He earns six figures a year and has $40,000 in his bank account. He lives in an area of the United States that is cheap by East or West Coast standards. And this MBA candidate got admission and landed on a few waiting lists.
But suddenly he has doubts.
“I am super worried about converting my waitlists into admissions and absolutely terrified of the cost of the program I attended with no $(scholarship support),” he wrote in a post on social media under the headline “Anyone cold-eyed about cost after admission. The 28-year-old admits he has an aversion to debt because he’s seen ‘pretty bad results with debt in my family, which partly explains why I’m afraid to take on so much for my MBA.
GETTING AN MBA FROM A GRANDE ECOLE IS A BIG INVESTMENT
“I understand the return on investment, but I wanted to hear the current opinions of students and alumni on dealing with such huge debt. How much was your debt and how long did it take to pay it off? Would you do it again if it was handed to you? »
He is not alone. Doing an MBA at a top business school is serious business. Overall, the average cost to attend one of the top 25 MBA programs in the United States for two years is now just under $200,000, up from $4,128, or 2.1 %, up from $195,416 the previous year (see What It Costs Now to Get an MBA from a Top Business School). And unsurprisingly, the big name-brand schools often have the highest prices. An MBA from NYU’s Stern School of Business now has an overall cost of $243,082 for two years of tuition, living expenses, and fees.
Stern is followed by Stanford Graduate School of Business ($239,928), Dartmouth Tuck School of Business ($237,630), Columbia Business School ($237,554), and MIT ($235,996). Of the 14 schools now in the $200,000 club, the newest member is Cornell Johnson Graduate School of Management, where the cost has risen about 2% from 2020 to $203,370. Three other schools are knocking on the door with costs in the order of $195,000.
“I WOULD LOVE TO GO BUT CAN’T JUSTIFY THE PRICE”
Although scholarship money helps reduce the overall costs of an MBA program, there is no guarantee that an applicant will be able to obtain a discount. It is therefore obvious for applicants, especially from low to middle income families, to worry about the cost of the degree, even after going through the marathon to get into an MBA program.
Just consider how much debt, on average, MBAs from top schools acquire. In the Poets&Quants Top 25, 15 schools get MBAs with six-figure debt, with the highest amount at the University of Pennsylvania’s Wharton School – a whopping $145,186 – followed by the USC Marshall School of Business (140,107 $), MIT Sloan School of Management ($135,588), NYU Stern School of Business ($128,953), and Dartmouth College Tuck School of Business ($128,373). The highest unestimated average MBA debt is from the Duke Fuqua School of Business at $119,125 (see MBA Debt Burden: The Embarrassing Data Point That B-Schools Stopped Reporting).
Following the cold-footed candidate post, one active candidate after another expressed similar concerns. Yet another candidate says he is in the same boat. He says he was accepted into a T15 program and will have to take out loans that will ultimately cost him nearly $200,000. “I would love to go, but I can’t justify the price knowing I’ll have to take a job that pays over $120,000 or I’m screwed – even though I hate that job,” writes RealLifeIsBetter. “I’m leaning towards not applying to lower ranked and cheaper schools. Debt makes me nervous and it looks like a straight bet that could ruin at least a decade of my life if it doesn’t pan out.
‘IF I WENT TO M7 WITHOUT A SCHOLARSHIP, I WOULD BE ON EDGE 24/7’
Some have chosen the strategy of applying to lower-ranked business schools in hopes of securing more scholarships to offset the cost of their MBA programs. “I also come from a low income family but am now earning money after MBA,” PizNoFlame replied on the Reddit post. “The opportunity cost is too high for me to attend a school without full/heavy scholarships. If I went to M7 without a scholarship, I would be on edge 24/7 at the opportunity cost of half a million dollars and it would drain my savings entirely. I’d be forced to go into my “comfort” consulting area and take a job I hate for financial reasons. Instead, I’m aiming for lower ranked schools where I can probably get a full scholarship, so I can really use those two years as self-discovery to find a career path that I like.
Or as another poster put it: “All the best programs, especially in the United States, are extremely expensive for someone who comes without family (or other) support. The idea of having the responsibility to repay this huge debt is absolutely frightening! I would like to repay my debt in 3-4 years maximum. I have come to the conclusion that prestigious schools are only for a small percentage of people. I looked for economic schools known for excellent return on investment. Added bonus if they offer their own accommodation, it saves a lot.”
An MBA, who graduated from a top 15 program in 2016, left school with a debt of $130,000. Yet he has few qualms about the burden the debt imposes on him. “My loans are around $1,000 per month minimum payment,” BucksBrew concedes. “It made sense to me given that I went from $60,000 before the MBA to $120,000 after the MBA, even though I moved to a city with a much higher cost of living, which compensates for a part of this gap.
‘Frankly, the $130K BORROWED FOR MY MBA IS NOT SOMETHING I THINK MUCH ABOUT’
Still, he has few worries. “Overall it’s honestly not something I think about a lot, the money automatically comes out of my account every month. The only real downside is that I’m now forced to make six figures every year to pay my loan repayments, so it’s a higher risk and it gives me less flexibility until the loan is paid off .
Another elder conceded that he got into debt again and doesn’t regret it. Among other things, he notes that he earned over $50,000 from his summer internship and signing bonus. savings. On the other hand, we had a kid, no scholarship, and lived in a HCOL (high cost of living) city. I paid a sticker in an M7, I graduated with $180,000 in loans, I worked at MBB for 4 years, my spouse got a big promotion, I had more kids, I bought a house in the same HCOL and was able to repay the loans ~4.5 years post-grad. We put 75% of the bonuses and raises in the form of loans and kept the rest in the form of lifestyle improvements.
TK has a reasonable view of what is a difficult decision for many. “Went in with very similar concerns, but decided to go into a T20 without an exchange, based entirely on the potential for revenue growth,” he wrote. “In your case, it seems to be less advantageous, but it depends on the school you enter and what you expect from your career in the future without an MBA. If you think you can enter a T20 or higher, you you’ll probably get a lot more benefits than a T50 (even if you pay the list price).
“IT MADE A LOT OF SENSE FOR ME TO GO THERE”
But he did his homework. “Before applying,” he added, “I assessed which schools I had a reasonable chance of getting into based on my work history, GPA and GMAT score. I then dove deep into their employment data. Of these schools, I only considered those where there was a historically high employment rate (minimum 93%) and the median salary (without bonuses) was at least 50% above the annual gross average at my previous job. I used smartasset’s paycheck calculator to get a rough idea of the difference between my MBA after salary (assuming a 5% increase in the cost of health insurance and no increase in my contributions to my IRA) for each school.
“Using this information, I determined that I could increase my income by about 20% after the MBA and pay off my student loans in 4-7 years, depending on the school. So, I decided to go for it. But my earnings in my previous role were pretty much capped since I was in a niche industry and it was very unlikely that I would be promoted again in the next 5-10 years.And my average annual raise (including promotions) was nowhere near 20% (the actual increase in my income for the first 4-7 years), so it made perfect sense for me to go for it.”
Well said, for an MBA graduate.
DO NOT MISS : HIDDEN MBA GEMS: B-SCHOOLS WITH BETTER EMPLOYMENT RATES THAN HARVARD AND STANFORD or 20 BIGGEST REGRETS OF MBA STUDENTS