MBA Debt Burden Rises Again: A Record $117,200 Average At Wharton

by John A. Byrne on

piggychartMBAs are taking on more and more student debt, so much so that graduates of at least six business schools last year borrowed more than $100,000 on average to finance their degrees.

The heaviest debt was assumed by graduates of the University of Pennsylvania’s Wharton School, where average debt hit an estimated record of $117,200. MBAs at Columbia Business School (an estimated $114,800), New York University’s Stern School ($105,782), Duke University’s Fuqua School ($102,054), the University of Virginia’s Darden School ($105,490), and MIT Sloan ($100,212) all racked up six-figure debt, too.

The full brunt of such debt isn’t obvious until the monthly payments become due. A Wharton MBA trying to pay down the average loan over ten years would face a monthly payment of nearly $1,350 and interest of nearly $45,000. The annual salary needed to carry that average student loan is at least $162,000, about 10% of monthly gross income. Over a 15-year payback period, the interest alone would come to more than $70,000.

What’s more, at MIT fully 77% of the graduating MBAs last year were in debt. At Duke, some 72% of the Class of 2012 left the school having borrowed, often heavily, to get their MBA degrees.

MBAS AT SECOND-TIER SCHOOLS ALSO BORROWING HEAVILY

Even graduating MBAs at second-tier schools were willing to go deeply into hock. At Fordham University’s business school, 87% of the graduating MBAs–the highest percentage at any school–graduated with average debt of $69,637. At Thunderbird’s Global School of Management and Pepperdine University’s Graziadio Business School, average debt was $88,195 and $85,672, respectively.

The latest data was reported by the schools to U.S. News & World Report as part of its annual rankings project. Several business schools told U.S. News that debt levels rose substantially, far outpacing any gains in starting salaries and bonus. At Pepperdine University, MBA debt jumped 29.6% over 2011, while at NYU’s Stern School average debt increased by 18.8%. In contrast, average salary and bonus for Stern MBAs increased by only 3.8% to $133,919 last year. The average MBA program student debt load incurred for full-time MBA students graduating in 2012 from the top 100 ranked schools was $49,619, according to U.S. News.

The crippling sums vastly overshadow the debt assumed by many of these same students during their undergraduate years–loans that they are still paying off. For all undergraduate student borrowers, the average debt in 2011 was $23,300, though one in ten owe more than $54,000, according to the Federal Reserve Bank of New York. Yet, at all of the top ten business schools, MBA debt ranges from Wharton’s $117,200 to UC-Berkeley’s $63,652. The average for a top ten school is $90,941.

DEBT LEVELS WENT DOWN AT A HANDFUL OF PROMINENT SCHOOLS

Some schools, however, were able to lower debt levels of their students by more aggressively discounting tuition through scholarships. Average borrowing fell at both Dartmouth College’s Tuck School, Northwestern University’s Kellogg School, UCLA’s Anderson School and Emory’s Goizueta School, among other schools.

The largest decline of any top school occurred at Harvard. Thanks to the most generous fellowship grants of any B-school, Harvard Business School MBAs graduated with average student debt of $70,731, some 9.2% less than 2011 when the average was $77,880.

So while Harvard was able to whittle down the debt of its MBAs, its West Coast rival, Stanford Graduate School of Business, found the debt incurred by its graduates going the other way. Stanford reported that the average indebtedness of its MBAs rose slightly last year to $79,049 from $77,599 in 2011.

(See following page for our table on the schools where MBAs graduate with the most debt)

RELATED STORIES:

MBA Debt: The Burden Grow Heavier & Gets Scarier

An MBA Vows To Graduate Without A Dollar of Debt

The Class The Loans Fell On

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  • http://twitter.com/DaveBivens David Bivens

    Can you PLEASE get rid of “share this” as your social media sharing tool? Not only does it quote “@sharethis” as the source instead of “@PoetsAndQuants,” it gets the headlines wrong.

    Clicking the twitter share button, for instance, gives you “MBA Debt Burden Rises Again: A Record 7,200 Average At Wharton http://shar.es/ezUll via @sharethis” instead of the proper (and far more helpful for your website) “MBA Debt Burden Rises Again: A Record $117,200 Average At Wharton http://poetsandquants.com/2013/03/19/mba-debt-burden-rises-again/ via @PoetsAndQuants”
    I don’t mean to come across as whiny or nitpicky, but it is a genuine annoyance and I can’t imagine it being good for this site, which I see as an excellet resource, either. Just a suggestion.

  • Shaniqua James

    My guess is that the Wharton students are spending profligately. The interesting question is whether they have to borrow that much or they’ve gone on a debt-fueled spending spree. Also, how does Wharton’s default rate compare with default rates at the other schools? If it’s very low, then that’s the real story.

  • guest

    Wharton has over 800 students in its class with vast socio-economic backgrounds. Some students are profligate consumers and tend to borrow for non educational purposes (trips, entertainment and condo housing). But most students need to take a loan to pay tuition and living costs. Very few students can cover tuition with savings or stipends alone. The single key factor is financial aid and there isn’t sufficient funding for most students at Wharton. Unfortunately it is known as conservative in terms of financial aid.

  • Mike R.

    Wow, I know it’s been said before, but who on earth thinks it’s a good idea to go to Pepperdine? Horrendously expensive, low return on investment. 37% employed at graduation. Low starting salary. They’re priced like they’re top 15 and US News doesn’t even have them in the top 90. Is Malibu that cool?

  • Shaniqua James

    If I were in charge of financial aid policy, there wouldn’t be any fellowships whatsoever. MBAs have too much earning power to be getting free money. Nevertheless, I want to see some statistics from Wharton on their average fellowship award in order to understand what all that borrowing pays for.

  • http://www.mbaover30.com/ MBA Over 30

    Pepperdine actually have a strong EMBA/Part-Time brand in Southern California. Most people who I know who’ve been there have done so when they already had a job and were checking a box to open up additional career opportunities for themselves; they also had tuition reimbursement (at the company we worked for at the time). In that case, Pepperdine is actually a great investment; not so much for other scenarios, apparently.

  • Guest

    Unfortunately, this is a ranking that Wharton can do without the top spot in total debts. Killing fellowships at Wharton would be very simplistic and wouldn’t address individual goals. Non traditional candidates from low income professions (Non profits, government) would be punished as a result of this policy. Besides it is a tool for adcoms to build profile and promote minorities/women.

  • http://www.mbaover30.com/ MBA Over 30

    This might also be driven by what % of the school’s revenue comes from student tuition. I’m not aware of the number, but have read multiple times that HBS’ number is so small that they almost don’t need tuition payments to run the program due to large sums of cash on hands. I know that Stanford has been really good about getting alum donations (or perhaps a fund that is fed by them?) to be generous with fellowships. I believe that almost everyone gets something at both skills, which definitely makes a difference.

  • guest

    I concur that some schools with small endowments depend on tuition as source of revenue and are known as financially aid conservative (Tepper, MIT, CBS, LBS and maybe Ross). I noticed that most fellowships are customized by gender, professions or nationality and rule out some students. Some unfortunate guy told me that he does not qualify for most fellowships. HBS’s endowments has the edge, any idea how much of returns go into tuition aid vs salaries?

  • http://www.facebook.com/tia.trussardi Tia Trussardi

    It would be interesting to see what that policy would do to your admissions yield.

  • lostinphilly

    It’s the trips, the clubs, and the $40-$80 parties twice a week.

  • Renault

    So you’d have schools full of nothing but bankers?

  • Healthcare-Guy

    Not defending Pepperdine, but I recently read an interview someone did with one of their B-school profs. He theorized that the abnormally low employment rate at graduation was skewed by students dragging their feet about having to leave Malibu. Having visited the campus..I could see that. Doesn’t excuse the other stats though.

  • Chisnock

    I’m a graduate of a top school. What was amazing was how much money these people just plain blew- new clothes, opera tix, dining out, etc. all to keep up with their classmate Jones’.

    Many of these folks then fell on tough times during the recession of 2008. 70% were laid off. So, $120k in debt to get into the game, there’s only a 5% chance of hitting it big, and then you get laid off during every recession.

    I’m just not. so. sure. about this

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