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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Had a Brave Supplicant ask us about GMAT scores and scholarships recently — something like, “If my score is impressive enough, will I get a full tuition grant at bschool?”
Here’s what we said:
It is actually quite rare to get a full-ride scholarship. Most schools do offer these but they tend to go to accepted candidates that the school is eager to recruit away from other competitive programs; typically, these go to people who will provide an important element of diversity to the MBA program (women, underrepresented minorities, very unusual backgrounds, etc.). If you’re from an oversubscribed candidate pool like Indian male or white guy in finance or consulting, then we don’t actually hold out much hope for you to get significant scholarship money, just as a very general rule.
Of course, there are always exceptions, and we do not know anything about your profile, so who knows what may happen!! Some bschools (like Harvard and Stanford) only offer need-based awards, based on the student’s financial circumstances; other schools (like Columbia) offer merit-based awards, which are sometimes based on the GMAT but mostly on the GPA and academic performance and other factors that show distinction. Many schools are able to issue offers of aid when they are very interested in recruiting a particular candidate, typically those underrepresented applicants we mentioned above, who the schools want to bring on board in order to increase diversity of the class. Public schools like the MBA programs at the University of California system may be prohibited from offering aid to those candidates, however, based on the laws that they are operating under from their state.
As you can see, each school handles it differently.
Because the MBA is seen as having an incredible ROI — most people are easily able to recoup their MBA investment quite easily based on increased earnings power — there just isn’t much scholarship money to go around. And, because of the extreme ROI, you shouldn’t expect to get support for this endeavor – it will pay for itself, so you should consider it an investment. This typically means looking for loans and funding to cover the cost and believing in the probabilities that you’ll be able to make good on it.
The risk/reward ratio for the MBA — for most people — is favorable.
Now of course there’s always contrarians and there’s all sorts of “is the MBA worth it?” controversies floating around — they tend to come and go quite regularly, yet for now, the MBA has remained incredibly popular. The cost of the MBA is significant, and you definitely need to look at the big picture and evaluate whether it will be worth it FOR YOU.
But sorry folks. If you’re the typical candidate, nobody is going to pay you to get an MBA.
The MBA is a very expensive degree. Hopefully you’re aware of that already. The schools publish numbers on their sites about tuition and estimated costs, yet many applicants neglect to read those pages until after they’ve been admitted and are faced with the prospect of plunking down a deposit and looking at how they’re going…