Before you apply for an MBA is the best time to begin planning your financing. After all, you’re opting to forego your annual salary just as you’re committing to one of the biggest financial investments of your life. The FT recently reported that the average Stanford GSB student will spend about $218,000 over two years while giving up an estimated $200,000 in compensation. As for other top tier programs in the US, annual fees for tuition and living expenses exceed more than $100,000. But the FT also cites that, on average, MBAs studying among the world’s top b-schools expect to double their pre-MBA salary within three years.
If one of your key considerations is cost, you can find a vast array of financing options to fund your program. But step back to understand your options and set a strategy before you dive into the details. How to best finance your MBA is tied to your particular circumstances and profile—your nationality, personal resources, credit history and chosen program are all elements that can impact your approach. At Fortuna Admissions, we‘re experienced at navigating financing options and advising candidates on scholarship applications. Having personally led INSEAD’s Admissions & Financial Aid office, I’m offer some guidance to help you get started:
Define a savings strategy.
It’s never too soon to save for your MBA. In fact, you should start as soon as you decide to apply. While need-based aid does exist—HBS reports that 50 percent of its MBA students qualify for need-based support—in reality it can be difficult to obtain without genuine financial hardship. (Blowing your savings on a big wedding doesn’t count.)
So get serious now about adjusting down your expenditures; now is a good time to reel in your Starbucks habit. If you’re earning a chunky disposable income and accustomed to spending without much thought you’re not alone—especially if you’re a young professional without kids or a mortgage. Take it from me—it can be a shock to reenter a student lifestyle. It’s better to start the budgeting conversation with yourself now.
Speaking of, get acquainted with the potential costs surrounding your program and project a realistic budget for its duration. Beyond the hefty tuition, your costs will include living expenses, books and materials, extracurriculars and study trips. Because it can be difficult and time-consuming to refinance mid-course, don’t underestimate your potential expenses. And you want to be in a position to make the most of pop-up opportunities, such as career treks and study trips, or travel for interviews.
Finally, explore your target schools’ financial aid resources. Most programs have useful online info, and if you get in, you’ll likely receive a bevy of options related to loans (public and private), flexible payment terms, scholarships and favored sources of other financing. Programs that accept you actually want you to find the money to go; it is a blow to the admissions office when promising students decline because of lack of financing.
Find your fit for scholarships.
Forty eight percent of two-year MBA students were scholarship recipients, according the FT’s 2017 ranking data. While they can be highly competitive, scholarships are often tailored to specific profiles—from personal traits to gender, service and academic or industry distinction.
It starts with your application—know it can position you to qualify for a merit scholarship, not just MBA admission. All candidates may be automatically considered for merit-based aid, and most schools regularly (if selectively) distribute fellowships. At INSEAD, so-called “spot scholarships” are given to the very best admits, although the bulk of funding is allocated after candidates submit specific aid or scholarship applications. Top tier schools (especially HBS and Stanford GSB) have extremely deep pockets. There’s often no separate paperwork to be eligible for MBA merit scholarships, but it’s advantageous to submit your admissions application in earlier rounds before they’re allocated.
Other need-based financial aid requires a separate application (so make careful note of deadlines). An impressive array of outside groups offer some level of funding, from clubs and industry associations to ethnic associations and athletic groups. This funding scene is continually evolving, so start your research early and keep yourself informed. New scholarships are announced regularly: This year NYU Stern released its Advancing Women in Business Scholarship to increase gender equity, which covers the first year’s tuition, while Forté fellowships are awarded to outstanding women applying for various MBA programs. INSEAD recently launched its Mexico Excellence Scholarship, driven by its values for diverse cultural viewpoints and “open borders.”
Occasionally reciprocity is involved—the Boustany Foundation, which offers a two-year award to HBS with priority given to candidates of Lebanese descent, expects post-grads to fulfill an unpaid internship at the foundation, while a Stanford GSB fellowship funds MBAs committed to generating economic development in the Midwest US for two years minimum. NYU Stern’s new Fertitta Veterans Program levels annual tuition to a flat fee of $30k for US military veterans, while former service members at participating schools may qualify for special funding and fee waivers through the Yellow Ribbon Program. The HBS website maintains a comprehensive and well-chosen sampling of outside funding opportunities across a multitude of categories.
Follow the evolving landscape of loans.
Student loans comprise the bulk of education financing. But while scholarships are often borderless, where you live usually determines your loan eligibility . The lowest interest loans for US citizens are often provided by the government (whether you’re studying overseas or domestically). To qualify for US state and federal financial aid, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA).
Then there are private loans, and some U.S. banks allow international students to borrow if they have a qualified cosigner (usually a creditworthy U.S. citizen). But alternative options are on the rise, many of which offer a non-cosigning option—from innovative investment models to school-based partnerships with credit unions (such as Duke Fuqua and Wharton). Prodigy Finance, a financing venture founded by MBA alumni from INSEAD, is challenging the traditional lending industry through a predictive model, which takes potential future income into account (not just your credit history); Prodigy’s non-cosigner loans have directed some $250M to 6,200 students from 118 countries.
Explore creative tactics.
More than a few enterprising students are turning to Crowdfunding their MBA on platforms such as Indiegogo or GoFundMe, making a powerful pitch to their community about investing in their future potential through helping to fund an MBA degree. It’s a DIY fundraising tactic that may be appealing if you’re someone with marketing and social media savvy.
On the more practical side of the spectrum: Some countries allow tuition to be deducted from your personal taxes, such as Canada, Germany and France. That said, things in the US are both particular and complex, since any tax deduction must meet narrow legal definitions in terms of an MBA being required by your employer or improving or enhancing the skills necessary to do your job. Fortuna’s Matt Symonds provides more specifics in this Forbes story, Is Your MBA Tax-Deductible?
If you’re pursuing a career in the public or nonprofit sectors, loan forgiveness may be a possibility. Yale SOM purportedly has the oldest and most generous Loan Forgiveness Program among b-schools, which supports grads who go on to pursue “public interest” jobs around the globe.
Finally, don’t overlook employer sponsorship—some industries, especially consulting, consider MBA education a worthy investment. According to the FT, 9 percent of MBA alumni who graduated from a top 100 program in 2010 received employee sponsorship in some form.
All told, most students will combine multiple sources of funding to round out their package—integrating loans, personal savings, and, if you’re lucky, a well-appointed scholarship. “The value of an MBA, like the cost, is about more than the money,” says Fortuna’s Judith Silverman Hodara, former head of Wharton admissions, who cites innumerable benefits such as a school’s alumni network and first-row access to bleeding edge industry insights. “While it is mission-critical to get practical about costs, the array of financial assistance that exists means that dollars shouldn’t stand in your way.”