For most people, it’s not too long after they start their business school research that they discover the high cost of attending a top program. After one or two jaw drops, the first question that pops into mind is “How am I going to afford this?” Undoubtedly, this is one of the most common questions from students considering an MBA, so let’s dive in.
While Cost of Attendance figures across MBA programs have a wide range, the top MBA programs all fit pretty nicely into a tight band between $80,000 – $110,000 per year.
Traditionally, MBA programs in Europe are one year, compared to the standard two-year MBA programs in the United States. It will be critical to understand not only length of study but also Cost of Living in the cities of the schools students are applying to in order to arrive at an accurate figure of total cost. All schools will publish their Cost of Attendance figures on their websites, so make sure to use the current year as a solid comp.
Now that you have an idea of the size of your bill, let’s figure out how to pay it.
If you’re still reading, have already decided to do an MBA, or have already been accepted at a top program, your next task will be figuring out how to pay for it. For most students, the funding requirement becomes an exercise of patching together different financing sources.
Fewer and fewer students are receiving full sponsorships or scholarships covering the entire Cost of Attendance. More commonly, students receive scholarships covering the full tuition fee, however they still must account for living expenses including rent, food, transportation, a nice suit or two if interviewing for more corporate jobs, etc.
And let’s not leave out the more formal or informal side trips that often add significant color and depth to the overall MBA experience, which may cost a little extra.
Types of Funding
The most common sources of funding are scholarships, sponsorships, loans, family and friends, and internships/working. Let’s chat through each of these “patches” of the funding quilt.
Free money is the best money, hands down! There are loads of scholarships out there and depending on your experience or background, you may qualify for one or more scholarships. This is certainly a route you should pursue. Aside from scholarships offered by your school, there are NGOs, local and federal government, and other organizations that offer scholarships.
Makes sure to do your research, ask around, and start early. Learning about that “I would be perfect for this” scholarship after the deadline has passed often involves tears.
If you plan to continue to work for your current employer after graduation, you may be offered an employer sponsorship. In many cases employer sponsorships cover tuition fees and in a few cases, they may also cover a stipend for living expenses. This is a great way for employers to retain top talent, while giving their employees the space for professional and personal growth.
For both scholarships and sponsorships, know what is in the fine print. Nearly all sponsorships require a return to the firm, which is often immediate, along with a commitment to work for the firm for a specified number of years. This is fantastic if you have made up your mind about where you want to work before you start your MBA.
However, if you learn about new employment opportunities during school, or end up wanting to switch careers, the “golden handcuffs” on the sponsorship can become tricky.
Similarly, some scholarships require you to return to your home country, work in a specific industry, or even in a specific role after graduation. There are also scholarship-loan hybrids that convert the scholarship to a loan upon the trigger of a qualifying event, turning free money into a loan. In most cases for international students, this event is when the student does not return to their home country at the end of the study period, but others exist as well.
It is necessary to carefully consider these limitations upfront, as it could greatly influence the path of your career and personal journey for a long time.
Loans are a great way to fund your study should you not have access to scholarships or do not want to be tied to a sponsorship. There are all kinds of loans – most that require co-signers or collateral, and some that do not.
At Prodigy Finance, we offer community-funded no-cosigner, no-collateral loans to international students studying at the top graduate programs around the world. Over the past 10 years we’ve supported over 7100 students with over $325mm in funding, and reached another great milestone this month with a new round of fundraising to expand our support of top education for international students around the world. We work closely with the top schools to ensure that student loans are certified and that the loans are disbursed directly to the school for the payment of tuition and living expenses.
Most loans have an interest rate that serves as one component of the total cost of borrowing. Interest rates can be fixed or variable, so it is important to understand the type of loan you are obtaining. As loans vary drastically from company to company, in order to make an apples-apples comparison, you’ll need to also look closely at the grace period (if offered), time of partial/total interest accrual, loan duration, origination fees, administration fees, and any anticipated costs with repayment of the loan.
Making a smart decision on your loan can save you thousands in the long-run.
Family and Friends
Friends and family that recognize the value of the journey you’re on, what you want to achieve, and who want to support your pursuits should certainly be considered as another funding source. But approach these conversations mindfully, as ruining a close connection is never recommended.
Many students find approaching conversations with family and friends very challenging, and as a rule of thumb only consider those family and friends who have first reached out to them about the idea of supporting their study.
Internships & Side Jobs
Finally, the earning money before and during school option. The concept of the pre-MBA internship is becoming more and more of a thing. During my time in business school, I learned that many of peers had pursued a pre-MBA internship. This allowed them to not only demonstrate experience and commitment to their post-study industry of interest, but also gave them an opportunity to continue earning money to pay for the program.
A more formal internship is often a required component of the longer MBA programs, offering students 8-12 weeks to work full-time for a company in between semesters. This too is another great way to earn extra money to pay for the remainder of your program, or perhaps those side treks that help shape your overall experience.
At some programs, you may be required to postpone a semester or double-up on classes to free up more time to use what you’ve learned in the classroom in the working world.
You’ll find that some of your classmates may be interning a few hours per week during the academic year, starting their own companies, serving as a TA, dabbling in other part-time gigs, or depending on visa requirements even working up to 20 hours elsewhere.
The value of an MBA never goes away, and the ride during business school will be a fast, wild, and enjoyable one. Whether your MBA was in the long-term game plan, or was a last-minute trigger pull, you can develop a funding strategy that will work for you.
Talk to current students, alumni, other applicants and get creative about your own plan! Having your funding ducks in a row before you begin your program will leave you wide open for all of the opportunity and fun that awaits!
Whitney Morgan is the Regional Partnership Manager at Prodigy Finance. She worked in cyber security engineering and venture capital before getting her MBA at the University of Chicago Booth School of Business. She then worked in early stage startups in a variety of industries before joining the Prodigy Finance team.