A graduate degree that pays off: the MBA

Borrowing money to go back to graduate school can be a sure-fire way to get bogged down in student debt. But a master seems to pay off for many people who finance their studies: the MBA

At about 98% of universities that offer master’s of business administration programs, graduates typically made more money in two years than they borrowed, according to Wall Street Journal analysis of federal loan data students for nearly 600 programs. This contrasts with law schools, where about 6% of the programs had graduates with median incomes higher than debt during the same time period.

Jenny Le and her husband, Quan Nguyen


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Jenny Le

Jenny Le, 29, enrolled in Columbia Business School in 2018, where the total tuition fee exceeds $ 160,000 for the two-year MBA. . Thanks in part to a signing bonus she secured with her new role as a Strategy and Business Development Associate for Teachers Insurance and Annuity Association of America in New York City, she paid off the debt in six months.

“I thought it would be worth it in the long term, but I wasn’t sure about the short term,” Ms. Le said of her graduation. “I’ve seen so many other people my age struggle with their debt payments. It was a better investment than I expected.

Many people who pursue their MBAs do so for the promise of a bigger salary, the ability to pivot into a new industry, or to embark on a path of leadership. The high sticker price for some programs, which can range from $ 100,000 to $ 250,000 or more once living expenses are factored in in addition to tuition and fees, may discourage potential students, just like the two-year career break required to return to campus.

Number of schools by debt-to-income ratio

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Business Masters

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The federal government allows graduate students to take out a fixed amount of relatively low interest loans. After that, students have to turn to higher interest Grad Plus loans, which have no cap. Thousands of MBA students take out six-figure loans each year to help fund tuition, fees, and living expenses. A small number of MBA applicants at some elite schools rely more on private loans with lower interest rates. Debt figures examined by the Journal do not include private loans, and salary data only reflects students who take federal loans.

Many MBA candidates have experience in the professional workforce, so the degree often enhances their existing career trajectory. Traditionally, some students have come from more affluent backgrounds, and people already working in finance or other high-paying industries have tended to gravitate towards the degree, which has made the pool of MBA applicants a financially healthy group. , although business schools say they have been trying to broaden their pool of applicants.

Juliette Laurent


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Juliette Laurent

When Juliet Lawrence, 37, received her MBA from the Ross School of Business at the University of Michigan in 2013, she decided not to immediately repay him over $ 108,000 in loans. She chose to put her higher salary and bonus at Dow Inc.

in his 401 (k) and the stock market while making loan repayments. Ms. Lawrence, now a senior financial director at Dow, paid off the last of her debt in 2020.

“From an equity perspective, you get more return than just paying off loans. There was no real rush, ”Ms. Lawrence said of investing instead of quickly writing off loans. “Your MBA pays off, but where are you going to get more growth? “

Not everyone who attends a well-known school catapulted themselves into a new income bracket. Bradley Hoefer, 31, borrowed approximately $ 110,000 to earn his MBA from Tulane University’s Freeman School of Business in 2020; he already had about $ 85,000 in loans for his undergraduate degree. He estimates that it could take him 20 years to pay off the debt.

Mr Hoefer had hoped his MBA would help him leave banking, the industry where he worked for five years, and enter the video game industry. After a year of job hunting and part-time work to make ends meet, he recently took a full-time job at Citigroup. Inc.

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in Buffalo, NY, with a remote departure from Ormond Beach, Fla., where he currently resides. His salary of $ 60,000 per year is a modest increase from the salary he received before his graduate studies.

“It was worth it for the experience,” Mr. Hoefer said. “I think there is a bit of false advertising about some MBAs. People expect their salaries to increase from $ 60,000 to $ 120,000.”

Paulo Goes, dean of Tulane Business School, said the 2020 class has had a particularly difficult time as many companies stopped recruiting MBA job seekers during the pandemic, which is reflected in the placement and the salary of graduates.

For-profit business schools had fewer students repaying their loans after two years. At Strayer University in Washington, DC, 2% of graduates have paid off their loans in full within two years, while about a third have asked for their payments to be suspended temporarily. Roaming students borrowed an average of $ 74,000, but half earned less than $ 57,000 two years after graduation. Strayer did not respond to requests for comment.

A dozen other business schools have shown that median debt exceeds the median earnings of graduates, according to the Journal’s analysis. Several of these schools said their debt counts were inflated because federal debt data reflects students enrolled in expensive double-degree programs. Roseman University of Health Sciences had the highest debt to income of any school, with students borrowing an average of $ 172,000. That figure includes students in the school’s dual dentistry and MBA program, a spokesperson for the school said.

In several elite MBA programs, including Harvard Business School and Stanford Graduate School of Business, the median starting salary after graduation has allowed more than half of alumni to repay their federal student loans in full. in two years, according to data reviewed by the Journal.

Some of the more expensive MBA programs had some of the lowest debt levels, according to federal data. At the Tuck School of Business in Dartmouth and some other top schools, graduates borrowed an average of $ 41,000 in federal loans, which is the maximum amount students can borrow at the best interest rates, without resorting to to higher interest Grad Plus loans.

At Harvard Business School, students had $ 41,000 in debt and median incomes of about $ 172,000, according to federal data. About 56% of the 2020 MBA class graduated with some debt, with an average of $ 79,000 in federal and private loans combined, said Chad Losee, general manager of MBA admissions at Harvard.

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Daniel Huizinga, 29, landed a job at consulting firm Accenture PLC after graduating from Baylor University’s undergraduate business degree in 2015, but decided to pursue an MBA in hopes of progressing at Accenture or land a job at one of the top consulting firms. —McKinsey & Co., Bain & Co., or Boston Consulting Group. He calculated that going back to school and supporting his young family during those two years would cost him about $ 300,000. He landed a $ 90,000 scholarship from the University of Chicago’s Booth School of Business and saved $ 100,000 in five years of work. He borrowed $ 100,000 to enroll last fall and will graduate in the spring of 2022.

At one of the large consulting firms, Huizinga expects to earn about $ 200,000 a year after graduation, which will allow him to pay off the debt in two to three years.

“I wanted to go to a big school with a good brand. It opens doors that I didn’t have after the first cycle, ”he said. “For me, it was obvious.”

Applications for MBA programs in the United States are on the decline. WSJ’s Jason Bellini visited Boston University’s Questrom Business School to hear students talk about why the investment is worth it.

Write to Patrick Thomas at [email protected] and Andrea Fuller at [email protected]

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