Conventional wisdom has it that an MBA pays for itself over time, no matter how expensive it may be. The problem for some prospective students is how to pay for it in the first place.
An MBA can be paid for in a number of ways, not all of which are well known. It is not a given that committing yourself to an MBA also requires a spartan, scrimping, student lifestyle. From loan financing to full or partial scholarships, paying for an MBA in US dollars or euros need not be as financially traumatic as many people think.
When Cai Qiuyuan wanted to make a career switch from the information technology industry to finance, he decided an MBA from the University of Maryland’s Robert H Smith School of Business was the best way to do it. However, he estimated that it would have cost more than US$80,000 to cover tuition and living expenses – a significant sum even though he had enough savings to cover it.
Luckily for Cai, he qualified and won a full scholarship from his university, which paid for tuition, textbooks and other administrative costs. This came up to about US$50,000 a year. That left US$30,000 in living expenses to take care of. Cai covered the more manageable amount with a combination of personal savings and salary earned from summer internships which he took on during the MBA program.
“I interned with a chemical company in New York which paid US$4,500 a month for the summer, so the scholarship and internship allowed me to cover my costs quite comfortably,” he said.
According to Nunzio Quacquarelli, managing director at QS Network, a higher education information provider, arrangements like Cai’s are less well-known ways to finance an MBA that prospective students should consider.
“A misconception is that all the funding has to be in place before a student can embark on an MBA. Certainly it is better to have all the funding in place, but there are many opportunities to work and earn money whilst studying for an MBA,” he said.
Internships can pay
In addition to summer internships, which universities usually help arrange, on-campus jobs are a common source of funds for MBA students, especially at US universities.
“In the US, there are many jobs on campus, like teaching assistantships. My alma mater, Wharton, encourages many students to become teaching assistants,” Quacquarelli said.
Indeed, according to Scott Koerwer, an associate dean at Smith, teaching assistant jobs not only provide income, they also help reinforce course material.
“[Smith] offers work-study assignments that pair MBA students with faculty; this helps the student because in order to teach a topic, you have to really understand it,” he said. In addition, internships like Cai’s are arranged both in the US and internationally.
“The two hottest international placements are China and India; there are a number of Maryland companies in China [that] we have great relationships with,” he said.
All well and good if a candidate has settled on a US business school. But what about schools in Europe and Asia? According to Quacquarelli, partial scholarships are more plentiful in Europe than in the US, although eligibility depends on a host of factors, including the student’s country of origin and the intended university.
Scholarships to Asian programs, however, are more scarce. Unlike European programs, which benefit from government backing, and US universities, which often have large alumni endowments that pay for scholarships, Asian MBA programs are still in their formative stages.
While the cost of living in Asia can be lower, studying in a city like Singapore can still be expensive without a scholarship. Loan financing then becomes the most commonly used option to pay for an MBA. The current economic climate is kind to Asians in this respect.
“In our low interest global economy of today, loan financing denominated in a local currency seems a sensible option,” Quacquarelli said. “Although there is some exchange rate risk, the RMB [for example] is only likely to strengthen against the dollar or euro in the near term.”
The good news
There is more heartening news. According to Quacquarelli’s estimates, although tuition fees have risen in recent years, post-MBA salaries and starting bonuses, which companies often pay graduates, have also gone up. The net effect is that the cost of a full-time MBA can be recouped quicker.
“A two-year MBA taken at a top US business school would have a payback period of three to four years. A one-year European MBA would take two to three years,” he said. “Someone returning to an average Asian salary would not necessarily have a much longer payback period – it would depend on the differential between their pre and post-MBA salary.”
Besides loans and scholarships, current employers may help pay for an MBA. However, this is rare – less than 5% of full-time MBA students receive company funding – and often comes with the condition that the student stays with the company for a certain period of time upon graduation.
If further proof of an MBA’s financial viability is required, just ask Cai. He is now a senior associate at Deloitte in Shanghai, and his friends who took loans to pay for their MBAs have also found good positions in China or Hong Kong.
“The job market is quite good right now; so far I haven’t heard anybody who is worried about their loans,” he said.
Quick links: MBA financing
Provides a searchable database of scholarships around the world
Country-specific British Council sites publish information of scholarships to British universities
The university offers several scholarships specifically for Chinese nationals or students with an interest in Asia
The higher education section lists scholarships for MBA programs offered in Singapore
The International Education Finance Corporation provides loans of up to US$45,000 to US citizens or international students with a US guarantor.
The German Federal Ministry of Education offers low-interest loans of 7,200 euros to graduate students who want to study in Germany
French residents of any nationality are eligible for funding of up to 90% of tuition
Citibank works with certain universities, like the Wharton School, to provide specific student loan packages