How do people actually pay for MBAs?
An MBA is ~$200k if you include cost of living and exclude opportunity costs. I'd imagine many people can't fork out that amount from their junior years' savings, so how do people actually go about funding an MBA nowadays?
Take on debt? Parents? Financial aid? Company sponsored?
.
care to elaborate?
Math isn't too complex. 2 year IB at average $175k annual, 2 year PE at average $225k annual equals $800k gross. 45% to govt. = $440k after tax.
NYC rent at ~$2k/mo for 4 years = ($96k), Food and entertainment at $2k/mo (assumes many meals at office, and above average leisure drinking/eating out spend for conservatism) = ($96k),
Gifts, and vacations, lets say ($50k) total over 4 years (# likely lower too).
Net is $200k savings plus any investment income/stock market appreciation. Very realistic to save $200k USD by MBA program.
My firm subsidizes tuiton for selected part-time MBA programs.
How do IB analysts go to class part-time when they are working 18 hours days / 7 days a week?
You think IB analysts are working 126 hours a week every week? Whoever told you that might be retarded and you probably shouldn’t be his friend.
IB Analyst 1: $30-50K Saved
IB Analyst 2: $40-70K Saved
PE Associate 1: $70-150K Saved (comp gets more variable here)
PE Associate 2: $80-200K Saved
So someone that does their 4 years should be able to comfortably save $200-$500K depending upon analyst rating and quality of PE fund. Once you include the 6-8% gains you are getting annually from index investing, it should be easy.
I would argue though that most MBA candidates do not come from this background. In fact a majority of them don't come from IB, which can imply much lower pay and savings pre-MBA.
yeah i feel like most are using debt, scholarships, daddy's money or a combination of the three
This was the position I was in when I chose not to go to business school, so maybe I'm just speaking for the PE folks at HBS/GSB that make up maybe 10% of the class at most.
are you high ?
GI Bill bruh.
In all seriousness: I’m getting my MBA now, but I would really have to think long and hard about getting the degree if I was paying out of pocket, especially if I had to finance a large chunk of it with debt, and I flat out do NOT see a positive ROI for lower ranked programs (outside the T10-15) for most people.
my 2cents / word of advice for college kids out there: getting an MBA to switch careers is a VERY expensive penalty for not doing your due diligence when selecting your career path out of school.
true but maybe a bit tone deaf. the vast, vast majority of people in high school that aren't from privileged backgrounds have no knowledge of the business world
hell i DID come from a privileged background (parents in medicine) and my parents still don't know shit about the business world
Can attest to this.
Single mum household, worked in a shop. I didn’t even learn a simple overview of what investment banking was until I was 19. How are people in that position supposed to know just how big an impact your school will have on you, one decade later?
It’s not like high school teachers don’t drill into your head the importance of college
Did a teacher ever tell you "if you don't get into a target college (by the way, here's a list of target colleges) you're probably going to need to drop a quarter of a million on a master's degree?"
Mine didn't.
That's a broad, and unfair generalization. Many motivated, and driven kids come from poor school districts where teacher quality is very low. Teachers can be hit or miss, and just because you came from a more privileged background where your teachers supported you, doesn't mean others had the same experience.
agree with both, and to be clear, my advice was more "do as I say, not as I did" because I also was clueless as to what I wanted career-wise when I was in college.
But to push back a bit: I was more focused on career selection post-graduation, and I think that over the years it has become a lot easier to do that research (plethora of forums, multitude of books on various career paths, ease of networking), and I was just recommending to college kids to try to do as much research / reflecting now in an effort to avoid paying the cost later.
Definitely a bit tone deaf / its certainly easier said than done and people's career preferences do change, but I do believe that raising this awareness of the second and third order consequences could help some college students make sure their career choice is a deliberate decision that aligns with their values and long-term goals rather than focusing on the window-dressing (prestige, pay, convenience, etc.) that is appealing to many college students and can result in future unforeseen costs.
While all the above are technically correct, the breakdown of my MBA business schools">M7 MBA (and I expect most) is approximately:
20-25% get all their MBA and living expenses paid for by parents
the next 25% get their MBA paid for by their parents and subsidize living expenses with scholarship and savings
25% take on some debt and pay for some out of pocket, through scholarship or by parents
25% take on a lot of debt and the rest / living expenses comes from savings with no help from parents
The majority of people get a least a good chunk paid for by family - and probably close to half get most if not all of the MBA paid for by family
Thanks for the insight, that’s probably significantly more than many of us thought. Seems like most students come from upper class backgrounds if their parents are paying for a portion to most of their MBAs at 27-30
This completely mirrors my experience. It was truly an eye opening experience to see how many of my classmates were getting help from their parents (full disclosure, I got a bit of help too).
It kind of blows my mind that so many people, who were working professionals for years, end up just tapping the bank of mom and dad. It also blows my mind just how well off the average b-school kid is if that's the case.
The business world really is a closed off, detached bubble from the rest of the economy damn.. sucks hard if you're just a regular middle/working class kid
Id guess the norm is people have enough saved to pay for 25-50%, then they borrow the rest. Average loan balance at top schools is around $100k +/-
lmao MBAs are unnecessary and useless for the most part at this point unless we're talking top 10, but even then, only worth it if you're trying to switch careers. Feel bad for the tards getting top 50 MBAs or even online MBAs, literal scam.
who on here is getting a T50 mba? I have never seen anyone discuss anything outside T15
who is this comment for
do you know where you are?
I didn't go for an MBA and never had debt in my life, so here is a noob question: What is counted as collateral for this kind of loan? Parents co-sign against their home or income? Any 25-29 y.o. owns property/inheritance/credit score to be approved? And how would a pandemic change this lending structure going forward?
It’s a student loan, so collateral rules don’t really apply. Similar to undergrad student loans
Thanks. I never had a loan in my entire life and didn't know how these huge loans would be approved.
For most people it's a combination of savings, family money, and debt.
However many, many MBAs do not pay full tuition. Many get some financial assistance (in the form of grants that don't need to be paid back) Furthermore, while one has to budget for living expenses, that isn't really a cost of the MBA because you would have them if you were working also. Opportunity cost is part of the cost of the MBA.
Maybe it is my naivety speaking here, but has anyone considering a degree purchased an operating business instead? I understand there are worlds between these two decisions and the theoretical upside of a stable job, promotions, and opportunities down the line are huge. But a business generates cash flow which then could be used to (partly) finance a degree - if that would be the goal. Does that make any sense?
I am going to an MBA business schools">M7 this fall. I had 3 years of AM/HF experience that paid ~90k going in. I have: 40k in scholarships 40k in savings + 25k in IRA I won't be touching plan to take ~100-140k in loans
Thank you for that real answer.
All of my friends who went to b-school (all M7) somehow got awarded scholarships even though they're loaded (I went to a target for undergrad), and on top of that some were MBB who got the MBA paid for if they committed for MBB post-MBA for 2 years.
No one has explained to me how the whole b-school scholarship thing works, but I've genuinely thought about an MBA purely as a vacation since I think I could get some scholarship based on my peers stats. I think probably 33-50% of people in IB/PE can finance 200k after 3-4 years work experience.
don’t buy your girlfriend any Chanel bags and avoid the Michelin restaurants. also, probably should delete you amazon prime account to be safe.
I plan to pay 100% out of pocket, but I also had the benefit of my parents paying 100% of my UG which isn't always the case.
I interned during UG summers and did ~10-15 hours of research/tutoring to save more. Had maybe $50k in savings after undergrad, and saved $30-40k/year for 4 years earning $100-120k gross in a decent (IB/PE professionals would be earning WAY more); this does not include substantial savings into my 401k. I now have $200-220k in total savings including investment income, and will attend an MBA business schools">M7 with a $40k scholarship, and have some limited savings after the program, funded entirely from my savings.
Having said that, I've only mentioned this funding to my closest couple of friends, and almost no one I've met during the process is funding it out of pocket. Many are having their parents pay (mine are totally willing but I'd feel so uncomfortable having my parents fund my education in my late 20s when I've worked for some time), and a larger % are taking out loans for some to all of the cost. I totally understand where someone making $50-80k/year post-UG and especially anyone with UG loans can't pay out of pocket, but planning out the MBA costs if that's on the horizon and just saving generally regardless of getting an MBA or not is a good plan.
How’d you get a scholarship if you had made so much?
Outside of H/S, scholarships are merit-based (or specific to things like nationality) so mine is merit-based. Plus, it’s not like I made more than the vast majority of students or anything.
Top programs usually provide financial aid for 80-100% of costs depending on your finances and how competitive your application is.
They provide scholarship even if you’re coming from the IB/PE route?
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