How much does it really cost to go to business school & how can you pay for it?
It’s not an easy equation. Let’s attempt to break it down.
The average annual tuition cost of business school is around $40,000, though it might range anywhere from $8000 – $100,000. Public schools are typically $10,000 cheaper each year, while some of the top schools are pushing six ﬁgures.
You want to factor in living costs (rent, food, daily costs), which assuming you need to pay rent (as opposed to crash with family) and depending on whether you are in the city or out in the boonies, will be somewhere around $20-25,000/year.
In addition, while you are going to be living the supposed “student life”, business school students like to party and have a good time (it’s all for networking, honestly). Some of these are costs that you would be paying whether you were in school or not (rent, food etc). So the real math you need to do is:
Tuition + Transport + Living Costs not currently incurred + Books and Materials.
Then, you need to add into this calculation the salary you will lose during your MBA program. (MBA Programs are usually 2 years in the US (excluding fast track), European MBA programs are typically 11-18 months). This is what is known as your opportunity cost. It should factor in any salary raises you are expecting to see over the next two years, if any.
So, the big calculation is;
Tuition + Transport + Books & Materials + Extra expenses not currently incurred
+ Salary expected over the next two years
= The real cost of business school.
“That seems like a lot of money!” I hear you cry!
Putting it in Perspective
Keep in mind the increase in salary post MBA, the reported payback period for all of these costs is somewhere around 18 months – 3 years. This is not long, in the grand scale of things, and while paying the money upfront is a scary thought, it’s important to focus on the investment you are making in yourself and your future.
So, you know that it’s possible to make the money back within 3 years, but where on earth are you going to ﬁnd the money in the first place?!
There are a number of options;
US- based applicants
1) Federal Stafford Loan: For full-time students = up to $20,500/year.
2) Federal Perkins Loan: $8,000/year w. 5% interest.
3) Grad PLUS Loan: Total cost minus any ﬁnancial aid.
1) Private Loans: International Student Loan Program – the drawback of which is the requirement of a US citizen or permanent resident to co-sign. This is paid back after graduating in monthly repayments for 5-30 years.
Besides loans, here are some other ways you can cut some costs;
– It is potentially cheaper to apply to an in-state college
– Scholarship/fellowship: view a school’s list of available scholarships, usually available on their website.
– Summer internship – these are usually taken for 3 months in the summer between your ﬁrst and second year of school. As well as the ﬁnancial advantage, they are an incredible way to gain invaluable experience and the possibility of employment post business school.
– Jobs – business school is time-consuming and demanding but a part-time job is not out of the question and may well be a welcome relief to sitting at your desk and hitting the books!
– There are ﬂexible options such as consulting or freelance writing, or perhaps you can ask your current employer about part time opportunities.
Another good option is to become a TA (teaching assistant) at your school. These involve some paperwork as well as assisting undergraduate classes, which might turn out to be beneﬁcial to your studies.
The Bottom Line
Most MBA graduates we have spoken to told us that monetary terms is not a very good way of analyzing the ‘cost’ of business school. Of course ﬁnancing is a concern, and a very real one. However, the non-ﬁnancial gains of going to business school are unquantiﬁable – fantastic networking opportunities, great relationships, personal growth and discovery, improved social and communication skills as well as a stimulating environment and a new zest for your career.
Here’s an example – if you meet just one person in business school who is on the same wavelength of you (and of course business school is a magnet for that kind of person), he/she may lead you to a job/partnership/ business opportunity in the future that will pay for the cost of business school many times over.
Calculating the cost of business school is not black and white, is not the same for any two situations and in many ways is impossible to foresee. Life experience cannot be valued. Talk to MBA graduates that you may know and see if they agree.