February 23, 2016
The Master of Business Administration is a desirable degree for a whole slew of reasons. It’s versatile, prestigious and one of the best diplomas you can acquire if you want to assure a sizeable income.
But it comes with a sizeable cost as well, and business school expenses are often larger than they first appear. An MBA can cost students around $100,000 to $200,000 for a top tier school like the University of Pennsylvania, New York University or Columbia University. That doesn’t even include a bachelor’s degree, which can leave students $30,000 or more in the hole before they even start their MBA classes.
Tuition costs for MBA programs are jumping more than 10% while salaries for MBAs are only increasing at 5% per year. As tuition continues to outpace income, more and more people will struggle to repay their loans.
So how should financial professionals go about fixing their own finances after graduation?
Thankfully, there are options specific to those working in the business sector, as well as tried and true methods to eliminate that debt. Read below for tips on how to get a cost-effective degree and how to pay it off.
- Find a company who will pay off your loans. Nowadays, more companies are offering loan repayment as part of their benefits package, likely as a response to the fact that more people are graduating with student debt. Some firms will also pay for you to get an MBA while you’re working – if your grades qualify. If your employer doesn’t have an official tuition assistance program, you can create your own. Present a report on how an MBA will make you a more valuable employee and how you will use your new skills to increase productivity, sales and efficiency. Plus, if you’re working while receiving your degree, you won’t have to take out loans for living expenses.
- Make more money. Most advice on paying off student loans boils down to cutting expenses, but there’s only so much you can skimp on. Writer and MBA grad Michelle Schroeder-Gardner of Making Sense of Cents said making more money was the only way she was able to pay off $40,000 in loans over seven months. “Whether that means asking for a raise, taking on additional hours at work, finding a part-time job, or starting a side business, this can be a great way to pay off your student loans quickly,” she said. Use your business savvy to find an efficient way to earn more without sacrificing all your free time.
- Live on less. Whether you’re getting your degree or have already graduated, continue living like a poor college student for as long as you can. By combining a high income with low expenses, you’ll have more money to contribute to your loan payments. Graduates run into danger when they scale up their lifestyle with their salary. It can be relatively easy to maintain a frugal outlook when you’ve been exercising that mindset for years, but it’s much harder to scale back after you’ve had a taste of the good life. Be patient – that lifestyle is coming, but not until you have your financial ducks in a row.
- Refinance your loans. Refinancing your student loans is one of the most effective ways to cut your monthly payment. If you keep putting the same amount toward your loans, you’ll end up paying them off faster. You can also take the difference and put it toward your retirement and other savings goals.
If you’re a prospective student, here are some tips for minimizing your future debt:
- Be aware of hidden costs. Tuition isn’t the only cost associated with business school. A new suit, travel for interviews and moving to a different city can all affect how much you need to borrow. Make sure to research these costs ahead of time so you don’t have to put them on a credit card with a high interest rate. If you choose not to work while getting your degree, you should also factor in lost wages and how much you’ll need to live on.
- Choose an affordable school. Getting a degree from Wharton Business School or another prestigious program may seem attractive, but it might not be the best option for those worried about loans. Several brand-name universities have committed to lowering tuition costs and offering more aid for those interested in an MBA. Graduates from Harvard Business School matriculate with only $70,731 in debt – not bad for the one of the top ranked business schools in the country. The Stanford Graduate School of Business also had an average student loan burden of $79,049. Prestige is great, but it shouldn’t be the only factor in choosing a school.
- Research other aid options. Loans aren’t the only way to pay for school. Scholarships and grants are available for students, especially those who can provide proof of need. You can find information on scholarships at FastWeb, GoodCall and FinAid. Start applying for aid when you start looking for graduate schools – many of these are only available on a first-come, first-serve basis. It may also take you a while to fill out the applications and receive the necessary paperwork.
An MBA is no guarantee of a prosperous career or steady employment. But if you use your business skills to your advantage, it can lead to many opportunities and an impressive salary. The current median starting salary for MBAs is $100,000 and represents a $45,000 difference between those with only an undergraduate business degree.
MBAs can work in a variety of fields and utilize their skills in the corporate, academic and nonprofit fields. This degree can be famously versatile and allow graduates to succeed in whatever field they choose.
So don’t let student loans deter you from pursuing an MBA, or make you regret getting one in the first place. Prepare accordingly, save smartly, consider all your options and start your career on the right foot.
Please note that the information provided on this website is provided on a general basis and may not apply to your own specific individual needs, goals, financial position, experience, etc. LendKey does not guarantee that the information provided on any third-party website that LendKey offers a hyperlink to is up-to-date and accurate at the time you access it, and LendKey does not guarantee that information provided on such external websites (and this website) is best-suited for your particular circumstances. Therefore, you may want to consult with an expert (financial adviser, school financial aid office, etc.) before making financial decisions that may be discussed on this website.
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