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How Much Is That MBA In the Window?

How much is that MBA in the window?
That two-year three-lettered degree?
How much is that MBA in the window?
The loans will be the death of me!

The MBA application season has started (cue resume updates, essay writing, interview prep, cross-country campus visits, and lots and lots of $$$). Even though the application process and travel is costing a pretty penny, I know the REAL big expenses will come once I am accepted into the hallowed halls of graduate education.

The cost of a 2-year MBA program usually runs $160,000+ including tuition, books, and room and board. Wharton, in fact, suggests a $180,000 budget for two years for new incoming students. To say that number is intimidating would be putting it lightly. With 12 months until I hopefully start my MBA journey, I’ve decided to look at my finances and see how I can meet that cost. No Debt MBA is an MBA student who plans to graduate without any debt. I may not be as ambitious as she is, but I would like to keep my total debt under $50,000 and I’d like to pay off, not capitalize, accrued interest during my 2 years in school. Here is how I plan on paying for my business education while minimizing student loans.

$80,000.

That’s how much I have right now, around $40,000 in personal savings and $40,000 in promised family contributions. To stretch this money as far as possible, I plan on living with roommates, getting by without a car, and limiting my purchases. Baaaack to student living! The family contributions will come from the sale of my grandmother’s apartment. My grandmother, despite never having gone to college, was a great proponent of education. So, my mother has decided that this will be her gift to me. I think she would be happy I’m using the money to go to school.

The rest?

I am crossing my fingers that I get some grants (i.e., “free money”). If I could get the $30,000+ a year that No Debt MBA did, I would be over the moon. If I can get even $10,000 a year, that would help tremendously. My 401K and Roth IRA hover around ~$70,000 (give or take $5,000 depending on which way the Dow blows), but I’m leaving those funds alone. Aside from the penalties and fees, I’d like to think that that money isn’t even mine – they belong to a nice old lady 60  years from now who will be mighty glad I didn’t raid her retirement kitty.icon smile How Much Is That MBA In the Window?

After graduation, I’d like to go into a marketing or marketing consulting role. While I should be able to make a good living from these jobs, they are not the $200K+ salary and bonus figures that finance types boast of in their first year out of school. So I want to be very careful about how I take on student loans. (A new blogger I just found, No More Harvard Debt, is a 2009 Harvard MBA who is blogging about paying off $90K in debt in 8 months). In any case, I don’t want to make too rosy a projection of my post-MBA finances. You get in trouble that way. Making $100,000 when you thought you’d only get $80,000 = Wundebar! Making $200,000 when you planned for a $250,000 lifestyle? No bueno.

Furthermore, getting married means that I am no longer just concerned about “my” finances. CB is also going to a masters program. He will also take on loans, although I am hopeful that he will receive many more grants than I will. The more we minimize our educational debt, the more flexibility we will have down the road.

  • Hedy - Holy cow, getting an MSW is a bargain compared to an MBA.
    Is the change in subsidized loans affecting your plans? http://www.idealist.org/blog/en/qa-about-the-debtReplyCancel

  • Amanda - Have you consider finding out what type of tuition reimbursement programs there are for various schools if you work for one? I am personally doing that and because I work full time for my school get free tuition. It's a great savings and yes, it may take more time but definitely worth the benefits.ReplyCancel

    • Well Heeled Blog - I am looking into full time programs, and now is the right time for me to get an MBA. The free tuition or reduced tuition perk IS a great resource for people who work at a university, though. I know a guy who is on his third masters because he can take 2 free classes a semester! ReplyCancel

  • Harri @TotallyMoney - While it's tough juggling work and studying, I worked as a freelance market research associate consultant during grad school. I was lucky enough that I could work remotely and organise projects around my studies. I can tell you that money helped me out no end!

    Having another income stream (not to mention this blog) really eases the pain. Best of luck! ReplyCancel

  • Miss T - How about getting your MBA in Canada. Our education fees are way less than those in the states and as far as I know, the credential is transferable. You could save yourself a ton of cash and experience living in a different country.

    Either way you have a difficult decision to make. Take your time considering the different options and make sure to include CB in the process. Starting a marriage out in making this kind of big decision together is a great step in the right direction of a strong and healthy relationship. ReplyCancel

    • Well Heeled Blog - Higher education IS so much cheaper in Canada. You guys are lucky. :)

      CB is extremely supportive… which is the reason I'm marrying him! I would completely look at CB in a different light had he said for me to drop the MBA. He is planning on getting a masters degree as well, and there is no reason for either of us to delay or sacrifice our career or educational goals for the other person. Our job now is to make sure we take on debt smartly and repay them as fast as we can after we graduate. ReplyCancel

    • moneycone - That is an excellent tip Miss T!

      WHB, good luck on your journey! Hopefully, you'll be able to pay it all off quickly. ReplyCancel

  • My Guest Post on Krystal’s Give Me Back My Five Bucks | Well Heeled Blog - [...] am a 20-something business professionl who is planning to get her full-time MBA, after graduation I am planning a career in marketing management. My mother is my greatest [...]ReplyCancel

  • Kellen - I've thought about doing an MBA to transition to a PhD later, but most PhD programs have some kind of stipend and tuition waiver, while MBA programs seem to just charge and charge. They do help your earnings, so I guess that makes up for it, but not if you have to carry that debt for the rest of your life. Good luck!! ReplyCancel

  • Jeff Sustainlifeblog - Good luck with finding an MBA program. I went to grad school, and though it helped, if I had to do it over again, I'd think much harder (though I didnt get an mba). My tuition/books were also paid for by the university, and they gave me a part time job – though I understand that this doesnt happen for mba's very much – much more likely in the sciences. ReplyCancel

    • Well Heeled Blog - It's easy finding an MBA program… the hard part is getting in! :) CB is applying for a program in STEM fields, so hopefully he will have more tuition support / stipends. ReplyCancel

  • Suba - I am looking into getting an MBA. From what I gathered, the school matters a lot when it comes to MBA. A small school and a great school, the tuition difference might be less than $20000 but the career prospects are very different. Is that right? I went to graduate school and after first semester, everything was paid by the school. So I am scared to venture out in these student loan waters. And I was looking at some So.Cal business school (at least to cut room/board) they are EXPENSIVE!

    Good Luck!ReplyCancel

  • Laura - I don't believe $200K at ALL as starting salary post-MBA. A lot of my friends either just finished their MBAs or are in their second year, and their starting salaries (mostly consulting, a few finance) are around $120-$150. And this is in NYC, where our salaries are higher than other places…ReplyCancel

    • Well Heeled Blog - I know folks who are making $200K+ base plus bonus… associates at ibanks, PE funds, etc. But if you are going into bschool expecting that kind of money, you have to make sure you 1. can get those jobs, and 2. want those jobs. The high finance jobs get the most attention because of the compensation, but what a lot of people don't realize is that it's very hard to transition into those fields, especially in a down economy, when you don't have a related background. ReplyCancel

  • fabulouslyfrugirl - I couldn't believe the cost of MBA's! when one of my friends told me her tuition costs. *shudder*

    I used to think it was "cool" to do an MBA, but now that I know the financial impact, I'm trying to figure out if I actually need an MBA to get where I want to be. It seems that work experience is more important in my field, so no MBA for now. I am planning to write my GMATS though, just in case. ReplyCancel

    • Well Heeled Blog - The financial aspect of an MBA is definitely worrisome, but I see the degree as an investment in my professional and personal development. I am going to do everything I can to keep my loan levels manageable, though. ReplyCancel

  • @CrabbyMrsJ - I agree with you, Well Heeled, an MBA is definitely an investment. At the time I started attending my school (still ranked in the Top 2!), I had about 1/2 of the expenses already saved. One thing I can tell you is that where you attend matters, and how the program supports your career aspirations. Not only are you paying for your education, but the long-term networking opportunities, and alumni development/support. Please keep in mind that whatever loans you might incur will be at ridiculously low interest rates, given our current economic situation. This, coupled with the fact that most MBA students consolidate their loans upon graduation, will mean you might have essentially 'free' money for a while. Your student activity fees will also play for plenty of meals (my alma mater had a weekly Friday afternoon event that included dinner and beer). Networking/recruiting events will also have food–sometimes in the city's best restaurants, if you aspire to be an investment banker or management consultant, that is. Best of luck to you. If you are considering Booth, let me know. ReplyCancel

    • Well Heeled Blog - I am definitely looking forward to the networking dinners and cocktail hours. They have the best food. One of my favorite MBA blogs (sadly now discontinued) was written by a Booth graduate: To MBA or Not. ReplyCancel

  • SP - That's awesome that your family is able to be so financially supportive, and that CB and you have such a great joint game plan! Living with roommates, like both of you together? Or would you consider living in separate cities for a defined short period?

    To MBA or not to MBA is something I've considered, but not so seriously at this point. I'm just starting to read and learn more about business on my own – someone with my education background can benefit a lot from that, while (I think?) you already have a lot of undergrad business knowledge. I assume I'll end up never getting one or doing it part time while working – which is a totally different ball game.

    i respect your desire to go full time. You are paying for the connections in addition to the name and the education! If I ever were to make a drastic leap in fields to something that required an MBA, that is what I'd want to do too! ReplyCancel

    • Well Heeled Blog - We will have to do long-distance. Not ideal, but I don't want to give up my choice of schools and I don't want him to give up his. So we will just have to make do for a few years. ReplyCancel

      • SP - agree it is not ideal, but with a defined end point, it is livable.

        I did a lot of long distance with T before we finally got everything set to be in the same city. I like to think I'd never do it again – but for the right reasons, I'm sure I would. Best of luck!

        ReplyCancel

  • Abbie - I'm not trying to sound negative here, but I think you should think carefully about quitting your job in this challenging economy to take on school debt. My husband and I met in MBA school (we went full time), we graduated in 2001 during the tech bust. I'm in Corporate Finance, I had a job lined up before graduation. My husband's focus was Marketing, it probably took him a year to find a job. When we graduated, the starting salary was between $60K to 80K. I was an undergrad business major, so to me, I didn't need my MBA to get to where I am today. It was the right move for my husband though because he was a science major in college. Good luck to you! ReplyCancel

  • dennis the menance - I would like to comment about the MBA. I cannot see the value in someone abtaining an advanced degree. I think to much is being made of higher education again I would recommend that all of you collage fans listen to the video the college conspiracy at The national inflation association. ReplyCancel

  • Parker - 150k for Wharton's 2 year MBA and you wouldnt make over 200k?

    WH, I have been reading your blog for years and have posted comments to you, but I think you need to re-evaulate your plans for grad school or even plans at your current job.

    150k for an MBA is like buying a starter home with nothing to really show you other than paper. Granted the house may not gain value, but you may not get a high paying job either.

    You could always change jobs and have your boss foot the bill. While I am not privy to you grades, I am sure you would pass the necessary requirements to get reimbursed.

    Think about the debt long term and be honest to yourself.
    ReplyCancel

    • Well Heeled Blog - Parker, you have an inflated idea of how much the average MBA makes. ;) $150K for Harvard's MBA and you wouldn't make $200K out of school UNLESS you aim for some very specific jobs. I want to go into brand management, which starts at around $90K-$110K all in comp. If business school is purely a financial decision, it wouldn't make sense to go. But for the jobs that I want to switch into, an MBA is an extremely helpful degree. Plus, I want two years to get a solid business education, expand my network, and invest in my personal development. Some people put that money into a starter home… I'm going to put it in myself. ReplyCancel

  • Parker - Sounds like you made your mind up and I like it.

    Good luck! ReplyCancel

  • Weekend Reading: Turning a Hobby Into Income - [...] blogger ponders whether or not an MBA is worth it. [Well-Heeled [...]ReplyCancel

  • Paragon2Pieces - I see some decisions have been made since our last chat :) Very excited to see how things turn out for you!!! ReplyCancel

  • roseandthistle - Hi, just found your blog and find it really interesting! I know this is an old post but I graduated in August from a Master of International Business program in San Francisco – basically an MBA for people with less than 3 years work experience. I found the course to be extremely valuable and I'd say what I learnt was definitely useful in securing a job offer (in Management Consultancy with a Big 4 firm in London). I have a few points from my experience – my school offers a 1 year program that is substantially cheaper than the figures you mention but it does come without the alumni network that Hass or Harvard would for example. It's still a great business eduction in my opinion in a very international environment – the school is called Hult International Business School.

    The other point I'd offer is more about prospects and the time required to secure a job after graduation. I can't speak for the 2-year programs but in a 1 year course you have little to no free time to be applying for numerous positions. Many grads from my school took at least 2-3 months to find a good position – some extra living expenses for this time would be well worth factoring into any budgeting. Also many of the MBAs have struggled to find the sorts of positions they wanted – and especially for the money they wanted. As I said a big school will probably help the job search prospects but I think it was way tougher for many than they anticipated. I don't want to be a downer on things and I'm sure you'll make the right choice, just wanted to share my recent experiences with you. If you're prepared for it to be a bit tough in this economy I feel like an MBA will always pay off long-term in your career prospects.

    I kind of ended up writing an essay here but if you want to send me any questions, feel free to email me :) Good luck with it all! ReplyCancel

  • MBA choices and student loans | Well Heeled Blog - [...] How do I plan to pay for this educational elephant? Fortunately, I’ve been able to save up and I am able to count on some family help. $50,000 comes from my personal savings from post-college work, $40,000 comes from inheritance from my grandmother, and my parents will probably help me out with another $10,000. So that’s $100,000 of tuition. The other $50,000 in living expenses will likely come from a combination of loans and freelance earnings during business school. [...]ReplyCancel

  • HerEveryCentCounts - MBAs are ridiculously expensive. They make sense for people going into careers in ibanking & consulting – but I'm not sure if they make sense for anyone else. What field do you want to go into after you graduate? ReplyCancel

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