering scholarships worth up to the full fee of ?18,500 for students taking its full-time MBA in CSR. "We are trying both to get good people and to raise the profile of CSR," says Stephen Diacon, director of the university's MBA programmes.

'What's scary is when I think of buying a house'

Keating Eakins was shocked when she applied for a private loan and was told she would need a co-signature. "It was frustrating to be 28 and to have worked for so long with a good income and need someone else to back my education," she says. But she interprets it as a sign of how jumpy the American loans market has become.

In the end, Eakins, who is studying for a full-time MBA in corporate social responsibility at Nottingham University Business School, decided to rely on her savings, a part-time job, and government-backed loans to pay the ?18,500 tuition fees, plus a similar amount in living expenses for the year. She has borrowed the maximum $20,000 (?11,700) in Stafford Loans, which she is repaying at 6.8 per cent interest and another $38,000 (?22,300) in Graduate Plus loans, at 8.5 per cent. Details of a part-time job in the London office of her previous employers, Corporate Executive Board, are still being finalised. She tried for a few scholarships through the university, but didn't receive any.

She admits it is daunting. She faces repaying around $400 (?235) a month for 15 years. She says: "What's scary is when I think of buying a car or trying to buy a house at the same time."