Fewer Than 20% of MBAs in Loan Default
Roughly one in five MBAs are failing to make their payments on student loans, Fortune reported today (Nov. 23).
Oddly enough, in comparison with most other students, business school grads are the elite of the elite. The report, based on government data, shows that business school students, in fact, have the best record of any students in repaying their loans. In fact, even the 20% number does not reflect actual defaults. One in five have gotten deferments or some kind of income-based payment reduction. The actual default rate is in all probability far lower than 20%.
In comparison, the average repayment rate for public colleges and universities is an estimated 54%–far below the 20% number for business schools. Fortune reported that it was 56% for private nonprofit schools and a dismal 36% for the for-profit colleges. Under proposed federal regulations, for-profit schools with student loan repayment rates under 45% would face some restrictions in federal aid, and those with rates under 35% could lose government financial aid altogether.
Among B-schools reporting repayment rates, Harvard Business School led the pack. Some 88% of Harvard students over the last four years have paid down at least one dollar on the principle of their federal student loans, Fortune reported. “The other 12% have taken advantage of debt repayment options like forbearance, income-based repayment or deferment. Some of the students among that 12% probably never graduated. And some likely defaulted,” Fortune said.
Stanford University’s Graduate School of Business and the London Business School, both with 84% repayment, along with Babson College in Massachusetts, at 83%, also did well.
Duke University’s Fuqua School of Business and the Wake Forest Schools of Business landed at 80%. Columbia University was at 77%, and the Pepperdine University Graziado School of Business and Management and the Thunderbird Global School of Management came in just below 70%.
Fortune noted that those rates could have a high margin of error, making direct comparisons between the schools difficult because each school has its own approach to loan repayment.
In any case, MBA students are borrowing more heavily than ever, in part because of the rising costs of attending an elite business school. Graduates who have the most debt hail from Wharton, according to a recent study by U.S. News & World Report, the only school where MBAs leave with six-figure debt totals. The average debt burden of a Wharton grad is a whopping $105,489, according to U.S. News. Next on the list? Graduates who get their MBAs from Yale ($99,418), Duke ($88,050), Carnegie Mellon ($87,592), and Chicago ($86,758). The least debt? According to U.S. News, it’s MBAs from Fayetteville State University in North Carolina ($3,810).