We’re not exactly advocating this as an actual strategy for selecting your MBA programs to target. But it’s something to consider! It’s certainly more practical and intelligent (yes we said it) than using rankings as the priority tool to choose where to apply. If a top MBA program has a special scholarship fund earmarked only…
Almost everyone headed back to school deals with the super stressful decisions around paying for it. After you get admitted, your happy-success-feeling bubble may have gotten burst pretty darned quickly when you realized how effing expensive this thing is. Why on earth does bschool cost so much!?? If you’re a foreigner interested in coming to the States for grad school, you may have been particularly shocked to see the numbers.
Thankfully (or not) most schools do a good job of escorting their new admits through the process of securing loans to pay for the MBA — if they didn’t, the schools would probably lose half their candidates. How this works is, once you’re accepted, you fill out the FAFSA which is the US government’s student loan and grants system. You provide information on your personal situation and finances and then the school’s financial aid office comes up with a loan package for you.
Here’s where we need to warn you, Brave Supplicant.
The schools all publish a Cost of Attendance, aka a student budget, which covers the tuition and all the costs of being a student (books and materials, fees, mandatory health insurance coverage unless you can provide proof of comparable coverage on your own, etc.) along with an estimate of cost of living in their specific city. For a full-time graduate program, they assume you’ll be seeking a loan to pay for housing, food, transportation, etc. to live on during the time you’re in school. The school’s published Cost of Attendance establishes the maximum amount you can borrow each school year. As an example, Columbia Business School for 2018-2019 has a COA of $110,978 .
That’s only for the school year, which runs for nine months.
And this is our warning:
Hopefully you’ve already been saving your ducats for the costs involved in earning your MBA. You’ve been planning for this for awhile, going all the way back to the time you started studying for the GMAT. We realize that many people do not do this, but hopefully you were thinking ahead on the financial front too and have been stashing some money now, while you’re still earning a healthy salary. If you haven’t been doing that, then now is the time to begin.
Bschool is EXPENSIVE and it royally sucks to go from earning a very nice paycheck every two weeks to $0 coming in.
And, it can be totally tempting to simply go along with the school’s financial aid offer and let them disburse a loan package to you for all this money, including the estimated rent and living expenses part, just because they have said you are qualified to receive it.
Please tread carefully on this part, whippersnapper.
Yes you’re about to embark on this great MBA experience, and no you don’t want to be stressing about money while you’re doing it. If you need to get the full COA amount in order to pay your bills during this time, then do it.
But if you don’t, then we’d encourage you to carefully consider.
The interest rates on student loans (for U.S. borrowers at least) are currently not exorbitantly expensive, but they’re also not cheap; new loans issued right now are at about 5% compounded interest. That’s not like the 17%+ amount that you’re probably paying if you’re carrying a balance on your credit card (which hopefully you’re not, but if you are, definitely get that paid down immediately and then stop using credit!!! it’s an avoidable waste of money!!! don’t do it!). Still, 5% every year for the life of the loan adds up to be a significant chunk of change.
You’re likely to have plenty of disposable income in 2 years when you graduate, should all go to plan, and it’s unlikely that your student loan payments will take such a huge bite out of your paycheck every month that you’ll feel it. But borrowing against the future should only be done for specific well considered reasons. If you haven’t looked into the actual costs you will be incurring to merely support yourself — outside of the whole tuition thing which is separate — then doing that now would be wise. And recognize that your standard of living will probably need to change. If you’re living a venti double shot mocha latte kind of life right now, then home-brewed drip in a travel mug may be in your future once you’re a student.
The main point we’re hoping to impart today though is this:
When the school generates a financial aid package for you, it may be tempting to simply accept it and sign on the dotted line.
Instead, look carefully at what you’re committing to. Do you need all of the money they have approved you for in the loan package? (Many students do; it’s not like the student budget figures that the schools generate are overly generous.)
Are you thinking about the nut that you’re taking on?
Be an advocate for yourself. Think critically about what you’re signing up for, and what your own individual situation requires.
It may be that you decide that the full COA amount is exactly right for you, and you max out your loan limits completely.
But maybe you don’t need to do that. It’s up to you to look at the numbers and decide what is right. Don’t get swept up by the process of the school’s intake procedures. Just because a full loan amount is available doesn’t mean you personally need to borrow it. Don’t put yourself in hock if you don’t have to.
If you do, then that’s OK too. You’re likely to end up just fine financially when you graduate. This post is only to get you to think through your options and decide for yourself. Once you register, you’re just a Student ID Number in the system, so be sure you’re still thinking for yourself at each step of the way.
After Round 2 wound up last year we issued an invite to all BSers to dive in with another big project and if you’re still wondering what you’re going to do with yourself right now, then that post may have some ideas. The other important task to tackle? Take a serious look at your finances….
Since we started the topic of adulting recently… Here’s a tip in the category of planning ahead! Because we just know you’re going to land an admit to some school this year!! Up to this point, we’d hazard a guess that 99.9% of your time in preparing for this huge big leap in your life…
The estimated first-year costs for a Columbia MBA have risen by over $40,000 in under ten years.
That’s just for the first year of your MBA, which for this year’s entering class, is expected to set them back a cool $111,000 . JUST FOR THE FIRST YEAR. That’s a 50% increase from 2007, where the first-year fully loaded cost was estimated at $73,464.
That’s absolutely nuts.
A fifty percent increase?!???
We used to scoff at questions from BSers about ROI and the MBA. The MBA has long been an excellent investment, in terms of the increase of earnings you’ll get from it. But seeing this change in the published 2018-2019 estimates really gave us pause.
What business can get away with annual increases like this without customers balking?
Well, apparently businesses which have seemingly limitless demand, like business schools have seen in recent years.
Contrast that to law schools where they’re practically begging for students to attend.
Now, before we get too far into this rant, we do have to mention that it’s in your favor for a school’s cost of attendance estimates to be higher at least from one perspective: These are the figures that are used for all financial aid calculations. If you’ll be applying for a student loan, the lender will use the school’s published estimates in order to determine the highest amount that they might fund you.
If the school underestimates the actual costs you’ll incur, not just for standard school stuff like the books and fees and all that nonsense they’ll be hitting you up for, but for the price of just living in that town, then you’ll be stuck and living a much more frugal life than perhaps you expected to be.
Pro Tip: All of this is why it’s so important to be looking at these numbers NOW and evaluating your finances NOW and understanding what it will feel like to live for nine months at a time with NO INCOME.
You need to be saving today for this expense, and you need to recall what it felt like to be a student.
Double caramel macchiato with an extra shot?
Not every day, you won’t.
But coming back to this issue of inflation:
The U.S. economy has been in a period of incredibly moderate inflation — so much so, that some economists are worried. It’s not a state of the environment that we’ve seen many times before and there are all sorts of theories about what’s happening, how long it may last, and what might happen as we start to move out of it.
Moderate inflation is quite nice as a consumer. Starbucks prices stay consistently the same. You’re not surprised by the increasing bill each time you go grocery shopping.
It’s not nice for the worker, as it also means that wages have been suppressed, which is a main concern of many of those economists.
But in an era of moderate inflation, we still have seen these universities jacking up their prices every year.
Every damn year.
There’s nobody telling them they can’t. So they do.
This holds true at public and private universities alike.
At least for public universities, there’s additional pressures on the school administration in trying to rein in spending.
Here’s a quick comparison of some figures from just two schools, Tuck and Columbia, over the past four years:
Whenever we log these values in our own tracking systems, we always capture the actual tuition figure, plus any fees that the school is reporting as mandatory for all, so that’s what those first columns are reporting. Often schools have other fees that end up being mandatory for many students, such as health insurance fees, but we don’t count those since they’re not technically mandatory for each and every person. However, don’t overlook it in your own budgeting: at most schools, if you don’t prove you already have sufficient medical insurance coverage, they force you to buy into their plan.
We don’t have complete records on all schools but just for comparison purposes, UCLA Anderson — a state school — for the Class of 2020 entering this fall has an estimated first-year tuition and loan fees of only $61,302 and a total first-year cost including living expenses of $98,699. Los Angeles is a pricey city so you can expect to pay nearly as much in rent as you might in Manhattan. The difference in full-year cost is from the lower tuition charges from the school. We don’t really advocate using tuition prices as a determining factor in choosing your schools, as we do believe there still is a good ROI on the MBA even from what some would call a “lower ranked” school like UCLA (we don’t see them as “lower ranked” but we know many shrug off our recommendations to try for a place like that as below them). We do recommend looking at these important considerations now, though, and we also really want to call the schools out for this ridiculous racket of forever increasing the charges.
Another problem when you’re digging in try and make sense of these estimates is that these schools aren’t reporting their data on an apples-to-apples basis. You’ll soon notice this when, for example, you see a fairly wide variation in estimates for books at different schools. We’ve seen this range from around $900/year to more like $1,500/year. Wouldn’t you think that books would cost nearly the same at any top-tier school? It’s even worse when you see the variance in actual categories being reported.
We look at those Tuck totals, and from what they’re saying, it’s only going to cost a first-year less than $4,000 more a year to go to school in Manhattan as it will in Hanover.
That just doesn’t make any sense.
You look closer and you’re like, “What is a $15k ‘miscellaneous and health’ charge?” Like, you know the U.S. healthcare system is a mess, but it’s not gonna cost you $15k a year!!
It’s confusing. And the way the numbers are broken out is just not standardized.
Either Columbia is unfortunately keeping numbers like room and board artificially low — which is likely — or Tuck is playing sneaky with how they’re allocating things out to those categories.
But the issue is that the way they’re breaking their figures down just doesn’t let us do a natural comparison.
Another thing to keep in mind when you’re looking at these estimates: The figures for living expenses (housing, or room and board; they’re listed in different ways by different schools) are almost always only for the school year. These are not full-year estimates. Most people are off somewhere else during the summer in their internship where they’re actually earning money, so that certainly helps, but you’ll need to pay rent in whatever city you’re interning in, and those costs are not estimated in these charts. When you’re planning out your own budgets, you’ll need to keep these things in mind.
And if you like 99.9%* of other BSers want to intern in Silicon Valley then remember it’s one of the most expensive housing markets in America right now. You’ll likely end up in a roommate situation both for convenience but also because of the price. Be prepared for some sticker shock. Even those coming from Manhattan may be dismayed.
And in the Valley you’ll need a car… or maybe not “need” but it sure is convenient. If you target SF then no.
All these things will need to be considered. And of course you need to look seriously at what your earning potential will be in your planned future profession. For many people it’s still a no-brainer, and the MBA is well worth it (and the EXPERIENCES you’ll gain in bschool cannot be discounted even if you cannot put a price on them) — but we can no longer issue a blanket recommendation that the MBA will pay off financially for everyone.
*OK maybe it’s only 97.3% who want to work in tech.
We admit to being DownerSnark when the subject of MBA scholarships comes up.
Mostly it’s because it’s….one of those things. Where applicants are often woefully misinformed or unaware of the realities of the situation.
If you’re applying for a graduate program in almost any other field, there is plenty of free money available. That’s how society gets smart people to go research important things. If there weren’t funding for, say, archeologists and sociologists and all those other -ologists who are ologisting all over the place to advance human knowledge, then nobody would be able to go do it.
But the MBA? There’s a very high ROI on this here degree.
We covered this good-news/bad-news situation quite directly in the post from the ‘snarchives called They are not going to pay you to get an MBA.
Today we’ll just burst your lil ol bubble with some Truth: Yes there is free money available in the form of scholarships and fellowships to help support you in your MBA dream, but you cannot assume you’re gonna get any.
The GMAT people did a survey of MBA applicants through much of 2017 and here’s what folks were assuming for how their graduate business degree would be funded:
The only category on that whole chart that resembles reality is the last one, where applicants have some corporate sponsorship lined up and their job is going to pay for their schooling. If you’re getting sponsored, you know it, and you probably know about how much you’re getting, or at least a ballpark.
The other category that’s showing a more realistic percentage is the Parental Support one, particularly for those younger applicants who are going to bschool very early on in their lives and they have their family behind them to make the investment.
But for that first bucket?
Yes certainly there are many applicants who are accepted by great schools who get significant support from the school. That money comes almost entirely from alumni donations; it’s the generosity of grads from that school who want to pay back. When you go to Harvard and you become fabulously wealthy later in life, then you can get a nice tax write-off for your donation (or at least, you used to get one; who knows if that’s going to hold true as it once did now that we’re post tax reform). It’s a little ironic that the school that’s one of the most expensive is also the one with the deepest pockets and ability to help its students out.
Which is an important point to be very aware of: The further down you go in the rankings, there is often less money available for the schools to give away. All schools have the ability to award something but it’s definitely not the same situation everywhere you turn. There’s also usually less money available for an Executive MBA track, though we’ve more recently heard of a few EMBA programs that have been able to offer more fellowships.
If you’re aiming for a Top 20 school, then your entire focus should be on earning an admit. That alone is going to be plenty of a reward! If you have an especially unique background or are coming from a particular country where there are special-focus scholarships available, then certainly you may win the double prize. But please do not assume you will get anything more than the acceptance. Start planning NOW for the costs of the MBA. Save those pennies. Cut down on your expenses today. And consider the big-picture strategy. If getting financial help for your degree is a critical factor that determines whether or not you will be able to attend, then make sure you’re putting a full-spectrum strategy into place, and make sure you’re operating in the realm of reality on how unique or differentiated or distinctive your background is (especially compared to the list of targets you’re planning for), so that you might be able to accurately hope and pray for free money.
If the free money comes, then that will be FABULOUS! But if it does not come, does that mean you won’t be going to bschool?
Having this conversation with yourself now is super important. It would suck to get all the way through this process and be sitting on a win when Round 1 closes at the end of the year, but with no way to actually afford the tuition. The schools publish this information and have lots of planning resources available. Now is the time to be looking at this, when there’s opportunity to adjust plans and create the right strategies. Given the incredible ROI of a top tier MBA, it’s highly likely that the category “Personal Earnings” will end up being a greater than 13% contribution to paying off the bill. And that’s OK! It’s the whole point of getting the degree in the first place, isn’t it?
You want to get an MBA to get a better job. Well then, doesn’t it make sense that you should plan for that better job to be paying off the cost of the MBA?
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