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

MBAs 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)

An MBA Vows To Graduate Without A Dollar of Debt

The Class The Loans Fell On