From Student Loans to Scholarships, Here’s How to Pay for Your MBA

Financing the MBA is a huge obstacle for many prospective students. In fact, the number one reason for MBA applicants to select a specific institution is the availability of

scholarships and financial aid, according to the QS TopMBA.com MBA Applications and Aspirations Report 2018. The degree can provide a significant boost to earnings, but the tuition bill and other costs can run into six figures. Harvard Business School, for example, charges students US$73,440 for tuition, US$13,350 for a room and estimates the check for living expenses to be US$15,242 per year.

Scholarships

The good news is that there is a wide array of options to pay for MBA tuition, such as scholarships based on need and merit. Some 61% of business school students this year are receiving scholarships, GMAC data show. This is up from 41% in 2014.

Roughly half of HBS students are eligible for needs-based fellowships, which average US$37,000 per year, says Matt Symonds, director of admissions consultancy Fortuna Admissions. The school’s financial aid budget is over US$30 million, he says.

Business schools see scholarships and financial aid as a way to lure the brightest students, as competition for top talent intensifies. Employer funding for MBAs has also fallen heavily since the financial crisis, as budgets have been cut.  

“There’s increasing tension as financial aid officers seek to make sure that scholarship funds go to the most deserving candidates, but at the same time they get pressure from admissions [teams] to allocate funds to top candidates who may otherwise go elsewhere,” says Caroline Diarte Edwards, the former director of admissions and financial aid at INSEAD.

MBA candidates can use this to their advantage by negotiating higher financial aid packages as a condition of accepting an offer of an MBA place. “Candidates are shopping around and being more upfront about asking for money than they were in the past,” says Diarte Edwards.

Higher GMAT scores are an influential factor in scholarship decisions and they have the power to persuade the admissions and financial aid office to go the extra mile in the offers they make, adds Symonds.

Student Loans

Despite popular belief, banks are still willing to offer student loans. Some business schools have partnerships with lenders who offer reduced interest-rate student loans.

Rotterdam School of Management (RSM), in the Netherlands, this year started working with student loans company Sallie Mae to offer financing for US-based students.

Brandon Kirby, ‎director of MBA admissions at ‎RSM, says students should plan ahead. “Often times, students have been considering an MBA for several years, but didn’t begin to save when they first started their MBA research phase. That is a missed opportunity,” he says.  

Crowdfunding

An innovative way to pay for MBA tuition is through crowdfunding. The unwillingness of some banks to lend to MBA candidates, especially those from developing countries without a credit rating, led to the founding of Prodigy Finance. The platform lets business school alumni invest in bonds, which are used to fund tuition for current MBA students.  

Full-time MBA students are eligible to apply for funding through Prodigy. The organization works with most top-ranked institutions including London Business School and the Rotman School of Management in Toronto. Students do not need to pay the student loan back until six months after graduation.

CommonBond also offers student loans to those studying at US business schools such as Wharton and the Kellogg School of Management. The minimum student loan balance is US$5,000 and interest rate is 2.57%. Students pay back the student loan over five-20 years.

Employer Sponsorship

Employer funding has dried up in recent years, but some companies are still willing to pay their employees’ tuition fees. According to the QS Applications and Aspirations Report, 9.7% of MBA applicants expect their largest funding source to come from their employer. So, it is worth asking your boss if they are willing to invest in your education, even if they do not cover the full amount.

However, students should be aware that there could be conditions, such as a lock-in period in which you are required to stay with your employer. Those who break the contract may have to pay back some or all of the MBA fees themselves.

The ‘Bank of Mom and Dad’

It is common for parents in the US to save for their child’s undergraduate education; less so for a graduate business education. MBA students are usually in their late-20s to early-30s with several years of work experience under their belts. Nevertheless, some parents are willing to pay for their child’s MBA tuition.

The proportion of financial support that business school students got from their families peaked at 22% in 2014, up from 15% in 2009, according to GMAC. Last year the figure was 18%.

The trend is most prevalent in Asia where a third of business school students received financial support from their families. In Europe, about 30% were helped by their parents. In America about one in 10 students were.

This is reflected in the QS Applications and Aspirations Report which shows that the average MBA applicant expects to fund 33.3% of his or her degree with personal or family savings.

Kirby says: “Usually, our students combine resources from multiple sources — [student] loans, family support, scholarships and financial aid. My guess is that over the coming years, there will be more innovative approaches to financing, both by students and schools themselves.”

Ultimately, the cost of MBA tuition is high, but with a wealth of financing options available, the price should not deter prospective students from applying to business school. After all, notes Kirby, the upside can be tremendous.

“For some (such as myself), getting an MBA set in motion a series of events that helped me to get where I wanted to be both professionally and personally, so there was tremendous upside,” he says.

“The upside can include increased business knowledge, greater self-understanding/awareness, polished leadership skills, access to a broad alumni network and sense of accomplishment.”