MBA Debt: The Burden Grows Heavier & Gets Scarier

In 2008, Brian Jenkins moved to Malibu, Calif., to start his MBA at Pepperdine University’s Graziadio School of Business and Management. He had big ambitions for B-school, expecting the degree to help him land a job in human resources at a top company. He hoped to make close to a six-figure salary, too.

Pepperdine seemed poised to deliver. When he was a mere applicant, the admissions director gave him a personal tour of the business school, which commands a stunning perch overlooking the Pacific. His student experience was “amazing,” he says, handing top marks to his professors and classmates. He loved his courses and wrote an up-beat student blog. The weather – “perfect every day” – was an added perk.

To pay for all it, Jenkins took out $120,000 in loans. But Jenkins’ six-figure-salary job never materialized. “The career services staff basically said, ‘We’ll help you edit your resume, good luck out there,’” he recalls. “That was a little miss-sold to me (when I applied). A lot of (my classmates) found jobs paying $55,000 to $65,000 per year, and they were very excited that they had a job. A lot of people didn’t get jobs like that.”

In fact, Jenkins’ class earned a mean base salary of $69,167, according Pepperdine’s official stats–but they also owed an average $66,242. But the school that ranks 78th in the country happens to rank 20th in having the largest MBA debt. When the economy was doing well, and there was upward mobility, it made not have made all that much of a difference. MBAs then made sense, Jenkins believes. “People were able to mange their debt load. (Now), people are putting off families and buying homes.”


MBAs like Jenkins are shouldering record levels of debt, approaching a tipping point that makes the degree – no matter how good the experience and learning – a risky investment that isn’t always being approached with financial caution and restraint. It’s now common for many graduates to leave a top business school with six-figure debt, and in some cases, MBAs are graduating with more than $150,000 in loans that will take them ten or more years to pay back.

At a few elite business schools, including Wharton and Columbia, the “average” debt burden is already in six figures. Wharton grads left Philadelphia last year with loans that averaged $109,836–the most among all B-schools. Overall, graduates from Poets&Quants’ top-ten U.S. MBA programs owed an average $87,049 last year (MIT-Sloan did not release its debt figures). (See 25 B-Schools That Lead to the Most Debt)

Several business schools, including Stanford and Dartmouth College’s Tuck School, expect these numbers to go much higher this year. The reason: Many students are starting their MBAs with diminished assets due to the Great Recession. They drained their bank accounts as the economy went south to maintain their lifestyles so many of them will have to borrow more than earlier classes to get the degree. And they’re doing so at a time when starting salaries for MBAs, by and large, have flattened.

“The numbers scare me,” concedes Diane Bonin, director financial aid at the Tuck School. “People coming in are making a little bit less and have much less in available savings.” She expects the average debt burden of latest Tuck grads to rise to $98,500 from the record $96,292 last year.


Taking on debt has become a big enough issue to a few MBA hopefuls and alums that several have started blogs to address it. No Debt MBA, a Boston-based female blogger who will begin classes at a top B-school this fall, vows to get through the experience without a dollar of debt. “I think debt is a lot like a miter saw,” she says. “As a skilled user it can be a really useful tool for getting work done, but if you’re reckless you can chop your arm off. Many students seem to be blissfully chopping away, and I am slightly terrified of becoming one of them.”

The MBA-bound blogger, however, is a rare exception. In general, the incoming Class of 2013 expresses little concern over taking out the “miter saw.” Like Jenkins at Pepperdine, they’re betting that the degree will payoff in the long run, providing salaries and bonuses that will easily allow them to repay the loans. “No one says, ‘how am I going to pay for this?’ says Rod Garcia, director of MBA admissions at MIT’s Sloan School. “I’ve been doing this for 23 years. A place like MIT is a low risk, high reward investment. With other schools, it may not be that situation.”

This is the first in a three-part series on MBA debt. The next story appears Friday on an incoming MBA at a top-tier school who is determined not to rack up a dollar of debt.

  • JohnAByrne


    That’s terrific, but the average student graduates from Pepperdine with the debt shown in the table accompanying this story. Plenty of students get scholarship help, but not all students receive it, and many students who get scholarships still must borrow to finance their education.

  • Benny

    please do some research before writing more of these criticism on MBA and debts. I just spoke with the admission from Pepperdine, she told me that if I can get 700 on GMAT, I will get full scholarship for the MBA program. Meaning I won’t be in debts. please reply with ur opinion (supporting by real facts).

  • fight the debt

    To get a scholarship you need to add diversity to your shool. I am at INSEAD and many non-European got scholarships.

    On the other hand, without writing any specific essay, I received 40k scholarship (20 per year) from Booth and full first year tuition at Columbia, renewable on the basis of academic results.

    Schools are really trying hard to bring diversity to the class. Be “exotic” to your average class in terms of nationality and experience.

  • Thank you for OUT-ING second rate over rated MBA programs. I attended Pepperdine, and University of California Irvine EMBA, and found dozens of us needing help, only to find institutionalized internal graduated mba’s WORKING in the career offices . . . without any ‘placement’ experience . . . . working for directors without any placement experience…. who couldn’t place five percent of the classes. These bloated staffs add huge costs to the MBA’s and are the equivalent of political patronage – PARENTS BEWARE! fight back and demand results… the difference between a dream and a hallucination is ROI – and every school must be held accountable. Especially the private institutions like PEPPERDINE who have the worst holier – than – thou attitudes

  • Good catch, MBA 2012 Hopeful!

    Indeed, year-end bonuses are an extremely important source of income for many MBA graduates. Here are a few concerns: 1) as you say, not all jobs offer such bonuses, yet some MBA hopefuls assume they’ll land these bonus-wielding jobs; 2) bonus amounts vary from year-to-year; and 3) the jobs that offer such bonuses have to be acquired before anyone should start assuming such income! Remember that B-school offers a bit of time for soul-searching, too. You might walk through the doors expecting to land a job in banking, and leave with your heart (and wallet) set on launching a start-up…

  • MBA 2012 Hopeful

    In Page 3 on the story, it mentions that median salaries for hedge funds is at $115. I think the article meant to say 115,000 since $115 makes one working at a hedge fund more poor than your typical nonprofit post-MBA grad. Another good nugget of information to mention is that some financial services positions such as investment banking and sales and trading have year end bonuses which give another financial cushion to pay off those student debt loans.

  • havstar

    Doesn’t this really depend on the school you went to and the field you enter? The school is ranked 78th, you’d need some pretty stellar stops to be pulled if you wanted a 6-figure salary.

    Also, imagine going to a non-profit afterwards – you’d be paying to not get paid.

  • MaxD,

    That’s an interesting question. I know that some of the very top schools claim they only offer fellowship money on the basis of need, not merit. Harvard and Stanford turn out to be quite generous in this regard, largely because they are concerned about students starting out with too much debt. I’ll look into it for you.

  • MaxD

    This is really scary. I know a MBA is an investment, but graduating with such a large amount of debt (especially at a time when I want to be thinking about buying a house, starting a family etc) freaks me out.

    Last year I was told by the admissions director of a ~50 P&Q-ranked school that were I to score a GMAT of 720 or above (90% percentile for that school) I would likely get a full-ride. Though I now qualify (GMAT of 780), I want to get into consulting, for which no major firms recruit at the school.

    John, do you have any information on where one needs to stack up in order to get full or partial scholarships at schools higher up the the rank? Or are there no hard and fast rules for them? Might form the basis of a great article, though I doubt most admissions directors are as candid as the one I met.